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https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The University o f North Carolina Social Study Series IN C O M E A N D WAGES IN T H E SOUTH https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T H E U N IV E R SITY OF NORTH CAROLINA SOCIAL STU D Y SERIES Published in cooperation with the Institute for Research in Social Science under the general editorship of Howard IV. Odum Odum and Johnson: The Negro and His Songs................................. $3.00 Puckett: Folk Beliefs of the Southern Negro..................................... 5.00 Odum and Johnson: Negro Workaday Songs..................................... 3.00 Odum and others: Southern Pioneers..................................................... 2.00 Pound: Law and Morals............................................................................. 2.00 Giddings: The Scientific Study of Human Society................................ 2.00 Odum and Willard: Systems of Public Welfare................................. 2.00 Branson: Farm Life Abroad..................................................................... 2.00 Ross: Roads to Social Peace..................................................................... 1-50 Willey: The Country Newspaper............................................................. 1.50 Jordan: Children’s Interests in Reading................................................. 1.50 Odum: Public Welfare and Social W ork............................................. 1-50 North: Social Differentiation..................................................................... 2.50 Knight: Among the Danes......................................................................... 2.50 Steiner and Brown: The North Carolina Chain Gang........ ............ 2.00 Lou: Juvenile Courts in the United States............................................. 3.00 Carter: The Social Theories of L. T. Hobhouse.................................. 1.50 Brown: A State Movement in Railroad Development........................ 5.00 Miller: Town and Country......................................................................... 2.00 Mitchell: William Gregg: Factory Master of the Old South.......... 3.00 Metfessel: Phonophotography in Folk Music....................................... 3.00 Wager: County Government in North Carolina.................................. 5.00 Brown: Public Poor Relief in North Carolina..................................... 2.00 Walker: Social Work and the Training of Social Workers.............. 2.00 Herring: Welfare Work in Mill Villages............................................... 5.00 Vance: Human Factors in Cotton Culture............................................. 3.00 Johnson: John Henry................................................................................... 2.00 Rhyne: Some Southern Cotton Mill Workers and Their Villages.. 2.50 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The U niversity o f N orth Carolina P ress Chapel Hill, N. C. The Baker and Taylor Co. New York Oxford University Press London Maruzen-Kabushiki-Kaisha Tokyo INCOME AND WAGES IN THE SOUTH BY CLAREN CE HEER Research Associate in the Institute for Research in Social Science in the Unicersity of North Carolina C H A P E L H IL L TH E U N IV E R SITY OF N O RTH CAROLINA PRESS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1930 C O P Y R IG H T , 1930, BY T H E U N IV E R S I T Y OF N O R T H C A R O L IN A PRESS https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis PRINTED THE IN THE SEEMAN UNITED PRESS, STATES DURHAM, OF A M E R I C A NORTH BY CAROLINA PREFACE T H IS preliminary study o f wages and income in the South grew out o f the immediate need for comparative data which arose in connection with regional studies o f eco nomic and social situations now being made by the Institute for Research in Social Science at the University o f North Carolina. The study owes its publication in its present form to the timeliness o f the subject and to the current demand for inform ation in the field covered. These factors have been allowed to outweigh the advantages o f making a more exhaustive study or one which incorporated the new census data, either o f which courses would have involved delay. Although the author assumes full responsibility for the statistical data and for the conclusions drawn therefrom, the study, nevertheless, owes much to cooperative effort. Special thanks are due Dean D. D. Carroll and Professor H oward W . Odum, o f the Board o f Governors, for making possible a preliminary inquiry at this time. The author is under especial obligation to Miss Harriet L. Herring, Re search Associate, who not only contributed valuable ideas and sound criticism, but generously gave the author the bene fit both o f her extensive researches in the field o f southern industry and o f her first-hand knowledge o f the South. He is under especial obligation, also, to Miss Katharine Jocher, Assistant Director o f the Institute, who prepared the manu script for the press. Finally, the author wishes to acknowledge his indebted ness to his w ife for her substantial assistance in the tedious work o f compiling the statistical data and for many sugges tions and criticisms. Chapel Hill, N. C. April, 1930. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis £ jq https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CONTENTS C hapter I PAGE T H E IN CO M E ST A T U S O F T H E SO U TH 3 The South and its characteristics— Statistical sources— Fed eral income tax returns— Estimated income per capita. C hapter II P R O D U C T IV IT Y A N D W A G E S IN SO U TH ERN A G R IC U L T U R E ........................................................12 Gross farm income per worker— Wages of farm laborers— Methodology. C hapter III T H E W A G E D IF F E R E N T IA L IN SO U TH ERN I N D U S T R Y .............................................................23 The census average wage— Is the census wage significant— Specific industries— Specific occupations and employments. C hapter IV M ISC E LLA N E O U S W A G E A N D S A L A R Y D I F F E R E N T I A L S .................................................. 42 Trade union wage scales— Wages in federal naval establish ments— Miscellaneous employments— Railway and public util ity wages— Salaries of teachers and clergymen— Omitted occupations— Summary of findings— Labor costs and real wages. C hapter V W H Y SO U TH E R N INCOM ES A R E L O W . . . . The preponderance of low yield occupations— Industrial wages and agricultural productivity— Farmers’ incomes— Farm and industrial incomes compared— Future of the wage differential. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 57 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis IN C O M E AND WAGES IN TH E SOUTH https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CHAPTER I T H E IN C O M E S T A T U S O F T H E S O U T H E O G R A P H IC A L regions, like individuals, may be G classified on the basis o f their income status. In some parts o f the country, the average level o f income per in habitant is high. This may be due to the presence o f a relatively large number o f wealthy persons or to the fact that salary and wage scales are higher than elsewhere. other parts o f the country, the level o f income is low. In This condition is usually found to exist where there are few per sons o f great wealth, where the bulk o f the population is engaged in unproductive employments, and where salaries and wages are lower than elsewhere. Although regional differences in the average level o f money incomes bear no necessary relation to the quality o f life which the various regions afford, it is none the less es sential that such differences be carefully analyzed and meas ured. In a pecuniary society, whose economic ramifications extend over an ever widening area, differences in income levels may have important practical consequences. They may cause entire industries to change their location or may set in motion a tide o f migration. They may be responsible for inequalities in taxation, for differences in the purchasing habits o f consumers and, not infrequently, for sectional con flicts o f interest and outlook. Incomes and wages in the South have been considerably below the average obtaining in the rest o f the country for upwards o f sixty years. Until comparatively recently, the effects o f this condition were mainly local and excited little https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis [3 ] 4 INCOME outside attention. AND WAGES IN THE SOUTH This is no longer the case. The new industry o f the South is part and parcel o f a larger economy, and the comparative level o f southern wages has accordingly become a matter o f nation-wide concern. Since it is in the field o f industry that the new forces at work in the South have been most widely felt, it is not strange that the interest o f industrial enterprisers, labor leaders, and students o f economics has been centered chiefly upon the wages o f southern factory workers. W ages and incomes in the various gainful employments are, however, to a considerable degree interdependent. In the South, as elsewhere, the earnings o f factory workers are affected by the rewards offered in other occupations, and by prevailing income standards. The problem o f industrial wages in the South is thus inextricably bound up with a much larger problem, that o f discovering the various factors which make the general average o f southern income what it is today. Incomes in the South are quite generally lower than in the rest o f the United States. This generalization holds whether the incomes under comparison be those o f farmers, ministers, teachers, skilled trade unionists, unorganized common labor ers, employees o f strictly private enterprises, employees o f railroads and other public utilities, or servants o f the state. It is the purpose o f the follow ing study to measure and to analyze these income differentials. M ore specifically it is proposed to compare the general level o f income in the South with that o f the rest o f the country and to observe the vari ations in the income and wage differentials applicable to particular occupations and employments. It is also pro posed to inquire into the nature o f some o f the factors which are responsible for the income disparity between the South https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE INCOME STATUS OF T H E S O U T H 5 and elsewhere and to consider what influences, if any, are at work to remove them. T o carry out these proposals in any adequate fashion would require the development o f much new information and an amount o f original research far beyond the powers o f any single investigator. This basic work still remains to be done; the present study offers no substitute for the de ficiency. Its purpose is merely to gather together such frag mentary statistics on income in the South as now exist ready at hand and to suggest tentative answers to the questions raised on the basis o f the uncertain light afforded by data which are admittedly incomplete and imperfect. T HE SOUTH AND ITS CHARACTERISTICS The term “ South” as currently used has no definite con notation. Roughly speaking, it means the southeastern por tion o f the United States, but just how far west and north its domain extends is a question over which there might be disagreement. It is necessary, however, to draw a line some where, and, for the purpose o f the present study, it has been drawn at Texas and Oklahoma in the west, and at Missouri, Kentucky, W est Virginia, and Maryland in the north. As thus delimited, the South comprises ten states, Virginia, North Carolina, South Carolina, Georgia, Florida, Ten nessee, Alabama, Mississippi, Arkansas, and Louisiana. The question at once arises as to whether these southern states possess any characteristics, other than geographical propinquity and a common historical background, which justify their being lumped together for the purpose o f an income study. It is a common impression that the South is rapidly becoming industrialized. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis In this respect, at least, 6 INCOME AND WAGES IN THE SOUTH the southern states are by no means all alike. I f it is proper to measure the rate o f industrialization o f a state by the percentage increase in the number o f its factory wage earn ers, then five o f the states under consideration possessed the distinction o f leading the entire country with respect to the rapidity o f their industrial growth during the period from 1919 to 1927. In South Carolina, according to the Census o f Manufactures, the number o f wage earners in manufac turing establishments increased by 37 per cent during the eight years in question. North Carolina came next with an increase o f 30 per cent, followed by Georgia with an increase o f 25 per cent, Tennessee with an increase o f 21 per cent, and Alabama with an increase o f 11 per cent. In the re maining southern states, on the other hand, the number o f industrial workers showed slight declines. It would be a mistake, however, to attach too much im portance to industry in characterizing the South. Most o f the region’s recent industrial progress has been due to the expansion o f a single activity, the manufacture o f textiles. Even in the most industrialized o f the southern states, the proportion o f the total working population engaged in manu facturing is considerably below the proportion found in the industrial states o f the Northeast. The distinguishing char acteristic, which all o f the southern states have in common, is the fact that they are still predominantly rural and agri cultural. Six o f them appear among the ten states which, in 1920, had the lowest ratios o f urban to rural population in the entire country. Seven o f them are to be found among the ten states which outranked the entire country with re spect to the relative size o f their farm populations in 1925. North Carolina has a higher proportion o f factory wage https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE INCOME STATUS OF T H E earners than any state in the South. SOUTH 7 Nevertheless, over half o f its population lived on farms in 1925. Aside from the predominance o f agriculture, another characteristic which distinguishes practically all o f the south ern states is the prevalence o f farm tenancy. O f the ten states which, in 1925, led the entire country with respect to the proportion o f tenant-operated farms, no less than seven belonged to the South. All o f the southern states are o f course alike in having a larger proportion o f Negroes than any other states in the union. In 1920, the ratio o f Negroes to the total population ranged from 19 per cent in Tennessee to 52 per cent in Mississippi. A final common characteristic o f the southern states is their low average o f wealth. Here again they stand out sharply from the rest o f the country. Thus, a ranking o f all the states o f the union on the basis o f per capita tangible wealth, as estimated by the Bureau o f the Census for 1922, shows eight o f the ten poorest states to be southern. This fact alone would seem to offer sufficient warrant for treating the South as a unit for the purpose o f the present study. STATISTICAL SOURCES Existing statistical materials bearing on the relative level o f income in the South fall roughly into four general classes. Some light on the subject may be obtained from federal income tax statistics. A second source o f information is the excellent study o f the National Bureau o f Economic R e search entitled Income in the Various States/ which con tains an estimated allocation by states o f the national income totals for the years 1919 to 1921 inclusive. The various 1 Leven, Income in the Various States, National Bureau of Economic Research, New York, 1925. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 8 INCOME AND WAGES IN THE SOUTH publications o f the Bureau o f the Census and o f other fed eral agencies such as the Department o f Agriculture, the Interstate Commerce Commission, and the Bureau o f Edu cation, offer a wealth o f information, segregated by states, concerning total values produced, number o f workers em ployed, and aggregate salary and wage payments in specific lines o f economic activity. Finally, there are at hand a number o f studies, made for the most part by the Depart ment o f Labor, which afford geographical comparisons o f the hourly wage rates paid in specific trades and occupations. The evidence obtainable from each o f these sources will be considered in turn. FEDERAL INCOME TAX RETURNS W hen it is realized that fewer than 10 per cent o f the gainfully employed o f the country file federal income tax returns, it will be seen at once that these returns offer very little help to the investigator interested in measuring geo graphical differences in the general income level. Practically all that the returns tell us is the number o f single persons and heads o f families whose individual or family incomes fall above certain variable limits. is not supplied completely. Even this information Concerning the incomes received by the 90 per cent o f the gainfully employed who do not file returns, the tax statistics are silent. In spite o f the above considerations, it is probably legit imate for the purpose in view to attach some significance to the ratio which the number o f persons filing returns in each state bears to the total state population. Table I sets forth such state ratios for the calendar year 1926. I f indic ative o f nothing else, this table is useful as showing the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE INCOME STATUS OF T H E S O U T H 9 variations from state to state in the proportion o f the total population which has attained or has surpassed a reasonably adequate income standard. It will be seen that the propor tion o f persons with incomes large enough to require the filing o f returns is only about one-third as great in the South as in the rest o f the country. M oreover, o f the ten states having the lowest percentage o f income taxpayers, no less than eight belong to the southern group under consideration. ESTIMATED INCOME PER CAPITA M ore revealing evidence o f the difference in income lev els as between the South and the rest o f the country is fur nished by the National Bureau o f Econom ic Research estimates o f aggregate income by states. Table II gives a comparison, based on these estimates, o f the average per capita income o f the South and the corresponding average for the remainder o f the country with respect to the only years for which such data are available, viz., 1919 to 1921. It will be seen from this table that the per capita income o f the South fell short o f the comparable figure for the rest o f the country by 45 per cent in 1919, 54 per cent in 1920, and 58 per cent in 1921. In other words, during the years in question Southerners were obliged to get along on an aver age income less than half as great as the average income received by residents o f other sections o f the United States. The shortcomings o f the figures presented in Table II are obvious. In the first place they are ten years old. In the second place general averages, obtained by dividing the aggregate o f incomes received from all sources by the total population, can have but limited significance. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis N o infor- 10 INCOME AND WAGES IN THE SOUTH T able I Percentage of Total Population Filing Federal Income Tax Returns for Calendar Year 1926. Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Percentage of Population Rank Filing Returns State Indiana................ 7.31 6.66 6.20 5.34 5.20 5.07 4.70 4.26 4.25 4.14 4.02 3.89 3.88 3.80 3.78 3.53 3.50 3.44 3.36 3.32 2.84 2.64 2.49 2.47 Average Ten Southern States. . 1.43 Massachusetts. . . Pennsylvania. . . . Michigan............. Rhode Island. . . . Wyoming............. New Hampshire.. Utah 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Percentage of Population Filing Returns State Vermont.............. Minnesota........... Nebraska............. Arizona................ Montana.............. Idaho.................... Texas.................... Iowa..................... Louisiana............. West Virginia.. . . South Dakota___ Kansas................. New Mexico........ Oklahoma............ North Dakota. . . Virginia................ Tennessee............ Kentucky............ North Carolina .. Georgia................ Alabama.............. Arkansas.............. Mississippi........... South Carolina... 2.45 2.42 2.42 2.36 2.33 2.23 2.10 2.04 2.03 1.95 1.80 1.80 1.68 1.60 1.54 1.50 1.44 1.30 1.24 1.17 1.13 1.02 .96 .76 Average Rest of Country............... 4.01 T able II Comparison of Annual Current Income Per Capita, Ten Southern States and Remainder of Country.* Calendar Years 1919-1921 Annual Current Income Per Capita Year 1919................. 1920................. 1921................. Southern States Rest of Country Percentage South to Rest of Country $378 348 369 $691 760 877 54.7 45.8 42.0 ♦Source- Leven, Income in the Various States, National Bureau of Economic Research, New York, 1925, pp. 249 and 253. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis THE INCOME STATUS OF T H E S O U T H 11 mation is supplied as to the manner in which individual in comes are distributed around the general average, nor are any means afforded for measuring income differentials applicable to specific industries and occupations. In order to understand why the general level o f income in the South is low, it is necessary to know something about the particular forms o f gainful activity which constitute the South’s chief means o f support, and to compare the returns received from such activities with the returns yielded by similar activities in other parts o f the country. F or this purpose recourse must be had to the data compiled by the Bureau o f the Census and other governmental agencies cov ering the operations o f specific industries. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C H A P T E R II P R O D U C T IV IT Y A N D W A G E S IN S O U T H E R N A G R IC U L T U R E T H A S already been pointed out that the South is over I whelmingly agricultural. In four o f the states under consideration, North Carolina, South Carolina, Mississippi, and Arkansas, over half o f the total population lived on farms in 1925. O f the total number o f persons gainfully employed in the southern area as a whole, 52.6 per cent were engaged in agriculture in 1920. The corresponding ratio for the rest o f the country was only 20.4 per cent. Since agriculture constitutes the main source o f livelihood o f such a large proportion o f the southern population, it is obvious that per capita agricultural productivity has an im portant bearing not only upon the incomes received by the farming classes, but, indirectly, upon the incomes o f other classes o f the population as well. T able III Comparison of Annual Gross Agricultural Income Per Worker, Ten Southern States and Remainder of Country* Year 1899.. 1909.. 1919.. 1924.. 1927.. Basis of All Workers Employed Basis of Adult Male Workers Remainder Percentage Ten South is of Southern of Rest of United States Country States Remainder Percentage Ten South is of Southern United of Rest of States Country States $189 318 1,059 591 609 $471 925 2,569 1,582 1,611 40.1 34.3 41.2 37.4 37.8 $334 648 1,656 925 953 $595 1,214 2,993 1,844 1,879 56.2 53.4 55.3 50.1 50.7 »For the derivation of the results shown in this table, see the section on methodology at the end of this chapter. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis [ 12 ] WAGES IN SOUTHERN AGRICULTURE 13 GROSS FARM INCOME PER WORKER That agriculture yields a much lower return per farm worker in the South than it does in the rest o f the country is decisively demonstrated by the data exhibited in Table III. This table has been compiled partly on the basis o f census data and partly from inform ation supplied by the Department o f Agriculture. A detailed explanation o f the methods used in arriving at the final results is given at the close o f this chapter. N o high degree o f accuracy can be claimed for the amounts which purport to show the gross value o f farm products per worker. F or the purpose in view, however, it is the ratios between the South and the rest o f the country which are important, and it is believed that these ratios reflect the comparative situation with a fair measure o f precision, since most o f the errors and omissions which affect the absolute totals are probably present to the same extent in both o f the areas under comparison. It will be seen from Table III that the gross value o f farm products per adult male worker gainfully employed in southern agriculture has averaged but little above one-half o f the corresponding value for the rest o f the country during the last 28 years. In view o f the importance o f agriculture in southern economy, this fact goes far to explain why the general level o f income in the South is low. WAGES OF FARM LABORERS If southern agriculture yields a gross return per worker only half as great as the average for the rest o f the country, this circumstance should be expected to exercise an important influence upon the rate o f wages paid hired farm labor. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis A c- 14 INCOME AND WAGES IN THE SOUTH cording to the Census o f Occupations, there were in the southern area as a whole, in 1920, some 430,000 male per sons, 18 years o f age or over, belonging to the class o f farm laborers working out. That these farm laborers formed no insignificant portion o f the southern working population is indicated by the fact that their total number amounted to more than half o f the number o f male workers o f all ages employed in manufacturing establishments in the same area in 1919. The farm laborers in question were by no means all Negroes. A ccording to the census, about 45 per cent o f them were whites. Although their number has undoubtedly fallen off considerably since 1920, farm laborers still con stitute one o f the m ajor working class groups in the South. H ow do the wages o f farm laborers in the South com pare with the average wages paid similar kinds o f workers in other parts o f the country? Does the farm wage differ ential correspond to the differential in per worker agricul tural productivity? Answers to these questions are supplied by Table IV , which gives data on the average wages o f hired farm hands in the various states o f the union as col lected by agents o f the Department o f Agriculture. It will be noted that as o f July, 1929, the average cash wage o f casual farm laborers ranged from $1.20 per day in South Carolina to $2.05 per day in Virginia. The median o f the state averages for the ten southern states under consider ation was $1.55 per day. The median o f the state averages in the remainder o f the United States was $3.25 per day. The wages o f casual farm laborers in the South, in other words, amounted, on the average, to only 48 per cent o f the wages paid elsewhere. Hired farm laborers frequently receive certain perqui- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGES IN SOUTHERN T able 15 AGRICULTURE IV Average Wages of Male Farm Laborers, by States. State Rank Ten Southern States South Carolina. . . Georgia.................. Alabama............... Louisiana.............. Mississippi............ Tennessee............. Arkansas............... Florida.................. North Carolina. .. Virginia................. 1 2 3 4 5 6 7 8 9 10 Laborers, Not Boarded, Average Wages Per Day, July 1929* Casual Farm Non-Casual Farm Laborers, Average Laborers, Monthly Cash Earnings Per Earnings Plus Per Day Plus Per quisites,Year 1925** quisites, Year 1926** 31.20 1.30 1.40 1.50 1.55 1.55 1.65 1.65 1.80 2.05 31.97 2.09 2.26 2.33 2.59 2.19 2.41 2.66 2.54 2.99 346.84 51.30 50.65 52.89 63.58 51.69 56.60 69.55 57.19 61.79 31.55 32.37 353.82 31.80 1.95 2.05 2.20 2.20 2.30 2.75 2.75 2.75 2.75 2.90 3.05 3.05 3.10 3.15 3.20 3.20 3.25 3.25 3.25 3.25 3.25 3.30 3.35 3.35 3.35 3.35 3.45 3.50 3.55 3.55 3.60 3.65 3.70 3.80 3.85 3.85 3.85 32.90 3.26 4.16 3.48 3.42 3.25 3.00 3.88 4.38 4.04 5.10 5.21 4.45 4.98 5.42 4.73 3.95 4.58 5.58 4.16 4.08 4.09 5.23 5.21 4.04 5.19 4.12 4.24 4.67 4.56 5.22 4.15 4.85 4 97 4.12 4.20 4.96 3.93 360.56 71.43 65.68 66.40 64.57 72.44 72.50 76.76 75.24 70.47 83.22 81.99 73.58 80.13 82.89 77.20 95.93 138.62 82.25 80.73 78.98 93.90 80.81 77.60 79.89 77.12 83.59 92.91 100.51 115.51 95.89 92.30 95.26 93.30 93.30 89.03 88.45 95.07 Median.................. 33.25 34.31 381.40 Percentage South is of Rest of Country 47.7 54.9 66.1 Median, South... . Remaining States Kentucky.............. Texas.................... Oklahoma............. Missouri................ New Mexico......... West Virginia. . . . Arizona................. Delaware.............. Indiana................. Maryland.............. Illinois................... Colorado............... Ohio....................... Maine.................... Iow a...................... Minnesota............ Oregon.................. Nevada................. North Dakota. . . . Pennsylvania........ Wisconsin.............. Utah...................... South Dakota. . . . Kansas.................. Michigan.............. Nebraska.............. Vermont................ W yoming.............. Idaho.................... California.............. New lersey........... New Hampshire. . Washington.......... Massachusetts.. . . Connecticut.......... New York............. Rhode Island....... 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 *Monlhh Labor Review, Sept. 1929, p. 173. ** Yearbook of Agriculture, 1928, pp. 1059 and 1060. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 16 INCOME AND WAGES IN THE sites in addition to their money wages. SOUTH The Department o f Agriculture has compiled estimates o f the average cash value o f such perquisites in each o f the several states for the years 1925 and 1926. I f the value o f perquisites be added to the cash earnings, the disparity between farm wages in the South and the rest o f the country is somewhat lessened but it is nevertheless considerable. Thus it will be seen from Table IV that the average wage, including perquisites, o f casual farm laborers in the median southern state in 1926 was $2.37 per day, which represented about 55 per cent o f the corresponding average for the rest o f the country. Non-casual farm laborers probably represent the most skilled and experienced workers o f their class. It will be seen from Table IV that the average monthly compensa tion, including perquisites, o f this type o f laborer in the median southern state was $54 in 1925, which represented 66 per cent o f the corresponding average for the rest o f the country. Summarizing the evidence furnished by Table IV , it may be said that the differential in farm wages as between the South and the rest o f the country is in substantial ac cord with the differential in agricultural productivity, al though the relationship seems to weaken in the case o f the more experienced workers. METHODOLOGY N o recent statistics are available bearing upon the amount o f net income derived from agriculture in the various states. The Census o f Agriculture, however, furnishes estimates, by divisions and states, o f the gross value o f farm products. These gross production figures are admittedly incomplete. Moreover, they contain certain elements o f duplication, the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGES IN SOUTHERN 17 AGRICULTURE most serious o f which is the double counting o f crops fed to livestock. A n attempt was made to eliminate this dupli cation in the Census o f 1900, but the effort was abandoned in subsequent reports. Comprehensive information on the value o f farm prod ucts cannot be obtained from the Census o f Agriculture beyond the year 1919. The Census o f 1925, for instance, gives merely the values o f crops and livestock products, omitting the value o f animals sold or slaughtered. In for mation compiled annually by the Department o f Agriculture may, however, be utilized from the point where the census material leaves off. Thus the Department o f Agriculture publishes annual estimates o f the gross income derived from farming operations after making deductions for products fed to livestock, used for seed, or wasted. These estimates apply to the nation as a whole, but certain supplementary data are available which permit the national totals to be al located between the South and the rest o f the country. Table A sets forth the estimated gross value o f all farm products in the ten southern states under consideration and in the remainder o f the country for the years 1899, 1909, 1919, 1924, and 1927. The figures for 1899, 1909, and 1919 have been obtained from the Census o f Agriculture. As has already been indicated, the 1899 totals represent values reached after deducting the estimated value o f crops fed to livestock. and 1919. This is not true o f the census estimates for 1909 The figures for 1924 and 1927 represent an allocation between the South and the rest o f the country o f the Department o f Agriculture’s national totals for gross farm income.1 The method used in making this allocation is shown in Table B. 1 See Yearbook of Agriculture, 1928, p. 1051, Table 525. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 18 INCOME AND WAGES T able IN THE SOUTH A Gross Value of Farm Products. Ten Southern States Year 1899............................................. 1909............................................. 1919............................................. 1924............................................. 1927............................................. ? 715,600,000 1.565.335.000 4.214.098.000 2.076.040.000 2.138.980.000 Remainder of Country $ 3,048,578,000 6.928.895.000 17.211.526.000 9.926.960.000 10.114.020.000 A s will be seen from Table B, the national total for gross farm income was split into three sub-totals, repre senting respectively income from crops, income from meat animals, and income from poultry and dairy products. The share o f the South in each o f these sub-totals was then separately computed. The basis o f allocation in the case o f income from crops was supplied by the Department o f A g ri culture’s annual estimates, by states, o f the gross value o f all crops produced.2 Before the estimates in question could be used, however, it was necessary to eliminate, as far as possible, the value o f crops fed to livestock. The principal crops fed to animals are corn, oats, barley, and hay. The 1920 Census o f Agriculture gives, by states, the average percentages o f these crops which were neither sold nor held for sale by farmers in 1919. It was assumed that the unsold percentages represented crops fed to livestock, and that the percentages in question had not changed greatly since 1919. On the basis o f these two assumptions, the percentages o f the corn, oat, barley, and hay crops not sold in 1919 were applied to the values o f the corresponding crops in 1924 and 1927. The values thus obtained were then subtracted from the Department o f Agriculture’s state estimates o f ’ See Yearbook of Agriculture, 1925, p. 1204; ibid., 1928, p. 1037. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGES IN total crop production. SOUTHERN 19 AGRICULTURE A fter this deduction had been made, the ratio, which the value o f crops produced in the ten southern states bore to the value o f crops produced in the country at large, was computed and used to determine the share o f the South in the total national income from crops. T able B Allocation of Gross Agricultural Income Between the South and the Rest of the Country. Item Gross Income for F.ntire Country as Estimated by Department of Agriculture in Millions 1924 1927 Percentage Allocated to Ten Southern States 1924 Gross Income Allocated to Southern States in Thousands 1927 1927 1924 Grains...................... $1,842 $1,636 Fruits and Vegetables........... 1,333 1,453 Cotton and Cotton Seed........ 1,719 1,458 All Other................. 1,232 1,236 Total Crops......... $6,126 $5,783 Meat Animals......... 2,619 2,842 Dairy and Poultry Products.............. 3,258 3,628 24.33 9.21 26.70 $1,490,460 $1,544,060 241,210 211,440 7.44 10.57 10.57 Total Income. . . . 12,003 12,253 344,370 383,480 $2,076,040 $2,138,980 In determining the share o f the South in the country’s total income from meat animals, the only available basis o f allocation was the value o f animals on farms, as estimated annually by the Department o f Agriculture. This basis can not be expected to give highly accurate results. Neverthe less, where large sections o f the country are under consider ation, there is an obvious correlation between the value o f meat animals produced in a given area and the value o f such animals on farms at a given date. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The method used in T able C Percentage of Gross Income from Meat Animals Allocatable to the South. Farm Value, Jan. 1, 1927 (In thousands) Weighted Value Weight** Entire United States Remainder.......................................... Dairy Cattle*............................... $ 59,103 26,153 $990,857 324,726 Total................................................... Hogs........................................................... Sheep.......................................................... $85,256 83,092 6,821 $1,315,583 945,093 432,619 Plus $59,679 134,243 3,410 $920,908 1,512,149 216,310 $197,332 $2,649,367 7.44 _ ‘ Estimates of the Department of Agriculture indicate that approximately one-fourth of the total beef and veal supply of the country is furnished by dairy cattle and dairy calves. The value of dairy cattle has, therefore, been given a weight of one-quarter as against the value of beef cattle. “ Statistics published by the Department of Agriculture indicate that the value of beef and veal animals produced in 1924 represented 70 per cent of the weighted value of beef and veal animals on farms as of January 1, of that year. The value of hogs produced in 1924 represented 160 per cent of the value of hogs on farms as of January 1, and, finally, the value of sheep produced represented approximately SO per cent of the value of sheep on farms as of the first of the year. See Yearbook of Agriculture, 1924, p. 961, Table 573. SOUTH Grand Total....................................... .70 1.60 .50 THE 32,289,761 1,298,904 IN $163,716 104,613 Entire United States WAGES All Cattle................................................... Less Dairy Cattle..................................... Ten Southern States AND Ten Southern States Percentage South is of Total INCOME https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis to O WAGES IN SOUTHERN AGRICULTURE 21 determining the percentage o f the total income from meat animals allocataire to the South in 1927 is illustrated in Table C. A s has already been indicated, the Census o f Agriculture for 1925 gives the value o f livestock products by states for the year 1924. On the basis o f this data it was possible to obtain directly the percentage o f the total income from poul try and dairy products allocatable to the South in 1924. The same percentage was used for 1927, on the assumption that there had been no change during the intervening two years. In order to compare the per capita agricultural produc tivity o f the South with that o f the rest o f the country, it was necessary to divide the gross values produced in each section by the number o f persons employed in agricultural pursuits. The total numbers o f persons gainfully employed in agriculture for the years 1900, 1910, and 1920 were ob tained from the Census o f Occupations. Approximate esti mates o f the numbers employed in 1924 and 1927 were calculated on the basis o f the percentage decline in farm population between 1920 and 1925 as reported by the Cen sus o f Agriculture. The Census o f Occupations reports as gainfully employed in agriculture many women and children whose contribution to the total agricultural product may be exceedingly slight. The South, due to its large N egro population, employs a considerably greater proportion o f women and children on farms than does the rest o f the country. T o compute the average product per worker on the basis o f figures which include persons o f both sexes and o f all ages will conse quently unduly depress the southern average. The work o f women and children, as a general rule, merely supplements https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 22 INCOME AND WAGES IN THE SOUTH the work o f adult males, and for this reason it is possibly preferable to limit consideration to the latter class o f workers. T o disregard the labor o f women and children entirely will, however, result in somewhat exaggerating the southern aver age. The proper method would, o f course, be to equate the women and children to their equivalent in terms o f adult males. Since there is no way o f doing this, both bases o f calculation were used in the present study. Table D gives the data on the number o f agricultural workers employed upon which these calculations were based. T able D Number of Persons Gainfully Employed in Agriculture, Ten Southern States and Remainder of Country. Both Sexes and All Ages Adult Males** Year Ten Southern States Remainder of Country Ten Southern States Remainder of Country 1900............ 1910............ 1920............ 1924*.......... 1927*.......... 3,794,486 4,927,906 3,978,306 3^510^457 3,510,457 6,479,183 7,489,491 6,704,638 6.276.212 6.276.212 2,142,116 2,416,380 2,544,231 2.245.029 2.245.029 5,125,884 5,708,745 5^750,933 5,383,448 5,383,448 •Estimated by applying the percentage decline in farm population between 1920 and 1925, to the 1920 totals for agricultural workers. •♦Figures for 1900 and 1910 represent all male workers twenty-one years of age or over. Figure* for later years represent male workers 20 years or over. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C H A P T E R III T H E W A G E D IF F E R E N T IA L IN S O U T H E R N IN D U S T R Y R O B L E M S connected with the growth o f southern in P dustry have received so much attention in recent years that it is easy to lose sight o f the fact that the South is still one o f the most agricultural regions in the United States. In 1920, for every Southerner engaged in manufacturing and mechanical pursuits, there were three Southerners en gaged in farming. In the rest o f the country the situation was almost reversed. For every person engaged in agricul ture there were 1.6 persons in the manufacturing and me chanical employments. The emphasis placed on southern industry is, nevertheless, amply justified by the extraordi nary rapidity with which it is expanding. Outside o f the South, the number o f wage earners employed in manufac turing establishments declined by some 9 per cent between 1919 and 1927. In the ten southern states under consider ation the number o f factory employees increased by 9 per cent during the same period. Further light on the drift to ward industry in the South is furnished by the relative rate o f decline o f the farm population. Between 1920 and 1925 the southern farm population experienced a reduction o f 11.8 per cent, as compared with a reduction o f only 6.4 per cent for the rest o f the country.1 Roughly speaking, about one and one-half million per1 The figures on farm population for 1925 are not strictly comparable with those reported in 1920, since the definition used in 1920 included not only persons living on farms but, in addition, those farm laborers and their families who, while not living on farms, did live in rural ter ritory outside any incorporated places. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis [ 2 3] 24 INCOME AND WAGES IN THE SOUTH sons are gainfully employed in manufacturing and mechan ical industries in the South. This constitutes about 18 per cent o f the total working population. Except for agricul ture, which is rapidly losing ground, industry supports a larger percentage o f the southern population than any other gainful activity. The relative adequacy o f this support as compared with standards attained in other sections o f the country is, therefore, o f considerable moment. O f the total number o f Southerners engaged in manu facturing and mechanical pursuits, somewhat over a million are factory wage earners. A rough measure o f the relative level o f income obtaining among these employees is supplied by the Census o f Manufactures, which gives, by states, the average number o f wage earners employed during the year as well as the total amount expended for wages. Division o f the amount spent for wages by the number o f workers employed gives an annual average wage which, within limits to be noted further on, may be taken as a fairly accurate index o f the variation in average industrial earnings as be tween different sections o f the country. THE CENSUS AVERAGE WAGE Table V gives a comparison o f the average census wage in the ten southern states under consideration with the cor responding average for the rest o f the country. This table seems to indicate that the average earnings o f southern fac tory workers have been from 30 to 40 per cent lower than the earnings o f similar classes o f employees in other parts o f the country for a long period o f years. Before attaching too much significance to this evidence, however, it is in order to inquire into its limitations. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 25 WAGE DIFFERENTIAL T able V Comparison of Census Average Wage, Ten Southern States and Re mainder of Country. Census Average Wage Year Ten Southern States Remainder of United States $197 257 215 272 337 410 884 792 794 832 828 $252 292 389 445 495 601 1,196 1,229 1,313 1,339 1,366 1849................. 1859................. 1869................. 1899................. 1904................. 1914................. 1919................. 1921................. 1923................. 1925................. 1927................. Percentage South is of Rest of Country 77.9 87.9 55.4 61.3 68.1 68.2 73.9 64.4 60.5 62.1 60.6 The objection may legitimately be raised that the cen sus average wages, as calculated in Table V , reflect neither average annual earnings nor rates o f pay for comparable kinds o f work. In the first place the wages in question are simply arithmetic results obtained by dividing the ag gregate annual amount spent for wages by the average num ber o f workers employed. The average number o f workers employed is obtained by dividing by 12 the sum o f the num bers reported on the payrolls as o f the 15th day o f each month. It is plain that the census average wage does not measure the actual average earnings o f the workers attached to a given industry. It merely indicates what would have been their average per capita earnings if production sched ules had been so arranged as to give them continuous em ployment throughout the year. The possible error involved in using the census average wage as a measure o f per capita earnings may be illustrated by a simple example. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 26 INCOME AND WAGES IN THE SOUTH Let it be supposed that two industries have identical wage bills o f $1,000,000 per annum. The first industry operates with a stable working force o f 1,000 employees throughout the year. The second industry operates with 1,200 em ployees for six months o f the year and with a force o f 800 employees during the remaining months. According to the method o f calculation used by the Census o f Manufactures, both industries will have an average working force o f 1,000 employees. Both industries will, therefore, have the same census average wage o f $1,000. However, unless the work ers, laid off in the second industry, find equally remunerative employment elsewhere, the average actual earnings o f the workers attached to that industry will be considerably below the average o f the industry which provides stable all year round employment. IS THE CENSUS WAGE SI GNIFICANT? It is evident that variations in the census wage averages as between different industries reflect corresponding vari ations in average actual earnings only when there is sub stantial similarity with respect to the ratio which the total number o f workers attached to each industry bears to the average number o f workers it employs during the year. Translated into concrete terms, this requirement means that the average amount o f unemployment per worker, in each o f the industries under consideration, must be the same. In an industry which has no reserve o f unemployed labor, and which gives continuous work to all o f its employees through out the year, the census average wage constitutes an accurate measure o f average actual earnings. On the other hand, in an industry which habitually has a large reserve o f unem- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE DIFFERENTIAL 27 ployed labor, and in which few workers have continuous em ployment throughout the year, the census average wage may be considerably higher than the actual earnings per worker. The question therefore arises, as to whether the indus tries o f the South are sufficiently like those o f the rest o f the country, with respect to the factor o f employment sta bility, to ju stify using the percentages shown in Table V as measures o f the relative difference in actual per capita earn ings. That no material error is involved in assuming such similarity is indicated by the results o f a study made by Professor Paul F. Brissenden for the United States Bureau o f the Census. Professor Brissenden supplies carefully worked out estimates, by states, o f the average actual earn ings o f industrial wage earners for the census years 1899 to 1923.2 W hen the census wage averages shown in Table V are replaced by the estimated actual earnings, as computed from Professor Brissenden’s data, little change in the per centage relation between the South and the rest o f the coun try is found to result. F or instance, when such substitutions are made for the year 1923, the ratio between the South and the rest o f the country changes no more than from 60.5 per cent to 61.7 per cent. The same procedure followed out with respect to the year 1919 changes the ratio given in Table V from 73.9 to 70.8 per cent. A second objection, which may be raised against the accuracy o f the comparison given in Table V , is that no allowance has been made for a possible difference in the proportion o f women and children in the tw o wage earning groups under consideration. Since women and children * “Earnings of Factory Workers, 1899 to 1927,” Census Monographs, X , p. 107, Table 42. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 28 INCOME AND WAGES IN THE SOUTH normally receive lower wages than adult males, it is evident that the group having the higher percentage o f women and children will have a lower average o f per capita earnings, even though the two groups are on a basis o f parity with re spect to the earnings o f their adult males. In order to secure a valid comparison, it is necessary to reduce each group to the same footing as regards age and sex distribution. That a correction o f this kind would have little effect on the per centages shown in Table V is indicated by data which are available with respect to the census year, 1919. In that year, approximately 15.2 per cent o f the wage earners in southern establishments were women over 16 years o f age, and 1.8 per cent were children o f both sexes under sixteen years. The comparable percentages for the remainder o f the country were 20.2 per cent and 1.3 per cent respectively. Professor Brissenden estimates that the average full-time earnings o f women factory workers in 1919 were about 54 per cent as great as the earnings o f adult males, and that the per capita earnings o f children under sixteen years o f age averaged around 30 per cent o f the earnings o f adult males.3 This information makes it pos sible to recalculate the census wage averages for 1919 on the basis o f wage earning groups composed exclusively o f adult males. A s thus revised, the census average wage for the South is found to represent 72.3 per cent o f the comparable average for the rest o f the country, instead o f 73.9 per cent as shown in Table V . This difference is too small to have any importance from the standpoint o f the present study. It may be objected, finally, that Table V attempts to compare the earnings o f workers engaged in widely dis* Census Monographs, X , p. 297, Table 134. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE DI FFERENTIAL similar industries and occupations. 29 This is perfectly true. The table in question simply shows how average earnings in the particular types o f employment open to southern wage earners compare with earnings in the particular occupations open to wage earners outside o f the South. It cannot and does not purport to measure the relative differences in rates o f pay for comparable kinds o f work. It is apparent that none o f the limitations o f Table V are sufficiently potent to discredit its main testimony, which is that the average annual earnings o f industrial workers in the South are, roughly speaking, about 40 per cent below the average obtaining in other parts o f the country. This information is important as far as it goes, but it does not go far enough. T o what extent is the lower average o f south ern earnings due to a lower scale o f wages for comparable kinds o f w ork? T o what extent is it due to other factors such as, for instance, a preponderance o f industries which normally employ large numbers o f unskilled workers ? Data bearing on the first o f these questions are given in the re maining sections o f the present chapter. The second ques tion is touched upon in Chapter V . SPECIFIC INDUSTRIES The bulk o f the industrial wage earners o f the South are concentrated in a comparatively small number o f industries. By all odds the most important activity, from the standpoint o f the number o f workers employed, is the manufacture o f textiles. Southern cotton goods establishments employed about 271,000 wage workers in 1927. Knit goods estab lishments employed about 50,000 workers. All told, nearly a third o f the total number o f southern industrial wage earn ers were attached to the textile industry in 1927. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 30 INCOME AND WAGES IN THE SOUTH N ext in importance to textiles as a source o f employment is the lumber and timber industry. About 215,000 wage earners, or slightly more than one-fifth o f the total number o f southern industrial workers, were engaged in this indus try in 1927. None o f the remaining industries o f the South stand out with any particular degree o f prominence as re gards number o f workers employed. A possible exception are steam railroad repair shops, the operation o f which re quired the services o f approximately 60,000 persons in 1927. This was the only southern industry, aside from textiles and timber products, which gave employment to more than 40,000 persons in 1927. The wage comparisons which follow are confined in the main to the few important industries enumerated above. This limitation was necessary because o f the lack o f adequate data on other industries. The wage statistics presented, however, cover nearly 60 per cent o f all workers engaged in manufacturing activities in the South. Table V I gives a comparison between the South and the rest o f the country o f the census wage averages obtaining T able VI Comparison of Census Wage Averages in Specified Industries, Ten Southern States and Elsewhere. Census Year 1927.* Census Average Wage Railroad Renair Shops..................... ‘ Source: Census of Manufactures, 1927. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis South Elsewhere $655 671 748 1,230 1,376 $1,099 1,012 1,195 T,495 1,537 Percentage Southern Average is of Average Elsewhere 59.6 66.3 62.5 80.4 89.5 WAGE DIFFERENTIAL 31 respectively in the cotton goods industry, the lumber and timber industry, the knit goods industry, foundry and ma chine shops, and railroad repair shops. It appears from this table that the wage differential between the South and the rest o f the country is markedly reduced when consideration is limited to comparable industries. A s indicated in Table V , the general census wage average for the South in 1927 represented only 60.6 per cent o f the corresponding general average for the rest o f the country. The wage ratios appli cable to the specific industries shown in Table V I are in all but one instance greater than this figure, ranging from 59.6 per cent in the knit goods industry to 89.5 per cent in the case o f railroad repair shops. That there should be a greater disparity in the general average o f industrial wages, as be tween the South and elsewhere, than in the wage averages applicable to specific industries may at first sight seem curi ous. A s is more fully explained in Chapter V , however, this apparent anomaly is due to the fact that the dominant indus tries o f the South are low-wage industries, whereas, outside o f the South, there are many high-wage industries which are either very weakly represented in the South or not repre sented there at all. The fact that the percentage ratios between the southern wage averages and the corresponding averages for the rest o f the country are subject to considerable variation from industry to industry is another circumstance which calls for explanation. W h y should the wages o f southern workers in the knit goods industry, for instance, have averaged less than 60 per cent o f the average obtaining among the same class o f workers elsewhere, while wages in southern railroad https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 32 INCOME AND WAGES IN THE SOUTH repair shops averaged nearly 90 per cent o f the correspond ing average elsewhere? The variations in question are probably due in part to the fact that the industrial classifications used are extremely broad and include establishments which differ considerably with respect to the type o f their product and the character o f their manufacturing operations. W ithin the same indus try, there may be found, at one extreme, establishments which specialize on products requiring the employment o f a high proportion o f skilled workers; and, at the other ex treme, establishments the manufacturing operations o f which are such as to require a relatively small proportion o f skilled workers. In the first class o f establishments, the average census wage will naturally be high. The second class o f establishments will have a relatively low census wage aver age. In an industry, the southern branch o f which has more than its proportionate share o f the latter class o f establish ments, a disparity in the census wage averages as between the South and the rest o f the country is bound to appear, even though there are no differences in rates o f pay for comparable kinds o f work. The relative distribution o f the high and low wage establishments, as between the South and elsewhere, will not, o f course, be the same for all industries. This circumstance probably accounts in part for the differ ences in the wage spreads shown in Table V I. There is very little inform ation at hand on which to base an estimate o f the extent to which the lower census wage averages o f southern industries are due to a larger repre sentation o f establishments, the manufacturing processes o f which require a relatively small proportion o f skilled work- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE ers. DIFFERENTIAL 33 There is direct evidence, however, that this factor is responsible for the extremely broad wage spread between the southern and northern divisions o f the knit goods industry. The most important product o f this industry is hosiery, o f which there are two main types, seamless and full-fash ioned. Full-fashioned hosiery workers represent on the whole a more highly remunerated group o f employees than workers on seamless hosiery. Thus, a shift by Massachu setts hosiery mills, from the manufacture o f seamless to the manufacture o f full-fashioned hosiery, was in large part re sponsible for an increase in the average earnings o f male hosiery workers in that state from 47 cents per hour in 1926 to $1.15 per hour in 1928.4 The number o f full-fashioned hosiery mills in the South is relatively small, and this cir cumstance undoubtedly serves to exaggerate the difference in average wages as between the southern and northern branches o f the knit goods industry. Another circumstance, which partially explains the vari ations, as between industries, in the wage ratios shown in Table V I, is the fact that the industries under comparison differ with respect to the factor o f geographical location. F or instance, outside o f the South, the lumber and timber industry is concentrated mainly in the Pacific Coast States. These states have on the whole a very high regional level o f wages. Even within the southern area, there are con siderable variations from state to state in the general level o f wages. In the cotton textile industry, for instance, aver age hourly earnings, for a representative pay period in 1928, * Bulletin of the United States Bureau of Labor Statistics, No. 504. p. 10. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 34 INCOM E AND WAGES IN TH E SOUTH were 31.6 cents in Virginia, 29.5 cents in North Carolina, 26.0 cents in South Carolina and Georgia, and 24.4 cents in Alabama.5 W hen an industry is located in an area o f high wages in the North and in an area o f low wages in the South, the wage differential between its two divisions will naturally be greater than if the situation were reversed. The factor o f geographical location, as a cause o f industrial vari ations in the disparity between southern and northern wage averages, is o f comparatively slight importance, however, in comparison with another factor which is brought to light when the wage differentials applicable to specific occupations within the several industries are compared. SPECIFIC OCCUPATIONS AND EMPLOYMENTS The United States Bureau o f Labor Statistics has col lected sample data by states relative to the hourly earnings o f workers engaged in specific occupations and employments in a number o f important industries. These industries in clude cotton goods, hosiery and underwear (knit g ood s), lumber and timber, and foundry and machine shop products. The census wage averages for all o f the above industries have been given in Table V I. Tables V II, V III, IX , and X , which are based on the data compiled by the Bureau o f Labor Statistics, give average hourly earnings in the more impor tant occupations included within these industries. They also show, by occupations, the relative level o f southern earnings o f pay as compared with the level o f earnings elsewhere. A cursory examination o f these tables indicates that there is no uniform relation between the average wages paid in s Bulletin of the United States Bureua of Labor Statistics, No. 492, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 35 WAGE DIFFERENTIAL various occupations in the South and the wages prevailing in similar occupations in other parts o f the country. The wage ratio between the South and elsewhere ranges, in fact, all the way from 51 per cent, in the case o f sorters in saw mills, to 104 per cent, in the case o f certain classes o f ma chinists. A further tendency to be noted is the apparent relationship between the size o f the wage differential and the factor o f skill. A s will be seen, the difference in hourly earnings between the South and the rest o f the country is apparently at a maximum in the case o f common labor and shows a tendency to become progressively less with each ad vance in the grade o f skill. In the case o f one or two highly skilled occupations it disappears entirely. This tendency is not particularly pronounced as regards industries in which differences in grades o f skill are slight and in which advance ment from one occupation to another is comparatively easy. It is strikingly evident, however, in industries in which there are broad differences in skill as between various occupational groups and in which passage from one group to another is difficult. In the cotton goods and hosiery and underwear indus tries, which are covered in Tables V II and V II I respectively, the correlation between the degree o f occupational skill and the size o f the wage differential is not as clearly apparent as in the case o f the lumber and timber industry or o f foundry and machine shops. variety o f factors. This circumstance is attributable to a In the first place, the gradations o f skill which separate the various occupations o f the textile indus try are for the most part very slight. A m ajority o f the occupations may be mastered in a relatively short period o f https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 36 INCOME time. WAGES IN THE SOUTH Employees in certain occupations are remunerated on a piece-rate basis. used. AND In other occupations a time-rate basis is Generally speaking, the differential in hourly earn ings, as between the South and elsewhere, Is somewhat smaller in the piece-rate than it is in the time-rate occupa tions. Another factor, which has to be reckoned with, is the circumstance that certain textile occupations are carried on primarily by males in the South, whereas in the North they are carried on primarily by females. Despite disturbing influences such as these, the tendency o f the wage differential to vary with the degree o f skill is observable to a certain extent even in the textile industry. Reference to the figures for male workers in the cotton goods industry given in Table V II, for instance, shows that the only occupations markedly out o f line with the tendency noted are those o f doffers and weavers. It is significant that the remuneration in both o f these occupations is normally based on piece rates whereas the other occupations are gen erally on a time-rate basis. The relationship between the size o f the wage differential and the skill o f the occupation, as measured by the rate o f compensation received, is displayed more prominently in the sawmill industry, data on which are given in Table IX . It will be noted that the average level o f southern wages in oc cupations which yield less than 30 cents an hour, ranges from 51 per cent to 62 per cent o f the corresponding wage level elsewhere. Southern wages in occupations which yield from 30 to 40 cents per hour range from 62 per cent to 70 per cent o f the prevailing wages elsewhere. Graders in the South re ceive an average o f 42 cents per hour, which is 76.5 per cent as great as the average earnings o f graders in the rest o f the https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Southern States Occupational Classification Number of Empls. Covered Average Hourly Earnings N orthern States Number of Empls. Covered Average Hourly Earnings Percentage Southern Earnings are of Northern Picker Tenders............................................................ Card Tenders and Strippers....................................... Doffers......................................................................... Speeder Tenders.......................................................... Slubber Tenders.......................................................... Weavers....................................................................... Loom Fixers................................................................ 774 1,151 3^013 2,415 768 5,738 2,089 $.232 .260 .280 .317 .317 .341 .399 397 606 932 498 336 4,588 1,452 S.380 .416 .411 .483 .475 .456 .602 61.1 62.5 68.1 65.6 66.7 74.8 66.3 1,113 3,119 6; 962 453 722 3,759 .208 .209 .228 .283 .285 .308 1,142 1,498 3; 456 537 2,273 4,364 .273 .314 .373 .363 .383 .425 76.2 66.6 61.1 78.0 74.4 72.5 F emales : Trimmers or Inspectors.............................................. DIFFERENTIAL M ales ; WAGE https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T able VII Comparison of Average Hourly Earnings in Cotton Goods Manufacturing, Five Southern and Six Northern States, October 1928.* ’ Source: Bulletin of the United States Bureau of Labor Statistics, No. 492, p. 26. The five southern states comprise Alabama, Georgia, North Carolina South Carolina, and Virginia; the six northern states, Connecticut, Maine, Massachusetts, New Hampshire, New York, and Rhode Island. With the exception of female drawers-in, only occupations represented by 1000 or more employees have been included in the above table. OJ able VIII GJ 00 Southern States Occupational Classification Number of Empls. Covered Average Hourly Earnings N orthern States Number of Empls. Covered Average Hourly Earnings Percentage Southern Earnings are of Northern H osiery M a l es : 55.5 69.6 809 380 1,355 436 261 238 .226 .232 .232 .245 .272 .280 .317 1,088 914 1,128 2,406 783 334 453 .378 .452 .368 .414 .420 .381 .392 59.8 51.3 63.1 59.2 64.7 73.5 80.9 89 33 .408 .595 357 190 .510 .751 80.0 79.2 248 64 74 .220 1,066 391 295 376 .292 .359 .361 .366 .373 .352 75.3 69.9 72.5 72.6 72.1 76.7 F emales : Inspectors..................................................................... Menders....................................................................... Knitters, Transfer....................................................... Loopers......................................................................... Pairers or Maters........................................................ Folders......................................................................... Winders........................................................................ 1,201 U nderwear M ales : Knitters, Web or Tube............................................... Machine Fixers............................................................ F emales : Inspectors.................................................................... Cutters, Hand, Layers-up and Markers................... Buttonhole Makers..................................................... Folders......................................................................... Seamers........................................................................ Finishers....................................................................... 112 415 422 .251 .262 .266 .269 .270 2,010 2,753 •Source: Bulletin of the United States Bureau of Labor Statistics, No. 504, p. 42. For the underwear industry, the states compared are North Carolina, Tennessee, and Virginia in the South, and Connecticut, Rhode Island, Illinois, Indiana, Massachusetts, Michigan, Minnesota, Wisconsin, New Hampshire, Vermont, New York, and Pennsylvania in the North. For the hosiery industry, the southern states comprise Alabama and Louisiana, Georgia, North Car olina, Tennessee, and Virginia; the northern, Illinois, Indiana, Maryland, West Virginia, Massachusetts, Michigan, Minnesota, Wisconsin, New Hampshire, Vermont, New Jersey, New York, and Pennsylvania. Only the more important occupations, in which employees could be segregated by states, have been included in the above table. SOUTH $.686 .912 THE 657 366 IN $.381 .635 WAGES 776 444 AND Boarders....................................................................... Machine Fixers............................................................ INCOME https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T Comparison of Average Hourly Earnings in the Hosiery and Underwear Industry, 1928.* IX Southern States Occupational Classification Laborers............................................................................. Off-Bearers........................................................................ Edger Tailers..................................................................... Sorters............................................................................... Transfer Men.................................................................... Truckers............................................................................ Saw Tailers....................................................................... Doggers............................................................................. Stackers, Hand................................................................. Machine Feeders, Planing............................................... Tallymen........................................................................... Edgermen.......................................................................... Setters................................................................................ Graders.............................................................................. Millwrights........................................................................ Sawyers, Head, Band....................................................... Number of Empls. Covered 11,857 412 315 1,753 '337 1,612 '324 601 544 2,455 811 256 445 329 541 261 305 Average Hourly Earnings 3-219 .222 .229 .230 .232 .240 .256 .259 .264 .270 .272 .326 .367 .376 .419 .524 .831 O ther States Number of Empls. Covered 10,169 448 393 2,385 371 1,525 '414 743 417 1,862 '971 424 476 413 1,021 '440 363 Average Hourly Earnings 3.401 .404 .391 .450 .440 .411 .433 .436 .427 .505 .457 .527 .565 .541 .548 .663 .934 Percentage Southern Earnings to Those Elsewhere 54.6 55.0 58.6 51.1 52.7 58.4 59.1 59.4 61.8 53.5 59.5 61.9 65.0 69.5 76.5 80.5 89.0 *Source: Bulletin of the United States Bureau of Labor Statistics, No. 497, p. 28. The ten southern states are Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia. The other states are California, Idaho, Kentucky, Maine, Michigan, Minnesota, Montana, Oregon, Texas, Washington, West Virginia, and Wisconsin. Only occupations represented by 6S0 or more employees have been included in the above table. WAGE DIFFERENTIAL https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T able Comparison of Average Hourly Earnings in Sawmills, Ten Southern and Twelve Other States, 1928* GJ able X Southern States Occupational Classification Number of Empls. Covered Average Hourly Earnings Average Hourly Earnings Percentage Southern Earnings are of Earnings Elsewhere O ther States Number of Empls. Covered 3.498 .545 .507 .762 .825 .832 57.2 57.0 64.1 72.4 85.8 92.8 245 35 60 69 51 61 22 98 35 23 27 249 21 .289 .383 .404 .419 .439 .557 .592 .615 .639 .729 .744 .754 .794 8,097 687 1,611 4',690 6,610 7,958 1,796 5,866 2^ 173 2'840 '818 3,545 1'207 .461 .532 .514 .608 .664 .654 .744 .696 .728 .756 .725' .726 .842 62.7 72.0 78.6 68.9 66.1 85.2 79.6 88.4 87.8 96.4 102.6 103,9 94.3 M achine Shops : Laborers, Male............................................................ Blacksmiths’ Helpers, Male....................................... Machinists’ Helpers, Male........................................ Drill Press Hands, Male............................................. Fitters and Bench Hands, Male................................ Assemblers, Male........................................................ Planer Hands, Male.................................................... Lathe Hands, Engine, Male....................................... Boring-Mill Hands...................................................... Toolmakers, Male....................................................... Blacksmiths, Male...................................................... Machinists, Male......................................................... Pattern Makers, Male................................................ •Source: Bulletin of U. S. Bureau of Labor Statistics, No. 471, p. 33. The southern states included in the comparison are Alabama, Georgia, Louisiana, and Tennessee. The remaining group comprises California, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massa chusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Washington, and Wisconsin. SOUTH 10,664 3,729 1,589 2',935 5,126 l'464 THE 3.285 .311 .325 .552 .708 .772 IN 353 128 231 105 249 48 WAGES Laborers, Male............................................................ Chippers and Rough Grinders, Male........................ Molders’ Helpers, Floor, Male................................... Core Makers, Male..................................................... Molders, Hand, Floor, Male...................................... Pattern Makers, Male................................................ AND F oundries : INCOME https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis T Comparison of Average Hourly Earnings in Foundries and Machine Shops, Four Southern and Twenty-four Other States, 1927* WAGE DIFFERENTIAL country. 41 Southern millwrights, with average earnings o f 52 cents per hour, receive 80.5 per cent as much as the aver age earnings elsewhere. Finally, in the case o f the highly skilled sawyers, whose average earnings in the South are 83 cents per hour, the ratio o f southern wages to those paid elsewhere is 89 per cent. Table X , which sets forth the comparative wage situ ation in foundries and machine shops, reveals similar tend encies. Thus, in foundries, the ratio o f average southern earnings to average earnings elsewhere is 57 per cent in the case o f common labor, 64 per cent in the case o f semi skilled molders’ helpers, and 93 per cent in the case o f the highly skilled pattern makers. In machine shops, the range o f the same ratio extends from 63 per cent in the case o f laborers to 104 per cent in the case o f skilled machinists. Since there is no uniform wage differential between the South and the rest o f the country, and since the size o f the wage differential with respect to any particular occupation depends largely on the factor o f skill, it is easy to under stand why average earnings for entire industries fall short o f the corresponding averages for the rest o f the country by varying degrees. In industries which employ a high propor tion o f unskilled workers, the disparity in average earnings between the South and elsewhere will naturally be high. In industries in which skilled workers predominate, the dis parity in average earnings will be small. This fact goes far toward explaining why the average census wage for the southern lumber and timber industry is so low relative to the corresponding census average for the rest o f the country, and why the census wage averages for railroad repair shops and foundry and machine shops are relatively high. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis C H A P T E R IV M IS C E L L A N E O U S W A G E A N D S A L A R Y D IF F E R E N T IA L S W A G E statistics covering employees in manufacturing establishments are by no means the only data which indicate that the differential between the South and the rest o f the country reaches its maximum in unskilled employ ments and is at a minimum as regards occupations involving a high degree o f skill. Table X I gives a comparison o f the wages paid common laborers in eight different lines o f ac tivity, including casual labor on farms, common labor in sawmills, street cleaning and other unskilled work performed by laborers on city payrolls, labor on federal-aid road p roj ects, common labor in foundries and in machine shops, and common labor in United States naval establishments. There are probably some differences as to the grade o f labor utilized in the various activities mentioned. Moreover, the propor tion o f N egro workers is possibly greater in certain employ ments such as farming and sawmill operation than it is in others. The wage rates quoted in Table X I, however, apply in all cases to the lowest grade o f adult male labor employed. In four o f the employments listed, the basis o f the wage comparison is hourly earnings. In the remaining four employ ments the basis used is hourly rates o f pay. It is significant, therefore, that the table reveals an extremely broad spread, in every one o f the employments enumerated, between the southern wage averages and those obtaining elsewhere. The difference is greatest in the case o f casual farm labor, which in the South is largely performed by Negroes and which may there be obtained at less than half the average wage required https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis [ 42] 43 WAGE AND SALARY DIFFERENTIALS in other parts o f the country. In none o f the activities speci fied, however, do the southern rates for common labor ever reach as high as 65 per cent o f the rates prevailing elsewhere. T able XI Comparison of Average Wages for Common Labor, the South and Elsewhere. Type of Employment Casual Farm Laborers, Not Boarded, Median of State Aver ages for Wages per Day, July, 19292......................... " Common Labor in Sawmills, Aver age Hourly Earnings, 19283. . . . Unskilled Street Laborers, Directly Hired by 369 Southern Cities and 2,257 Cities Elsewhere, Hourly Entrance Rate, Median Ci tv, 19284................... Common Laborers Employed on Federal Aid Road Projects, Average Hourly Rates, 19285. .. Common Labor in Foundries, Average Hourly Earnings, 19276. Common Labor in Machine Shops, Average Hourly Earnings, 19277. Common Labor Employed in 13 Selected Industries, Average Hourly Entrance Rates, Jan. 1, 1929s................................ Common Labor in U. S. Naval Establishments, Three Southern and Seven Northern Ports, Hourly Rate at Median Port, 19299............................. The South1 Elsewhere Percentage Southern Wages are of Wages Elsewhere $1.550 $3.250 47.7 .219 .401 54.6 .255 .452 56.4 .267 .445 60.7 .285 .498 57.2 .289 .461 62.7 .291 .458 63.5 .360 .560 64.3 * Unless otherwise indicated the term “ South” means Virginia, North Carolina, South Car olina, Georgia, Florida, Tennessee, Alabama, Mississippi, Arkansas, and Louisiana. * For source see Table IV. 3 For source see Table IX. 4 Source: Bulletin of the U. S. Bureau of Labor Statistics, No. 481, p. 1. ‘ Source: Yearbook of Agriculture, 1928, p. 1105. For the purpose of this comparison the southern area includes, in addition to the ten states indicated above, the states of Delaware Ken tucky, Maryland, Oklahoma, Texas, and West Virginia. * For source see Table X. 1 For source see Table X . * Source: Monthly Labor Review, May 1929, p. 189. This report gives average hourly en trance rates by geographic divisions. The rate for the South, as given in the above table, repre sents a weighted average of the averages for the South Atlantic and East South Central Divisions. The rate for the rest of the country represents a weighted average of the remaining divisional" averages. * For source see Table X III. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis INCOME 44 AND WAGES IN THE SOUTH TRADE U NI ON WAGE SCALES Whereas common laborers rank near the bottom o f the scale o f skill, trade unionists may be placed near the top. The wages o f trade unionists should, therefore, be expected to approach more closely the level prevailing in other parts o f the country, and such statistics as are available do not disappoint this expectation. The United States Bureau o f Labor Statistics makes an annual compilation o f union wage scales obtaining in each o f forty cities. Eight o f these cities are located in what has been defined for the present purpose as the South. Table X I I compares the rates o f pay obtain ing in the respective median cities o f the South with the T able X II Comparison of Trade Union Wage Scales, Eight Southern Cities and Thirty-two Cities Located Outside of the South, May IS, 1929.* Occupation Hourly Rate Hourly' Rate of Pay, of Pay, Median Median City Southern Elsewhere City S I.500 .900 .920 $1.500 1.200 1.023 100.0 75.0 89.9 1.000 1.125 .875 1.250 1.250 1.145 1.375 1.125 1.500 1.375 87.3 81.8 77.8 83.3 90.9 .923 1.057 87.3 1.000 1.148 87.1 $1.074 $1.245 86.0 Compositors, Day Work, Typesetting Machine Operators, Typesetting Machine Operators, Unweighted Average.................. Percentage Southern Rates are of Rates Elsewhere »Source: Monthly Lahor Review, September, 1929, p. 144. The eight southern cities are Atlanta, Birmingham, Charleston, Jacksonville, Little Rock, Memphis, New Orleans, and Rich mond. The thirty-two other cities comprise Baltimore, Boston, Buffalo, Chicago, Cincinnati Cleveland Dallas, Denver, Detroit, Fall River, Indianapolis, Kansas City, Los Angeles, Louis ville Manchester, Milwaukee, Minneapolis, Newark, New Haven, New York, Omaha, Phila delphia, Pittsburg, Portland, Providence, St. Louis, St. Paul, Salt Lake City, San hrancisco, Scranton, Seattle, and Washington. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY DIFFERENTIALS 45 corresponding averages applicable to the group o f cities located outside o f the South. It will be noted that in none o f the trades listed is the representative southern rate more than 25 per cent below the corresponding figure for cities outside o f the South. On the average, southern trade union wage rates are only 14 per cent below the level prevailing elsewhere, as contrasted with a differential ranging from 40 to 50 per cent in the case o f common labor. WAGES I N FEDERAL NAVAL ESTABLISHMENTS That the tendencies discussed above are sufficiently strong to affect the wage policy o f even so disinterested an em ployer as the United States government is indicated by Table X III. The Federal government has ten naval establish ments, three o f which are located in the South. The oper ation o f these establishments normally requires a consider able force o f civil employees representing a wide variety o f occupations and trades. Employees are divided into three groups or services on the basis o f their skill and experience. The laborer service comprises unskilled common laborers. The helper service comprises semi-skilled assistants to skilled mechanics. The mechanical service comprises the class o f skilled craftsmen. It will be noted from Table X I I I that the ratio o f the representative southern to the representative northern rate o f pay is 64 per cent in the case o f common laborers, 82 per cent in the case o f mechanics’ helpers, and 94 per cent in the case o f skilled craftsmen. A comparison o f the above percentages with those given in the preceding tables for employees o f the same grades o f skill would seem to indicate that the wage differentials between the South and the rest o f the country are given substantially the same rec- https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 46 INCOME AND WAGES IN THE SOUTH ognition by the United States Navy as they are by private employers. T a b l e X III Comparison of Hourly Wage Rates of Civil Employees in United States Naval Establishments, Three Southern and Seven Northern Ports. Year 1929.* Occupation Hourly Rate Hourly Rate Percentage Southern Median Median Northern Rates are Southern of Northern Port Port G roup I—Laborer Service: $ .36 $ .56 64.3 Electrician................................... Machinist..................................... Pipe Fitter................................... Rigger........................................... .51 .51 .51 .51 .63 .61 .63 .61 81.0 83.6 81.0 83.6 Unweighted Average.................. $ .51 $ .62 82.3 Boiler Maker............................... Calker and Chipper, Iron.......... Cement Finisher......................... Chauffeur..................................... Coppersmith................................ Machinist..................................... Diver............................................ Electrician................................... Engineman................................... Gardener...................................... Joiner........................................... Mason, Brick or Stone............... Painter......................................... Welder, Gas................................. Pipe Fitter................................... Welder, Electric.......................... Plasterer....................................... Plumber....................................... Rigger........................................... Sheet-metal Worker.................... $ .82 .82 .88 .60 .85 .82 1.90 .90 .81 .63 .85 1.14 .81 .83 .90 .83 1.14 .90 .81 .89 $ .88 .89 .95 .71 .96 .90 1.90 .95 .88 .63 .92 1.14 .90 .88 .94 .89 1.14 .94 .90 .95 93.2 92.1 92.6 84.5 88.5 91.1 100.0 94.7 92.0 100.0 92.4 100.0 90.0 94.3 95.7 93.2 100.0 95.7 90.0 93.6 Unweighted Average........................ $ .91 $ .96 94.2 Laborer, Common...................... G roup II—Helper Service: G roup III—Mechanical Service: * Source: Monthly Labor Review, Feb. 1929, p. 105. The three southern ports are Norfolk* Charleston, and New Orleans. The northern ports are Boston, New York, Philadelphia, Wash ington, Mare Island, Puget Sound, and Great Lakes. MISCELLANEOUS EMPLOYMENTS Practically all o f the income and wage data thus far pre sented apply to persons gainfully employed in agriculture or https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY DIFFERENTIALS in manufacturing and mechanical industries. 47 These persons comprise about 65 per cent o f the working population o f the South. The remaining elements o f the population are, how ever, by no means negligible. A ccording to the Census o f Occupations, the ten southern states under consideration had, in 1920, some 643,000 persons gainfully employed in various form s o f domestic or personal service. Over half a million o f their citizens were employed in trade and about 407,000 o f them in transportation. Various kinds o f professional service engaged the activity o f about 254,000 persons, while over 236,000 were reported as employed in clerical occupations. A study o f income and wages in the South which fails to present at least a modicum o f data relative to the important classes enumerated above can scarcely make much claim to completeness. It is unfortunately true, nevertheless, that very little information o f the kind desired is available. The Interstate Commerce Commission supplies considerable ma terial bearing on the earnings and wage rates o f railroad employees. The Census o f Manufactures makes it possible to arrive at an approximate estimate o f the average annual salaries o f clerks in manufacturing establishments. The United States Bureau o f Education compiles detailed statis tics relative to the average salaries o f public school teachers. Certain private agencies have collected data on the average salaries o f ministers and university professors and on the rates o f pay o f employees in gas and electric plants. This, however, practically exhausts the field o f readily obtainable information. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 48 INCOME AND WAGES IN THE SOUTH RAI LWAY AND PUBLIC UTILITY WAGES Table X I V compares the average earnings and rates o f pay o f southern railway and public utility employees with the general level o f earnings and wage rates in similar em ployments elsewhere. It will be noted that the average earnings o f southern railroad workers are about 88 per cent o f the average earnings in other parts o f the country. The wage differential, in other words, appears to approximate T able X IV Average Earnings and Rates of Pay of Railroad and Public Utility Employees Item Average Annual Earnings, All Employees, Class I Railroads, 19272.............................................. Average Annual Earnings, Em ployees in Railroad Repair Shops, 19273.................................. Average Hourly Kates of Ray, Section Men, Maintenance of Way and Structures, 19284......... Average Hourly Earnings, Em ployees in Gas Plants, July, 19256.............................................. Average Hourly Earnings, Em ployees in Electric Plants, July 1925s............................................... Percentage South is of Rest of Country The South1 Outside of the South $1,500.00 $1,710.00 87.7 1,376.00 1,537.00 89.5 .33 .41 80.7 .49 .55 88.9 .48 .62 77.2 1 For the purpose of the present table it has been necessary to adopt a flexible definition of the term “ South.” The original definition applies only in the case of employees in railroad repair shops. As regards other railroad employees, the term South means the Southern Region as set up by the Interstate Commerce Commission. Arkansas, Lousiana, and a large part of Virginia are thus dropped, while the state of Kentucky is added. In the case of employees in gas and electric plants, the term South includes not only the ten states selected at the outset of the study but in addition Delaware, Maryland, Kentucky, Oklahoma, Texas, and West Virginia. » Source: Interstate Commerce Commission, Statistics of Railways in the United States. Average annual earnings obtained by dividing total compensation of employees by average number employed. » Source: Census of Manufactures, 1927. Total wages divided by average number of wage earners. 4 Source: Interstate Commerce Commission, Comparative Statement of Operating Averages, Class I, Steam Railroads in the United States, Years 1925-1928. 6 Source: National Industrial Conference Board, Wages in the United States, p. 66. The report in question gives average hourly earnings by geographic divisions. The figures for average earnings outside of the South, as shown in Table X IV , represent unweighted averages offthe appropriate divisional averages. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY DIFFERENTIALS 49 very closely the differential observed in the case o f trade unionists. Inasmuch as railroad workers represent for the most part a body o f highly skilled and experienced employees, this is about what might be expected. As might be expected, also, the wage differentials applicable to employees o f gas and electric plants are not materially out o f line with the differential for railroad employees. SALARIES OF TEACHERS AND CLERGYMEN Table X V shows how the annual salaries o f southern teachers, college professors, clergymen, and factory clerks compare with the average salaries received in similar call ings in other parts o f the country. In comparing the salaries o f public school teachers, only cities o f 10,000 to 30,000 population were considered. This was done advisedly to in crease the comparability o f the averages. The comparison is still somewhat vitiated by virtue o f the fact that it was not possible to eliminate the salaries o f N egro teachers in computing the southern average. Data covering six south ern states indicate that the average salary o f white teachers is about 16 per cent higher than the combined average o f white and N egro teachers. I f this percentage holds good for all o f the ten states under consideration, the average salary o f southern white teachers becomes 77 per cent o f the average for the rest o f the country instead o f 68 per cent as indicated in Table X V . But even with this adjustment, it will be seen that the salaries o f southern school teachers fall short o f the level prevailing elsewhere by a considerably greater percentage than in the parallel case o f southern col lege and university professors, whose salaries average around 88 per cent o f the general average for the rest o f the country. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 50 INCOME AND WAGES T able IN TH E SOUTH XV Average Annual Earnings in Specified Professional and Clerical Pursuits. Occupation Average Annual Salaries of Public School Teachers in Cities of 10,000 to 30,000 Population, 1925-19262..................................... Average Annual Salaries of College and University Professors, 1926-273......................................... Average Annual Salaries of Clergymen, 19204......................... Estimated Average Annual Salaries of Male Clerks in Manufacturing Establishments, 19195.................. The South1 Remainder of Country Percentage South is of Remainder of Country $1,014. $1,500. 2,660. 3,033. 87.7 716. 981. 73.0 1,537. 1,688. 91.0 67.6 * As regards college and university professors, the term “ South” includes the District of Columbia and the states of Delaware, Kentucky, Maryland, Oklahoma, Texas, and West Vir ginia, in addition to the ten states originally selected. 1 Source: United States Bureau of Education, Biennial Survey of Education, 1924-26, p. 742. Includes salaries of kindergarten, elementary, and high school teachers. 1 Source: Publications of The General Education Board, Occasional Papers, No. 8, Table I, p. 44. ‘ Source: Interchurch World Movement, World Survey-American Volume, p. 286. ‘ Source: Census of Manufactures, 1919. The averages shown above were obtained by divid ing the aggregate of salaries paid by the equated number of clerks. For this purpose one male was considered the equivalent of 1.9 females. For the justification of this procedure see Leven, Income in the Various States, pp. 79-80. This difference is understandable when it is considered that professors are normally drawn from a nation-wide area, whereas public school teachers are as a rule recruited locally. It will be seen from Table X V that the salaries o f south ern clergymen average around 73 per cent o f the prevailing level elsewhere. This percentage may possibly misrepresent the present situation since it is based on data which are ten years old. It is known, however, that ministers’ salaries vary closely with teachers’ salaries in different parts o f the country.1 Since the respective salary differentials for teach ers and clergymen as given in Table X V are not far apart, 1Leven, Income in the Various States, p. 95. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY DIFFERENTIALS 51 it may be assumed that the relative difference in present ministerial salaries, as between the South and elsewhere, is still substantially as indicated. According to Table X V the average salary o f male clerks in southern manufacturing establishments is only nine per cent below the comparable average for the rest o f the country. A number o f considerations, however, serve to cast doubt upon this result. The figures used are over ten years old and apply to a year in which conditions were abnormal. The salary averages have been estimated on a basis which involved certain questionable assumptions. F i nally, in view o f the smaller average size o f southern estab lishments, there is no certainty that comparable groups o f employees were involved. OMITTED OCCUPATIONS In concluding the present survey o f southern income and wages, it is pertinent to observe that the picture drawn is far from complete. Important elements o f the working population, for instance the large group o f domestic servants and the numerous class o f persons engaged in trade, have been left out o f the reckoning altogether. This deficiency, however, may not be as serious as it appears. The investi gations o f the National Bureau o f Econom ic Research indi cate that wages in occupational groups which are recruited from the same class o f society are to a certain extent inter dependent.2 T o the degree that this tendency may be re lied upon, it is thus possible to consider the wage differentials worked out in the present study for a limited number o f employments as representative o f the average differentials 'Leven, Income in the Various States, p. 95. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 52 INCOME AND WAGES IN THE SOUTH applying to groups o f occupations drawing employees from the same economic class. Making a practical application o f this reasoning, it is probably safe to assume that the average wages o f southern domestic workers fall short o f the pre vailing level o f wages elsewhere by about the same margin as was noted in the case o f unskilled common labor, that is, by from 40 to 50 per cent. The income differential applying to persons engaged in trade is probably considerably less than this. Trade, however, is a general term which encom passes a wide variety o f occupations, ranging all the way from newsboys and porters to proprietors o f stores and bank presidents. This miscellaneous assortment o f employments would obviously have to be broken up into subgroups before any generalizations could be hazarded. S UMMARY OF FINDINGS It can scarcely be claimed for the statistical investigation, which has just been brought to a close, that it has resulted in the discovery o f any new and startling information. The statistics which have been presented merely supply quanti tative confirmation o f certain facts and tendencies o f which inform ed Southerners have been aware for a long time. These facts and tendencies may be summarized briefly as fo llo w s: M oney incomes and money wages are quite generally lower in the South than in the rest o f the country. The degree o f difference, however, cannot be summed up in a single percentage which applies uniformly to all industries and types o f employment. Notwithstanding the publicity which has lately centered around the lower level o f factoryearnings, it is not in manufacturing but in agriculture that https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY DIFFERENTIALS 53 the income differential between the South and the rest o f the country reaches its maximum. This is all the more serious for the South, since agriculture represents the main source o f livelihood o f nearly half o f its population. The average per capita income o f the southern agricul tural classes is, roughly speaking, about one-half o f the aver age income received by similar classes in other parts o f the country. Outside o f agriculture, the extent to which south ern earnings and rates o f pay fall below those o f the rest o f the country seems to depend largely on the factor o f skill. The differential in rates o f pay for the least skilled type o f common labor appears to be on a par with the differential in agriculture. F or common labor in general, southern wages seem to range from 50 to 65 per cent o f the wages in com parable employments elsewhere. In semi-skilled employ ments, the range o f southern wages seems to be from 65 to 85 per cent o f the comparable wages paid elsewhere. In the case o f skilled mechanics, the disparity between the South and the rest o f the country appears to reach its minimum, southern wage rates representing from 75 to 100 per cent o f the corresponding wage rates obtaining outside o f the South. The differentials noted do not seem to be materially affected by the character o f the employing agency, applying in substantially equal degree to wages paid by strictly private enterprises, public utilities, and governments. The extent to which average wages for entire industries in the South fall short o f average wages in similar industries elsewhere is determined largely by the relative proportions o f skilled and unskilled workers employed. In industries which employ a high percentage o f unskilled workers, as for https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 54 INCOME AND WAGES IN THE SOUTH instance in the sawmill industry, the disparity in wage levels as between the South and the rest o f the country is large. In the foundry and machine shop industry, which employs a high percentage o f skilled workers, the disparity between the South and the rest o f the country is relatively small. LABOR COSTS AND REAL WAGES In order to guard against the drawing o f unwarranted conclusions, it is important that the limitations o f the statis tics presented be clearly understood. In the first place, it should be borne in mind that the incomes and wages dealt with are primarily money incomes and money wages. Prac tically the only gainful activity in which income items other than cash have been taken into account is agriculture. This particular limitation has very little significance, since most gainfully employed persons other than farmers receive their income in the form o f cash. But one exception o f some consequence deserves to be noted. Southern textile em ployees customarily receive certain valuable perquisites in addition to their cash wages. Thus the great m ajority o f them live in company-owned houses for which they pay less than a full commercial rental. Electricity, coal, and wood are also frequently supplied by the companies at less than the full commercial rates. The National Industrial Con ference Board estimated the annual value o f perquisites such as these at $87 per family in Charlotte, North Carolina, in 1920.3 N o comprehensive statistics on the value o f the non cash elements o f the average textile worker’s income are available, however, and in the present study only money 3 National Industrial Conference Board, Special Report No. 8, May, 1920, p. 18. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WAGE AND SALARY wages have been considered. DIFFERENTIALS 55 Had it been possible to include the non-cash items, the wage differentials between the South and elsewhere, as regards the textile industry at least, would have been somewhat reduced. From the point o f view o f the industrial enterpriser, regional differences in money wages are, o f course, not im portant unless they reflect actual differences in the labor cost o f producing comparable commodities. In other words, the employer o f labor is interested not only in the money wage which he pays out but in the value o f the services which the worker gives in return for his wages. L ow money wages do not necessarily mean low labor costs. It would be a seri ous mistake, therefore, to assume that the differences in money wages between the South and the rest o f the country, as worked out for the present purpose, represent correspond ing differences in labor costs per unit o f product. The spread o f industry to the South in recent years, coupled with the known differentials in money wages, make it a reasonable supposition that southern labor costs, in certain productive activities at least, are somewhat lower than else where. However, the statistics on money wages developed in the present study are not o f themselves sufficient to prove the correctness o f this supposition. Just as the employer o f labor is interested primarily in labor costs, so the wage receiver is interested not so much in his money wages as in his real wages, that is, in the standard o f living which his money wages will enable him to support in the particular locality in which he lives. It would doubtless be desirable to know to what extent the differences in money incomes worked out for the present https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 56 I N C O M E A N D WA GE S I N T H E S OUT H study correspond to differences in real incomes. This in formation might not be difficult to obtain, if the living re quirements and tastes o f wage earners were everywhere alike and if there were no qualitative but only quantitative differences in real incomes. But as a matter o f actual fact, such variables as climate and other environmental factors, as well as dissimilarities in social habits, render any attempt to measure the disparity in real income as between the South and elsewhere an extremely hazardous undertaking. The fact that the income and wage differentials given in the present study have not been adjusted for regional differences in the cost o f living does not deprive these fig ures o f their primary significance. As has already been in dicated, the average amount o f money income per capita in the South is less than half o f the corresponding average for the rest o f the country. So great a disparity in money in come must necessarily carry with it a significant difference in real income in a country as closely integrated, economi cally, as is the United States, in which a large proportion o f the necessities and satisfactions o f life are supplied by or ganizations which operate on a national scale. A consideration o f even greater importance from the standpoint o f the present investigation is the fact that the translation o f money wages into real wages would not change the relative size o f the various wage differentials with refer ence to one another. In other words, the measurement o f wages in terms o f commodities and services instead o f in terms o f money would not affect the relationship observed to exist between the size o f the wage differential and the factor o f occupational skill. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis CHAPTER V W H Y S O U T H E R N IN C O M E S A R E L O W T H E F A C T S o f the southern income and wage situ ation, as they have just been summarized, raise one or two questions which invite further discussion. In the first place, what factors are responsible for the South’s extremely low average o f income per capita ? According to the figures o f the National Bureau o f Econom ic Research, shown in Table II, the total income o f the South divided by the total population yields a quotient which on the average is less than half as great as the corresponding quotient for the rest o f the country. These figures, it is true, refer to the years 1919, 1920, and 1921. However, as indicated by the data contained in Tables III and IV , in neither agriculture nor manufacturing have subsequent changes been great enough to make the present relative position o f the South materially different. One circumstance which partially accounts for the South’s low average is the relatively small number o f South erners belonging to the higher income classes. This factor cannot be rated as o f prime importance, since the recipients o f very large incomes are not sufficiently numerous nor sufficiently affluent to exercise a marked influence on the general income average.1 Another factor, o f course, is the lower scale o f wages and salaries in the South, as well as the smaller returns per worker in agriculture. ever, does not offer a complete explanation. This, how A s has been noted, the average amount o f income per capita in the South 1 See King, The National Income and Its Purchasing Power, p. 178. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis [5 7 ] 58 I N C O M E A N D WA G E S I N T H E S OUT H is less than half o f the corresponding average for the rest o f the country. Not even in agriculture nor in the least skilled o f non-agricultural employments are the disparities in per capita productivity and rates o f pay as great as the disparity in per capita income. It is obvious that another factor must be looked for in order to explain adequately the low average o f income in the South. That factor is found in the occu pational distribution o f its population. The rewards offered by the various forms o f gainful employment are by no means all alike. Manufacturing yields a larger average return per person engaged in it than does agriculture. Some forms o f manufacturing activity yield larger returns per worker than do others. Irrespective o f regional differences in wage and salary scales, it is pos sible for one geographic area to have a lower average level o f income than another simply because its working popu lation is more highly concentrated in occupations and em ployments o f relatively low return. This is one o f the main reasons for the low level o f income in the South. A dis proportionately high percentage o f its population is employed in the low-yield industries. THE PREPONDERANCE OF LOW-YIELD OCCUPATIONS Under present conditions, agriculture probably offers smaller returns to those engaging in it than any other m ajor economic activity. The per capita productivity o f southern agriculture, as has been seen, is particularly low. Neverthe less about 46 per cent o f the southern population depends on agriculture for support. Elsewhere, the proportion o f the population which still elects to support itself by farming is only 24 per cent. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W H Y S O U T H E R N I N C O ME S ARE L OW 59 Since manufacturing on the whole yields larger per worker returns than does agriculture, a shift o f man power from the latter to the former activity would tend to increase the South’s per capita income. During recent years, the number o f factory wage earners in southern establishments has been increasing steadily. The percentage o f the southern population engaged in manufacturing and mechanical pur suits, however, is still far below the average for the rest o f the country.2 M oreover, the particular industries which em ploy the largest number o f southern workers are, generally speaking, industries which rely heavily on unskilled and semi skilled labor and in which average earnings per worker are consequently low. This fact is brought out by Table X V I, which shows the relative importance o f specific types o f manufacturing activity in the South from the point o f view o f the number o f wage earners employed. It will be noted from Table X V I that half o f the indus trial wage earners o f the South are concentrated in two in dustries, textiles and lumber and timber. Regardless o f where they are carried on, both o f these industries rank low as regards average earnings per worker employed. Massa chusetts employs more cotton textile workers than any other state outside o f the South. The average annual earnings o f its textile workers, as indicated by the Census o f Manufac tures, fell short o f the average earnings o f other factory wage earners within the state by approximately 24 per cent in 1927. In Michigan, the average annual earnings o f work ers in the lumber and timber industry were some 27 per cent 2 In 1920, according to the Census of Occupations, 18.1 per cent of the working population of the South was engaged in manufacturing and mechanical pursuits as compared with 33.7 per cent of the working population elsewhere. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 60 I N C O M E A N D WA G E S I N T H E S OUT H below the general average o f other industrial wage earners within the state. Even in Oregon, where wages in the lum ber and timber industry are exceptionally high, there was, nevertheless, a disparity o f nine per cent between the average earnings o f workers in that industry and the general average o f earnings applicable to other industries o f the state, in 1927. In most o f the northern industrial states, the effect o f the low-wage industries is more or less offset by the presence o f industries in which earnings per worker are high. N o table examples o f high high-wage industries are printing and T able X V I N u m b e r o f W a g e E a r n e r s E m p lo y e d in S p e c ific T y p e s o f i n g A c t i v i t y in th e S o u t h , Y e a r Type of Activity M a n u fa c tu r 1 9 2 7 .* Average Number of Wage Earners Employed Percentage of Total Textiles: Cotton Goods...................................................... Knit Goods.......................................................... 5270,995 47,063 25.8 4.5 T o t a l .................................................................. $318,058 30.3 21,951 2.1 193,155 18.4 Railroad Repair Shops............................................. Tobacco and Tobacco Products.............................. Turpentine and Rosin............................................... $215,106 59,800 36,971 33,766 28,356 20.5 5.7 3.5 3.2 2.7 Iron and Steel Products Including Cast Iron Pine ..................................................... All Others.................................................................. 24,009 335,898 2.3 31.8 G rand T o t a l .................................................... $1,051,964 100.0 Lumber and Timber Products: Planing mill products......................................... Lumber and timber products not elsewhere classified......................................................... T o t al .................................................................. *Census of Manufactures, 1927. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis WHY S O U T H E R N I N C O M E S ARE L OW 61 publishing, automobiles, iron and steel, and foundry and machine shop products. These industries are either absent altogether from the South or are very weakly represented. The foregoing considerations make it evident that the low average o f income per capita in the South is due in the main to three factors: ( 1 ) the relatively small number o f persons receiving large incomes; ( 2 ) the lower scale o f sal aries and wages coupled with the small return per worker in southern agriculture; ( 3 ) the concentration o f the work ing population in industries and employments which yield a relatively low return per worker no matter where they are carried on. INDUSTRIAL WAGES AND AGRICULTURAL PRODUCTIVITY In order completely to explain the difference in per capita income as between the South and elsewhere, it is necessary to account for the wage and salary differentials which were observed to be present in varying degree in practically all o f the occupations studied. T o treat this subject in any basic fashion would carry the discussion far afield. A complex o f many interrelated factors, not all o f them economic, is doubt less involved. The immobility o f certain elements o f the southern working population and the presence o f the N egro with his low standard o f living and limited range o f occu pational choices are obvious elements to be considered. It is not proposed here to go behind the statistical data which have just been presented. These data point to a strong rela tionship between the depressed level o f southern wages and the low income-yielding capacity o f southern agriculture. It has been observed that the income differential between https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 62 I N C O M E A N D WA G E S I N T H E S O U T H the South and the rest o f the country is greater in the case o f agriculture than in the case o f any other employment con sidered. It is in this submerged industry that nearly half o f the southern population gains its livelihood. In view o f these considerations, it is highly significant that it is in the unskilled occupations capable o f being filled by raw recruits from the farm that the wage differential between the South and the rest o f the country reaches its maximum. In semi skilled occupations, which are less immediately affected by the competition o f the agricultural classes, the wage differ ential is considerably diminished. Finally, in highly skilled occupations, which are for the most part out o f reach o f potential industrial workers from the farm, the wage differ ential is at a minimum and in some cases entirely disappears. f a r m e r s ’ in c o m e s There is abundant evidence that the annual incomes o f hundreds o f thousands o f farmers in the South are so de pressed that employment in manufacturing establishments even at existing southern wages would constitute for them a decided advance in the economic scale. Although there are no comprehensive statistics on the average incomes received by farmers in different sections o f the country, the Depart ment o f Agriculture collects annually certain sample data from which important conclusions may be drawn. The de partment has compiled detailed returns covering the oper ations in 1927 o f 5,255 southern farms.3 The average net 8 Yearbook of Agriculture, 1928, p. 1038. The statistics used cover farms located in the South Atlantic and South Central States. That is, the territory covered includes in addition to the ten states selected for the present study, the states of Delaware, Maryland, West Virginia, Kentucky, Texas, and Oklahoma. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W H Y S O U T H E R N I N C O M E S ARE LOW 63 income from these farms, including the value o f food pro duced and used on the farm, and after the deduction o f in terest at 5 per cent on the farm investment, was $635 in the South Atlantic States and $700 in the South Central States. These figures represent family incomes, since the value o f labor contributed by members o f the farmers’ family has not been deducted. L ow as the income figures in question may appear, there are strong reasons for believing that they present too opti mistic a picture to be truly representative o f the conditions prevailing among the rank and file o f southern farmers. The average size o f southern farms is less than 80 acres. The farms from which returns were received by the Depart ment o f Agriculture averaged 189 acres in the South A t lantic States and 249 acres in the South Central States. The farms in question, moreover, were owner-operated farms. O f the 2,060,000 farms reported by the 1925 Census o f A g riculture in the ten southern states which form the basis o f the present study, only 47 per cent were operated by owners or managers. The remaining 53 per cent represented tenantoperated farms. About 516,000 o f the tenant operators, or slightly less than half o f them, were so-called croppers, that is, married laborers, without capital o f their own, hired to raise a crop for a half interest. There can be no doubt that the average income o f all southern farmers, including the 1,090,000 tenant farmers, is considerably lower than indicated by the farm returns re ceived by the Department o f Agriculture. It is possible to arrive at a rough approximation o f the true average on the basis o f the figures for gross farm income given in Table B https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 64 I N C O M E A N D WA G E S I N T H E S O U T H on page 19. A s indicated in that table, the gross value o f all farm products, with duplications eliminated, amounted to about $2,139,000,000 in the ten states under consider ation in 1927. Dividing this amount among the 2,060,000 farms gives a gross income per farm o f $1,038. In the case o f the 5,255 southern farms, for which detailed cost statis tics were collected by the Department o f Agriculture, the net return to the farmer, including the value o f farm products consumed by his family, and after the deduction o f interest at five per cent on the farm investment, represented approxi mately 50 per cent o f the gross farm income. I f this per centage may be taken as applying generally, the conclusion follows that the average southern farmer received a net re turn for his labor and managerial functions o f approximately $519 in 1927. FARM AND INDUSTRIAL INCOMES COMPARED Although the two sets o f figures are not, strictly speak ing, comparable, it is worth while to contrast the average farmer’s income, as calculated above, with the average an nual earnings o f southern factory workers, as indicated by the 1927 Census o f Manufactures. The census average wage, obtained by dividing the annual factory wage bill by the average number o f workers employed, represents an in dividual and not a family income. It is an average, more over, which has been diluted by the inclusion o f women and minors. In view o f these facts, it is all the more significant that in the same year in which southern farmers had an average income o f only $519 per capita, southern factory workers, taken as a whole, had average annual earnings o f $823 per capita; the average annual earnings o f workers in https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 65 W H Y S O U T H E R N I N C O M E S ARE LOW the lumber and timber industry amounted to $748; while, in the cotton goods industry, earnings per worker averaged around $671 per annum. It would, o f course, be a mistake to assume that all southern farmers receive an income equal to $519 per year as a reward for their agricultural efforts. That great num bers receive considerably less than this is indicated by a study made by the North Carolina T a x Commission covering the operations o f 1,115 North Carolina farms in 1927. The poorest farms studied were located in the mountain counties o f the western portion o f the state. Returns from 281 sam ple farms located in three o f these mountain counties indi cated an average cash income per farm o f $86. Including income received in kind, and without deduction o f interest on the farm investment, the average income was $554 per farm. Deduction o f interest at five per cent on the value o f the farm investment left an average o f only $273 as the farmer’s labor and managerial income.4 In the same year, 1927, workers in North Carolina cotton mills had an aver age census wage o f $694 per annum. FUTURE OF THE WAGE DIFFERENTIAL T o the theoretically minded, the South today presents the spectacle o f an economic system in unstable equilibrium. Southern wage rates, especially for unskilled labor, are con siderably below the average for the rest o f the country. Manufacturing offers larger rewards to the rank and file o f southern workers than are normally obtainable in agriculture. Theoretically, this situation should be expected to set strong currents in motion. Industrial enterprises, whose successful * Report of the North Carolina Tax Commission, 1928, p. 119. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 66 I N C O M E A N D WA GE S I N T H E S OUT H operation depends upon the availability o f large numbers o f unskilled and semi-skilled employees, should be expected to move to the South. There should be a flow o f labor from agriculture to manufacturing, a flow which should be com paratively rapid in view o f the South’s million or more ten ant farmers with little in the way o f capital investment to tie them to the land. There should also be some tendency for southern labor to migrate to the high wage industrial centers o f the North. Such scant statistical evidence as is available indicates that the movements described have to a certain extent actu ally been taking place. Manufacturing activity in the South has been expanding more rapidly than in the rest o f the coun try. A ccording to the Census o f Manufactures, the number o f factory wage earners employed outside o f the South de creased by about nine per cent between 1919 and 1927. W ithin the South, however, the number o f persons employed in manufacturing establishments increased by nine per cent during the same period. Although the shift o f man power from agriculture to other employments is not peculiar to any particular region, the movement seems to be progress ing more rapidly in the South than elsewhere. Thus, be tween 1920 and 1925, the farm population o f the ten southern states under consideration showed a decline o f approximately 12 per cent. Outside o f the South the de cline in the farm population was only six per cent.5 The 6 The farm population figures for 1925 are not strictly comparable with those reported in 1920, since the definition used in 1920 included not only persons living on farms, but, in addition, farm laborers and their families who, while not living on farms, did live in rural territory. The Census Bureau expresses the belief that the number of laborers thus included is not very great. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis W H Y S O U T H E R N I N C O M E S ARE L OW 67 absolute decline in the southern farm population between 1920 and 1925 was in the neighborhood o f 1,300,000 per sons. Some part, at least, o f this loss was due to migration to the North as is evidenced by the rapid growth o f the N egro population o f certain northern cities. A n optimist might be inclined to view the tendencies noted above as an augury o f the ultimate disappearance o f the southern wage differential. H e would doubtless seek to justify his faith by reasoning somewhat as fo llo w s: W ages in the South are low because the sole source o f livelihood o f nearly half o f the population is a particularly unprofitable agriculture. I f agriculture could be made to yield a more adequate living to the present masses o f south ern farm dwellers, there would be a corresponding rise in the level o f industrial wages. I f such a solution be regarded as chimerical, the only other alternative, aside from migration, is to create opportunities for employment in more remuner ative lines o f endeavor. Even at the present scale o f wages, industry has more to offer the southern worker than has agriculture. I f industry can be expanded to the point where it is capable o f absorbing the sub-marginal workers on the farms, the wage differential between the South and the rest o f the country should, in the course o f time, automatically disappear. Pending the completion o f this process, the wage differential has a useful purpose, for it serves both as a lure to attract the industrial capitalist and as a stimulus to migra tion. T o attempt to reduce or remove it by artificial means would only retard the growth o f southern industry and con demn the tenant farmer to a longer period o f poverty on his farm. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 68 I N C O M E A ND WA GE S I N T H E S O U T H Individuals who have less faith than the optimist in the beneficent workings o f unregulated economic forces are not likely to find this reasoning convincing. They may very well point out that the income disparity between the South and the rest o f the country is as old at least as the Civil W ar and that it has not as yet disappeared automatically. In the opin ion o f such as these, the present situation in the South calls for a high order o f economic statesmanship rather than for a supine policy o f laissez-faire. I f the latter view is correct, and if more positive meas ures are required to raise the level o f income in the South, one fact seems clear. Such measures, if they are to succeed, must not neglect the South’s two million farmers. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis