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revised equivalence scale
F O R E S T IM A T IN G
E Q U IV A L E N T IN C O M E S
OR BUDGET COSTS
B Y F A M IL Y T Y P E
B u lle t in N o . 1 5 7 0 - 2
U.S. DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS
revised equivalence scale
FOR ESTIMATING
EQUIVALENT INCOMES
OR BUDGET COSTS
BY FAMILY TYPE
B ulletin No. 1 5 7 0 -2
U.S. DEPARTMENT OF LABOR
Willard Wirtz, Secretary
BUREAU OF LABOR STATISTICS
Ben Burdetsky, Acting Commissioner
November 1968
For sale
by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402
Price 35 cents
Preface
Family equivalence scales are measures to determine the relative income required by
families differing in composition to maintain equivalent levels of consumption. Ideally,
such information would be obtained by developing estimates of budget costs for
specified standards of living for various types of families. In lieu of such a battery of
family budgets, which would be costly and time-consuming to construct, family equiv
alence scales have been developed for use with estimated budget costs for a specific
type of family to approximate comparable costs for other family types.
Policy decisions and legislation designed to maintain or improve standards of
living have multiplied the uses of such equivalence scales. Minimum wages, social
security and other social insurance programs, as well as guidelines for public assistance,
may be determined on the basis of prescribed levels of adequacy for family living.
Programs for college scholarships, for public housing, and for distribution of food
through the Food Stamp Plan are among those that attempt to distribute benefits
equitably by stipulating family income as a criterion of eligibility.
The intensified attack on poverty after passage of the Economic Opportunity Act
of 1964 promptly spotlighted a basic problem facing the Office of Economic Oppor
tunity-defining and identifying the poor. A given income could not indicate
comparable well-being for all types of families. Income adequate for an elderly
couple fell short of meeting equivalent needs of families with several children.
The Bureau’s Survey of Consumer Expenditures, 1960-61, provided data for
calculating new scale values for urban families of different sizes, cross-classified by
family composition and age of head. In a sense, the scales introduced in this bul
letin may be regarded as a progress report on the continuing program of research
being conducted by the Bureau of Labor Statistics (BLS) to measure and evaluate
levels of material well-being of American families. A great deal is yet to be known
about the consumption behavior of families at different phases of the life cycle. The
Bureau’s efforts, as well as research outside the Bureau referred to in appendix D,
recognize the need for continued study and review of the assumptions and methods
used in deriving equivalence scales.
This bulletin was prepared by Carolyn A. Jackson under the supervision of
Helen H. Lamale, Chief of the Division of Living Conditions Studies and Kathryn R.
Murphy, Chief of the Branch of Consumer Expenditure Studies. It is one of a series
of bulletins prepared under the general direction of Arnold E. Chase, Assistant Com
missioner, to report results of the standard budget research program.
m
Contents
Page
Concepts and assumptions....................................................................................
Formula derivation ..............................................................................................
Food expenditures-income elasticity ................................................................
Steps in deriving scale based on food
expenditures-income.........................................................................................
Effect of family composition and age of head ................................................
Comparison with other scales...............................................................................
Application of the scale ....................................................................................
Costs of goods and services ..........................................................................
Total budget c o s t s ...........................................
Tables:
1. Revised equivalence scale for urban families of different size, age,
and composition....................................................................................
2. Equivalent income scales from selected studies .................................
3. Estimated annual cost of goods and services for family
consumption at a moderate standard for families of differing
size, type, and age...............................................................................
4. Estimated annual cost of a budget providing a moderate living
standard for families of differing size, type, and age ....................
1
1
2
3
5
7
9
9
11
4
8
10
12
Appendixes:
A. Revised scale of equivalent income before ta x e s .................................
Table A-l Revised scale of equivalent income for urban families
of different size, age, and composition ...........................................
B. Experimentation with food consumption and total consumption
in scale...................................................................................................
C. Technical referen ces...............................................................................
D. Research on scales outside the Bureau of Labor Statistics.................
13
14
15
17
21
Chart:
Revised equivalence scale for selected types of urban families composed
of husband, wife, and children ..................................................................
iv
6
REVISED EQ U IV A LEN CE SCALE:
FOR
ESTIM ATIN G
BUDGET COSTS
BY F A M I L Y T Y P E
Concepts and
The basic problem in deriving an equivalence scale is
to obtain an objective means of identifying equivalent
levels of consumption for families of varying compo
sition. Research and experimentation with family con
sumption data accumulated for more than 100 years
have resulted in various criteria of general welfare.
These include the relative adequacy of diets, the pro
portion of income spent for various categories of goods,
or the proportion of income saved. 1
Assum ptions
The BLS Survey of Consumer Expenditures in 1950
provided the detailed cross-classification of family ex
penditures necessary for a scale differentiating six
family-size classes by family composition and age of
head.5 In that scale, the measure used to determine
equivalent income was the proportion of income after
taxes spent on food. It is based on the assumption that
families spending an equal proportion of income on
food have attained an equivalent level of total consump
tion. The same assumption underlies the revised scale
presented here.
Historically, a food-income relationship has been the
most commonly accepted criterion for appraising levels
of living in the United States and in other countries. In
1857, Ernst Engel observed, “The proportion of the
outgo used for food, other things being equal, is the best
measure of the material standard of living of a popu
lation.” *2
Formulation of the equations used for the two latest
BLS equivalence scales was preceded by extensive
research showing that essentially the same form of re
lationship between food expenditures and income was
observed in eight major consumer expenditure surveys
conducted by the BLS between 1888 and 1950.6
Before adopting the 1950 method for the present re
vision, similar research on the income elasticity of food
expenditures was conducted with data from the Survey
of Consumer Expenditures, 1960-61.
Scales based on a combination of food and nonfood
items have been developed, but they have presented
more technical difficulties than those based on food
alone. The problems arise partly because housing and
certain other nonfood expenditures are family rather
than individual in character. Prais and Houthakker
referred to the difficulties of using nonfood items in
scales in terms of the “existence of economies of scale.”
This concept “gives expression to the possibility that,
with given levels of income per person, a larger house
hold may be able to attain a higher standard of living
than a smaller household.” 3*
The principal advantage of the current BLS method
of approximating equivalent levels of consumption is
its objectivity. It can be calculated directly from
measures of actual market behavior of different groups
of families. Also, from an operational standpoint, the
method is easy to use. It shares limitations of equiva
lence scales derived by other methods: The assumptions
on which they are based are arbitrary and do not take
into account all of the factors affecting levels of con
sumption for families differing in size and stage in the
life cycle.
In 1948, the BLS presented two scales for measuring
equivalent income of families of different sizes with its
initial calculation of the City Worker’s Family Budget.4
These BLS scales or relatives of “family well-being”
were based on adequacy of diets and amounts of savings.
They related only to family size, and did not differ
entiate by age of head or age of oldest child.
Form ula
D erivation
The relatives or indexes of equivalent income for
families differing in size, type, and age of head who
attained equal levels of consumption were derived from
iFor a summary of early consumption scales and source refer
ences, see technical reference 26, appendix C.
See also
technical references 9, 16, and 27. In addition, appendix D
contains notes on procedures used outside the Bureau of Labor
Statistics in deriving measures of equivalence.
2A s translated in Carle C. Zimmerman, Consumption and
Standards o f Living, technical reference 27, p. 99, appendix C.
3See appendix D and technical reference 16, pp. 145-146,
appendix C.
^Technical reference 23, pp. 28-30 and 49-51, appendix C.
EQ U IV A LEN T IN C O M E S OR
te c h n ic a l reference 22, appendix C.
^Technical reference 3, pp. 149-156, and technical reference
18, pp. 359-393, appendix C.
1
was computed for all urban families and single con
sumers. It was derived from a regression of the loga
rithm of average annual food expenditures8 on the
logarithm of the average annual money income after
taxes for nine income classes, excluding the class “under
$ 1,000.” The relationship was linear, and the regression
coefficient (or the income elasticity of food expenditure)
was 0.53. This figure compares favorably with the elas
ticity of 0.54 found by previous studies,9 and substan
tiates the 0.5, or Vi, in the formula used to derive the
scale. The value was rounded in the formula to avoid an
implication of overprecision and to simplify compu
tations.
the functional relationship of food expenditure and
income,7 and expressed by formula:
(1) yi= Ki Cxi)°
Where,
y.= the average expenditure for food by family type i
X|= the average money income after taxes of family
type i
Ki= the measure of level of the income-food expendi
ture relationship for family type i
Elasticities also were computed for the family types8
shown below:
Deviation in
standard
units*
e= income elasticity of food expenditures, assumed
to be approximately
tfl
The ratio of food expenditures to income for the i
type family,
K.
*i _ —E.
—
Xj
K 4
1.62
Husband-wife, oldest child
under 6 years
y ' = 1.0838 + .5 3 2 8 x '................... 045
.73
Husband-wife, oldest child
6-17 years
y / = 1.2714+ .5092X7 ....................020
.45
Husband-wife, oldest child
18 years and older
y '= 1.2310 + .5 1 8 7 x '....................022
.83
One parent-own children
only
y ' = .8914 + . 5 9 4 8 x '....................018
5.12
Single consumer (one person)
y '= .5461 + . 6 4 9 0 x '....................099
1.50
(derived by dividing equation (1) by Xj),
(x / 2
when K.
Husband-wife only
y / = 1.1098 + .5 2 2 7 x '................... 014
(x ^ 2
( x 4 ) 1/2
(2) or x{
K. 2
K.
Before deciding to use this method for revising the
scale, the validity of the assumption that the income
elasticity of food expenditures was 0.5 was tested with
data from the Survey of Consumer Expenditures,
1960-61. Special tabulations also were obtained to
experiment with an alternative scale based on the
1960-61 relationship of food consumption and total
consumption. This alternative scale is discussed in
appendix B.
*Assuming universe “e” = 0.5, deviation equals e. . eu
----------y ' = log of food expenditures
x' = log of money income after taxes
£ j~ ei
Fo o d E x p e n d i t u r e s - l n c o m e E l a s t i c i t y
The income elasticity of food expenditures, or e in
formula (1)
8Average food expenditures for each income class were
adjusted for family size by using an equation which expresses
the relationship between the reported family size and the average
family size. This empirically derived relationship for standard
izing family size was developed by Dorothy S. Brady and
Helen A. Barber; see technical reference 2, appendix C.
9Research of Brady and Snyder cited in technical references 3
and 18 showed that income elasticities of food expenditures cal
culated from over 300 cross-section family expenditure studies
in individual cities at different dates yielded an average value of
0.54.
yr W
7This is the formula used in deriving the scale based on the
1950 data (see technical reference 22, pp. 1198-1199). For a
detailed discussion of the consumption function, see technical
references 3 and 18, appendix C.
2
The standard error of the elasticity (a - e^ was
highest for one-person families. The income distribu
tion for this family type showed very few persons in
the top two classes ($10,000 to $14,999 and $15,000
and over).10* Averages based on the food expenditures
reported by this small number were not considered re
presentative of either the level of food expenditures or
the distribution of total food costs between home pre
pared food and meals in restaurants, etc. for all indi
viduals with incomes of $10,000 or more. Exclusion of
the top two income classes from the regression reduced
the food elasticity for one-person families to 0.51 and
the standard error to 0.033.
1960-61, were made for urban families. Data were tab
ulated for each of the four major geographic regions
(Northeast, North Central, South, and West) and were
combined with population weights to represent the
entire urban United States. These tabulations provided
average income after taxes and average food expendi
tures per family for a three-way classification of
families13 by: (1) family size, (2) family type, and
(3) age of family head. (See table 1.)
The following steps were required to derive the equa
tion of equivalent income x
/k \ 2
1. K., or y.
The one parent-children family was the only type for
which the elasticity (.59) differed significantly (at the
1-percent level) from the Vi or 0.5 assumed in the for
mula. The relation was linear, and no unusual cases
explaining the high regression coefficient could be
isolated. H
(when y = average food expenditure,
(x ^ 2
x = money income after taxes
for ith class) was computed for each size-age-type class.
2. Ratios of K. to K4 for the base class-husband 35
to 44 years, wife, and 2 children, the older 6 to i5
years—were calculated and squared.
The algebraic adjustment to the scale to account for
the elasticity of income for food being different from
that of the base family was computed.12 The effect on
the scale results, however, was minor, and for all prac
tical purposes a scale for one-parent families derived in
the same manner as for all other types is adequate.
3. The squared K ratios for all urban U.S. families
were plotted by family type-size for different ages of
head and smoothed graphically. Where necessary, lines
representing the U.S. were smoothed by averaging
regional differences by inspection.
Food Expenditures-lncom e
4. A second graphic smoothing was made after
plotting the ratios obtained in step 3 by age of headfamily type for each size group.
To obtain data in the form required for the scale of
equivalence represented by equation (2) above, special
tabulations from the Survey of Consumer Expenditures,
5. The smoothed values for seven age-of-head classes
were combined by population weights into four classes,
as follows:
S t e p s in D e r i v i n g S c a l e
Based
on
Under 35 years (Under 25 and 25 to 34)
35 to 54 years (35 to 44 and 45 to 54)
55 to 64 years
65 years and over (65 to 74 and 75 and
over)
^Survey o f Consumer Expenditures and Income, 1960-61:
Cross-Classification by Family Characteristics, Urban United
States, 1960-61, Supplement 2 to BLS Report 237-38, p. 3.
1 !The one-parent families were the smallest group for which a
food/income regression was computed. It may he less homo
geneous than the other family types since by definition it
includes a parent with only grown children, as well as a parent
with young children.
12The principal difference in the case where a family-type has
an income elasticity for food different from that of the base
family is that the equivalent income ratio is no longer a con
stant but varies with the income of the base family. For
example, in the case where the i-th family type has an elasticity
of 3/5 the ratio becomes:
The scale values are shown in table !.
13This is the principal difference between the procedures used
with 1960-61 and 1950 data. In 1950, three-way classifications
were not available. Therefore, an iterative process was used to
obtain the three-way classifications from averages for food
expenditures and income for each size-age class and each sizetype class. In combining the size-age and size-type classes, the
x
x4
(x )1/2
was assumed to be proportional to Kj on the basis of evidence
from the earlier large sample surveys of 1935-36.
and it would be necessary to recompute the scale value each
year a different budget (i.e., x^) is estim ated.
3
T a b le !«
R e v is e d E q u iv a le n c e S c a le 1 F o r U rb a n
F a m ilie s o f D iffe r e n t S iz e , A g e , and C o m p o s itio n
|_4 -pe rson fa m ily - h u s b a n d , a g e 35 to 54, w ife , 2 c h ild r e n , o ld e r 6 to 15 = 1 0 0 ]
A g e o f he ad
S iz e and ty p e o f f a m il y 2
U nder
65 o r
over
35
3 5 -5 4
5 5 -6 4
O ne p e r s o n .....................................................................................................
35
36
32
28
T w o p e rs o n s : a v e ra g e 3 ..........................................................................
H u s b a n d and w i f e ....................................................................................
47
59
59
52
49
60
59
51
O ne p a re n t and c h i l d ..............................................................................
40
57
60
58
a v e r a g e 3 .......................................................................
62
81
86
77
H u s b a n d , w if e , c h ild u n d e r 6 .............................................................
62
69
—
-
H u s b a n d , w if e , c h ild 6 -1 5
62
-
82
88
491
88
81
-
T h re e p e rs o n s :
................................................................
H u s b a n d , w if e , c h ild 1 6 - 1 7 ................................................................
H u s b a n d , w if e , c h ild 18 o r o v e r ......................................................
O ne p a re n t, 2 c h i l d r e n ..........................................................................
-
82
85
77
67
76
82
75
91
.......................................................................
74
99
109
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r u n d e r 6 ) ...............................
72
80
~
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r 6 - 1 5 ) ......................................
77
—
-
100
105
95
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r 1 6 - 1 7 ) ..................................
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r 18 o r o v e r ) ........................
113
125
—
88
96
96
no
O ne p a re n t, 3 c h i l d r e n ..........................................................................
F o u r p e rs o n s :
a v e ra g e 3
—
-
89
—
a v e r a g e 3 .......................................................................
94
118
124
—
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t u n d e r 6 ) ...........................
87
97
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 6 - 1 5 ) ..................................
96
116
—
120
—
-
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 1 6 -1 7 ) ...............................
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 18 o r o v e r) .....................
128
119
138
124
-
~
.......................................................................
108
117
—
—
.........................................................
F iv e p e rs o n s :
O ne p a re n t, 4 c h ild r e n
111
138
143
~
H u s b a n d , w if e , 4 c h ild r e n or m o re , ( o ld e s t u n d e r 6 ) . . . .
101
—
—
—
H u s b a n d , w if e , 4 c h ild r e n o r m o re , ( o ld e s t 6 -1 5 ) . . . . . .
no
132
-
—
-
-
146
149
140
-
-
125
137
S ix p e rs o n s o r m o re:
a v e ra g e 3
H u s b a n d , w if e , 4 c h ild r e n o r m o re , ( o ld e s t 1 6 - 1 7 ) ..............
H u s b a n d , w ife , 4 c h ild r e n o r m o re , ( o ld e s t 18 o r o v e r) . .
O ne p a re n t, 5 c h ild r e n o r m ore
......................................................
^The scale value s shown here are the percentages of the co st o f goods and se rvice s for fa m ily consum ption o f the base fa m ily
(4 persons— husband, age 35-54, w ife , 2 c h ild re n , older c h ild 6-15 years) required to provide the same level of liv in g fo r urban
fa m ilie s o f d iffe re n t s iz e , age, and c o m position.
^H u sb a n d -w ife and one-parent fa m ilie s w ith th e ir own c h ild re n (in c lu d in g adopted and s te p c h ild re n ) present, but w ith no other
persons liv in g w ith the fa m ily .
^Scale value s fo r in d iv id u a l fa m ily types w eighted by the number o f fa m ilie s of each type in the u n ive rse . The averages in clu d e
some types for w h ich value s were not shown s ep arately because of the sm all number of such fa m ilie s in the sam ple.
^ R e v is e d .
SOURCE:
D erived from BLS Survey o f Consumer E xp e n d itu re s, 1960-61*
4
Effect of F a m i l y C o m p o s i t i o n
school, and has not begun the period of rapid growth
and the pattern of expenditures associated with teenage
youth. A comparison of these young families and the
same type families having an older head (35 to 54 years)
supports this observation. For all family sizes, the in
come required for equivalent consumption is higher for
the group headed by 35 to 54-year-old fathers than by
younger ones. When the father is 35 to 54, probably his
oldest child is more frequently 13 to 15 than under 12
years. This 35 to 54 age group, which includes the basetype family, shows most completely the range of chang
ing income requirements as the children grow up.
a n d A g e of H e a d
The scale value for each size and type of family in
each age class shown in table 1 is expressed as a percent
of the spendable income for four-person urban families,
composed of husband age 35 to 54 years, wife, and two
children, the older of whom is 6 to 15 years old. This
general type is most comparable to that described for
the City Worker’s Family Budget, which consists of an
employed husband 38 years old, his wife, a 13-year old
son, and an 8-year old daughter.14 Application of the
scale to costs for consumption goods and services in the
City Worker’s Family Budget (CWFB) provides estimates
of budget costs for consumption goods and services
(spendable income) required by different types of urban
families.
Income and other personal taxes, social
security deductions, etc. vary by family size, age, and
level of income, and therefore must be calculated sepa
rately. An adjusted scale appropriate for application to
income before taxes or total budget costs is described
in appendix A.
Families whose oldest son or daughter is 16 or 17
years old in general need more income than other fami
nes; those whose oldest child is 18 years old and over
tend to have income requirements similar to families
whose oldest child is 6 to 15 years old. Study of
the food-income relationships for these groups suggests
that although average food expenditures continue to
rise for the 18- and -over type, incomes rise faster.
Families having a child 18 and over had higher aver
age incomes and also a higher average number of full
time earners (1.3 earners) in 1960-61 than any other
type of family.17 These data indicate that in a third of
the families having a child beyond high school age, not
only the father but the mother and/or children were
working. If the number of earners had been held con
stant and, in effect, it was assumed that the children 18
years old or over were dependent on the parent’s in
come, the decrease in the scale value probably would
not have occurred. However, it must be stressed that
the data underlying the family equivalence scale had no
limitations on employment of family members, such as
those specified in the standard budgets for the city
worker’s family and the retired couple. The decreasing
scale reflects the anomaly that while the presence of
children 18 and over adds to the costs for equivalent
well-being in some families, these young adults also con
tribute to the achievement of higher levels of living for
the family. On the other hand, food expenditures for
the 18-and-over group may have been understated be
cause of difficulties in reporting amounts spent on meals
by young people attending school away from home.
The new scale based on the 1960-61 food expendi
ture-income relationship confirmed the relationships
revealed by the previous BLS scale based on 1950 data.
To maintain an equivaient15 level of “well being,” (1) as
family size increases, more income is necessary regardless
of the family composition and age of head; and, (2) for
families with a husband, wife, and children present,
income requirements rise as the age of the oldest child
increases from under 6 years to 16 or 17 years old.
The chart shows that for all husband-wife-children
families in which the husband is under 65, the age of
the oldest child makes a difference in the income
required for the family. Families headed by a husband
under 35 are predominantly of two types—the oldest
child is 6 to 15 years or is under 6. Although the first
type needs more income for all family sizes than the
second type, the differences are relatively small. The
reason for the similarity may be that in many families
having a father under 35 and the oldest child 6 to 15
years, that child is under 12,16 attends elementary
The one-parent-children family represents a less
homogeneous group than a husband-wife family type
specifying the age of the oldest child. Less than 7 per
cent of the families of two persons or more in the 1960-
14U.S. Department of Labor, Bureau of Labor Statistics, City
Worker’s Family Budget for a Moderate Living Standard, Autum 1966 (Bulletin 1570-1).
!5 lt should be kept in mind that equivalent “well being” is
measured by the percent of income spent on food.
^Available CES tabulations classify husband-wife families
only by the age range of the oldest child and do not show the
distribution of children within these age classes.
17Survey o f Consumer Expenditures, 1960-61: Cross-Classi
fication o f Family Characteristics, Urban United States, 196061, Supplement 2 to BLS Report 237-38, pp. 17-22.
5
or more
or more
N u m b e r of p e r s o n s In family
Source: T ablet.
or more
61 urban sample were the one parent-children type. 18
Because the sample was small, these families were not
cross-tabulated by the age of oldest child. Sixty percent
of the two-person, one-parent families had no children
under 18 and in all probability the parent would be
over 35 years. The scale, therefore, of one parentchildren composed of two persons, the head being 35
years and over would be roughly comparable to the
scale values for the husband-wife only type in that age
range. (See table 1.) The same size family that had a
parent under 35 conceivably could have a lower scale
value than the husband-wife type because of the pre
sence of a young child rather than another adult.
in 1950 can be noted. Housing shortages persisted and
rent controls imposed during World War II remained in
effect in most large cities throughout 1950. In mid-year,
the outbreak of hostilities in Korea stimulated such
demand for consumer durables that in September and
October the Federal Reserve Board issued regulations
to reduce inflationary pressure by curtailing credit for
automobiles, homes, and many household durables.
There is evidence that these restraints affected spend
ing of some types of families more than others and may
be relevant in explaining the decrease after 1950 in the
scale for one-person families. In 1950, the average single
consumer spent 52 percent of his total food bill for
food away from home, compared with 17 percent for
meals away from home by families of two persons or
more. By 1960-61, the single consumer was spending
only 42 percent of his food budget for food away from#
home. This difference suggests that rather than living in
boarding houses or in a rented room and eating in restau
rants as in 1950, a larger share of the single consumers
were living in apartments and preparing many of their
meals in 1960-61. After allowance for price changes
between 1950 and 1960-61, food expenditures of single
consumers declined about 9 percent, and those of fami
lies of two persons or more were practically identical in
the two periods. 19
Comparatively few families in which the husband is
65 years or older have children living at home. The scale
values in table 1 for such older families are based on
small samples. However, there is a general tendency for
the income required for family equivalence to rise as
the age of head increases, but to decline for families
headed by persons 65 years and over.
C o m p a r i s o n with O t h e r S c a l e s
Selected values from the Bureau’s revised equivalence
scale are compared with values from previous BLS scales
and from scales estimated by other agencies in table 2.
As already indicated, the BLS used essentially the same
procedures for estimating the scales based on data from
its 1960-61 and 1950 surveys. Each of the other scales
was derived by different methods, described briefly ia
the footnotes to table 2.
The decrease in the proportion of nonhousekeeping
families from almost 10 percent of all urban families in
195020 to only 4 percent in 1960-61 corroborates these
observations. In brief, families had greater freedom of
choice in their living arrangements and purchases and
generally higher incomes in 1960-61 than in 1950, and
the consequent adjustments of individual family spend
ing plans affect the indicators of equivalent levels of
well-being as measured by BLS expenditure surveys.
Also, it can be speculated that the relative position of
small families on the scale might be altered by a dif
ferent set of assumptions for deriving the measure of
equivalence. For example, they might be higher on a
scale based on some combination of food and housing
expenditures that allowed for “economies of scale” in
housing referred to earlier.*2
The BLS scale values derived from the 1960-61 survey
are lower than comparable values from the 1950 survey
on both sides of the base-type (four person) family.
However, the 1960-61 BLS scale is in line with the three
other scales (identified in table 2 as IDA, Nutritive
Adequacy, and SSA) developed during the 1960’s to
arrive at a poverty cutoff level. The close corres
pondence between the 1960-61 BLS scale and the IDA
scale is of particular interest, since the latter also is
based on food and income information from the BLS
Survey of Consumer Expenditures, 1960-61, but was
estimated by a different type of regression analysis.
Increases in income and reduction in the proportion
of income families spent for food in the decade follow
ing 1950 affected the relationships between the scale
values derived from the two surveys. Although it is
difficult to isolate specific causes of change or to mea
sure their effect on the scales, some unusual conditions
l^These comparisons were developed by Laura Mae Webb in
“Food Expenditures of Urban Families, 1950 to 1960-61,”
Monthly Labor Review, February 1965, pp. 151-52.
2®Helen H. Lamale, Methodology o f the Survey o f Consumer
Expenditures in 1950, p. 107. A housekeeping family contains
at least 1 member who regularly eats at least 10 meals a week at
home or carried from home.
l 8Ibid.,p. 17.
7
Table 2. E q u iv a le n t Income Scales from S elected Studies
(S pe cified 4-person fa m ily = 100)
BLS
P e rc e n t o f incom e
s p e n t on food in
F a m i ly s iz e
ID A 3
N u tr itiv e
adequacy
SSA P o v e rty
in d e x --e c o n o m y
196 2 4
le v e l5
1 9 6 0 -6 1 '
19502
One p e r s o n ...............................................................
36
50
...
...
549
T w o p e r s o n s ........................................................ j
M a rrie d c o u p l e .....................................................
...
...
60
66
64
...
59
...
564
...
...
.. .
82
87
82
...
81
...
...
...
...
T h re e p e r s o n s .........................................................
M a rrie d c o u p le , c h ild 6 - 1 5 ...........................
M a rrie d c o u p le , b oy 13
.................................
W PA
M a in te n a n c e
b u d g e t^
A dequacy
o f d ie ts
1 93 5 -3 6 7
A m o u n t of
s a v in g s
1935-36,
1941, 1944®
...
...
46
...
67
65
...
66
...
78
...
...
...
84
84
...
...
...
...
87
...
...
100
...
...
100
.. .
...
114
.. .
...
F o u r p e r s o n s ............................................................
M a rrie d c o u p le , 2 c h ild r e n , o ld e r 6 -1 5 • .
M a rrie d c o u p le , boy 13, g ir l 8 ....................
...
...
100
100
100
...
100
...
100
.. .
...
...
...
...
...
...
...
100
F iv e p e rs o n s ............................................................
M a rrie d c o u p le , 3 c h ild r e n , o ld e s t 6 -15 •
M a rrie d c o u p le , b oy 13, g ir l 8, c h ild 6 * *
...
...
116
...
120
...
116
...
...
116
...
...
118
...
...
...
...
114
115
...
...
...
...
...
130
132
...
129
127
132
137
...
...
...
...
...
...
S ix p e rs o n s ...............................................................
M a rrie d c o u p le , 4 or more c h ild r e n ,
o ld e s t 6 -1 5 ........................................................
M a rrie d c o u p le , b oy 13, g ir l 8, 2 c h ild r e n ,
4 and 6
...............................................................
^ See t a b le 1.
...
—
.. .
128
A g e o f h e a d , 3 5 -5 4 y e a rs .
^ “ E s t im a t in g E q u i v a l e n t In c o m e s o r B u d g e t C o s ts by F a m ily T y p e , ”
M o n th ly L a b o r R e v ie w , N o v e m b e r 1 9 6 0 / p* 1 1 9 8 *
A g e o f h e a d , 3 5 -5 4 y e a r s .
^ E l l i o t W e tz le r , D e t e r m in a t io n o f P o v e r t y L in e s a n d E q u iv a le n t W e lfa r e , R e s e a rc h P a p e r P -2 7 7 , I n s t i t u t e fo r D e fe n s e A n a l y s i s , S e p te m b e r 1 9 6 6 / p . 8 .
B a s e d on fo o d c o n s u m p tio n - in c o m e r e l a t i o n
s h ip s f o r u rb a n f a m i li e s d e r iv e d b y r e g r e s s io n a n a ly s e s o f c r o s s - s e c t io n d a ta fro m th e B L S S u r v e y o f C o n s u m e r E x p e n d it u r e s , 1 9 6 0 -6 1 *
^ R o s e D . F r ie d m a n , P o v e r t y , D e f in i t io n a n d P e r s p e c t iv e , A m e ric a n E n t e r p r is e I n s t i t u t e f o r P u b lic P o l i c y R e s e a rc h , W a s h in g to n , D „C „, F e b r u a r y 1 9 6 5 , p . 26*
B a s e d on 1 9 6 2 in c o m e s a t w h ic h n o n
fa rm h o u s e h o ld s o f v a r y in g s i z e s a c h ie v e n u t r i t i v e a d e q u a c y --w h e re n u t r i t i v e a d e q u a c y is d e f in e d a s 7 5 p e r c e n t o f th e f a m i li e s m e e tin g t w o - t h ir d s o f th e re c o m m e n d e d a llo w a n c e s o f th e N a t io n a l R e
s e a rc h C o u n ci I .
^ M o l li e O r s h a n s k y , “ C o u n t in g th e P o o r:
A n o th e r L o o k a t th e P o v e r ty P r o f i l e , "
S o c ia l S e c u r it y B u l l e t i n , J a n u a r y 1 9 6 5 , p. 9*
N o n fa rm f a m i li e s o f 3 p e r s o n s o r m o re w e re c l a s s i f i e d a s p o o r w h e n
t h e i r a n n u a l m o n e y in c o m e w a s le s s th a n 3 tim e s th e c o s t o f th e I L S . D e p a rtm e n t o f A g r ic u l t u r e e c o n o m y fo o d p la n d e s ig n e d to p r o v id e a d e q u a te n u t r i t i o n .
D i f f e r e n t d e f i n i t i o n s w e re d e v e lo p e d fo r
1 -o r 2 -p e rs o n f a m i li e s .
® L e lia M . E a s s o n a n d E d n a C„ W e n tw o r th , “ T e c h n iq u e s
1 9 4 7 , p* 12*
fo r E s tim a t in g th e C o s t o f L iv i n g a t th e W P A
S c a le s c a lc u l a t e d fro m c o s ts o f W P A M a in te n a n c e B u d g e t in S t. L o u i s , J u n e 1 5, 1 9 4 1 .
M a in te n a n c e L e v e l fo r F a m ilie s o f D i f f e r e n t C o m p o s i t i o n , " S o c ia l S e c u r it y B u ile tin , M a r c h
A g e o f h e a d , 3 6 -4 7 y e a r s .
^ W o r k e r s ’ B u d g e ts in th e U n ite d S ta te s : C i t y F a m ilie s a n d S in g le P e r s o n s . ..1 9 4 6 a n d 1 9 4 7 , B L S B u l l e t i n 9 2 7 (1 9 4 8 ), p* 5 1 .
a g e o f h e a d a n d f a m ily c o m p o s it io n n o t s p e c i f i e d .
° l b i d . B a s e d on p e r c e n t
o f i n c o m e s a v e d b y f a m i l i e s o f d i f f e r e n t s i z e ; age o f h ea d an d f a m i l y c o m p o s i t i o n n o t s p e c i f i e d .
B a s e d on p e r c e n t o f f a m i li e s w it h a d e q u a te d ie t s b y in c o m e , 1 9 3 5 -3 6 ,
A p p lication
of the S c a l e
budget is the retired couple.22 The U.S. urban average
of costs for a retired couple’s budget for a moderate
living standard at autumn 1966 prices was 49.6 percent
of the costs of goods and services in the budget for the
four-person city worker’s family. The Revised Equiva
lence Scale value for a two-person family in which the
husband was 65 years or older was 51 (table 1). The
slightly lower percentage indicated by the comparison
of standard budgets for the two family types is in the
direction that might be expected because the scale value
for the couple headed by a husband 65 years or older
was derived from family accounts for both employed
and retired persons.
Underlying the Revised Equivalence Scale based on
the food expenditure-income relationship, as has been
stated, is the assumption that families who spend an
equal percent of their income on food have attained an
equivalent level of consumption. Implicitly the use of
this scale also assumes that a family first satisfies its
need for food, and then disburses the remaining income
for less essential goods and services. Thus, when one
family type spends a smaller percent of its income for
food than another type, it is assumed that the first
family type needs less income to satisfy its food require
ment, that is, to provide an equivalent level of consump
tion.
Cost of Goods and Services
In using the Revised Equivalence Scale with the City
Worker’s Family Budget to estimate the cost of equiv
alent consumption for other sizes and types of families,
the scale values should be applied to the cost of family
consumption, i.e., the costs for goods and services.
Other outlays or deductions—for income taxes parti
cularly—vary by family size, age of head, and level of
income, and must be calculated separately to estimate
total budget costs.
In general these assumptions are reasonable for most
families, but for some family types the percentage of
income spent for food may not be an adequate measure
of equivalent well-being. Even within the rather nar
rowly defined family types specified in table 1, there is
room for considerable variation in composition and
spending patterns, and such variation increases as the
number of children and the age of the oldest child
rise.21 Also, the scales are based on the market be
havior of families as recorded in the Survey of Consumer
Expenditures, rather than on standards satisfying speci
fied physical or social requirements. The nature of food
expenditures makes them more flexible than those for
housing or automobiles that frequently involve long
term obligations, and it may be easier for families to
economize on food to offset temporary reductions in
income than to reduce contractual payments. Implicitly,
the averages on which the scale values are based take
account of such variations among families of specified
types, but the scales should be used as guidelines and not
interpreted in too literal or precise a manner.
Estimated autumn 1966 costs of goods and services to
maintain a moderate living standard for selected types of
urban families are shown in table 3. For families headed
by persons under 65 years, averages were estimated by
applying the Revised Equivalence Scale to the estimated
annual cost of consumption in the City Worker’s Family
Budget in each of the 39 metropolitan areas and regional
groups of nonmetropolitan places for which separate
costs were calculated for the CWFB. For the 65 years
and older classes, however, the Retired Couple’s Budget
is shown for the husband-wife family and has been used
as the base for estimating costs for the retired single
person. (See footnote 5, table 3.) As indicated in the
earlier reference to the Retired Couple’s Budget, these
amounts tend to be slightly lower than would be ob
tained by applying the Revised Equivalence Scale values
for the older families to the CWFB. The size and
direction of the small differences vary among cities,
because the percentage that the Retired Couple’s Budget
is of the CWFB varies from city to city.
The only type of family other than the four-person
city worker’s for which BLS has prepared a standard
21 These observations are particularly pertinent in using scale
values for the open-end classes of size and age o f oldest child.
The average number of persons in urban husband and wife fami
lies having 4 children or more ranged from 6.1 in families in
which all the children were under 6 years to 7.4 persons in
families having children 18 and over. The latter group had an
average of 3.9 children under 18 and 1.5 children 18 and over.
(See CES report cited in footnote 17.) No data were tabulated
on the sex or employment status of the children in the CES
sample.
22Costs of the City Worker’s Family Budget and the Retired
Couple’s Budget for a moderate living standard, priced in 39
metropolitan areas and 4 regional classes of nonmetropolitan
areas in autumn 1966, and the Revised Equivalence Scale are
shown in the 1968 edition of the Bureau’s Handbook o f Labor
Statistics (BLS Bulletin 1600).
9
T a b le 3« E s tim a te d A n n u a l C o s t o f G oods and S e rv ic e s fo r F a m ily C o n s u m p tio n 1
A t a M oderate S tandard fo r F a m ilie s o f D iffe r in g S ize , T y p e , and A ge
^ r b a n U n ite d S tates, 39 M e tro p o lita n A re a s and N o n m e tro p o lita n A re a s by R e g io n , A utum n, 196£]
H usband and w ife under 35 y e a rs 2
A re a
S in g le p e rso n ,
under 35
y e a rs 2
No c h ild re n
1 c h ild under
2 c h ild re n
o ld e r under
6 years
6 ye a rs
H usband and w ife , 35-54 y e a rs
1 c h ild 6 -15
ye a rs 2
6-15 ye a rs 3
3 c h ild re n
o ld e s t
6 -1 5 y e a r s 2
2 ch i Idren
o ld e r
H u s b a n d and
w ife r e tir e d ,
65 y e a rs
and o v e r 4
S in g le p e rso n
re ti re d ,
65 y e a rs
and o ve rS
$2 ,5 7 0
2,620
2,340
$ 3 ,5 9 0
3,6 6 0
3,270
$4 ,5 4 0
4 ,6 3 0
4,1 4 0
$ 5 ,2 8 0
5 ,3 8 0
4,8 1 0
$ 6 ,0 1 0
6,1 3 0
5 ,4 8 0
$ 7 ,3 2 9
7,4 7 4
6,681
$ 8 ,5 0 0
8 ,6 7 0
7 ,7 5 0
$ 3 ,6 3 7
3 ,7 6 6
3 ,2 5 2
$ 2 ,0 0 0
2 ,0 7 0
1,790
2,820
2,680
2 ,8 3 0
2 ,530
2,810
2,560
2,490
2,620
2,510
3 ,9 4 0
3 ,750
3 ,960
3,5 4 0
3,9 4 0
3,5 9 0
3,4 9 0
3,6 7 0
4,9 9 0
4,7 5 0
5 ,0 1 0
4 ,4 7 0
4,9 8 0
4 ,5 4 0
6 ,6 0 0
6 ,2 8 0
6 ,6 3 0
5 ,9 2 0
6 ,5 9 0
6 ,0 0 0
8,0 4 5
7 ,6 5 7
8,086
7,215
8,031
7 ,3 1 9
3,5 1 0
4 ,4 1 0
4 ,6 4 0
4 ,4 4 0
5,7 9 0
5,5 1 0
5,8 2 0
5,200
5 ,7 8 0
5,270
5,1 2 0
5,3 9 0
5,1 6 0
5 ,8 4 0
6 ,1 4 0
5,8 8 0
7,1 6 6
9 ,3 3 0
8 ,8 8 0
9 ,3 8 0
8 ,3 7 0
9 ,3 2 0
8 ,4 9 0
8 ,2 6 0
8 ,6 9 0
8 ,3 1 0
4 ,0 4 0
3 ,9 5 2
4,091
3,681
4 ,0 6 4
3 ,7 6 5
3 ,6 8 2
3,861
3 ,6 0 3
2 ,2 2 0
2 ,1 7 0
2 ,2 5 0
2 ,0 3 0
2 ,2 4 0
2 ,0 7 0
2 ,0 3 0
2 ,1 2 0
1,980
2 ,610
2,650
2 ,690
2,511
2,630
2 ,460
2,530
2 ,470
2,630
2,550
2,640
2,570
2,580
2 ,520
2,390
3,6 5 0
3,7 1 0
3,770
3,5 2 0
3,6 9 0
3,4 4 0
3 ,5 5 0
3,4 6 0
3 ,680
3,5 6 0
3,7 0 0
3 ,5 9 0
3,610
3,5 2 0
3,3 4 0
4 ,6 2 0
4,6 9 0
4 ,7 7 0
4 ,4 5 0
4 ,6 7 0
4 ,3 5 0
4 ,4 9 0
4 ,3 8 0
4 ,6 5 0
4 ,5 1 0
4 ,6 8 0
4,5 4 0
4 ,5 7 0
4,4 6 0
4,2 3 0
5,3 6 0
5,4 5 0
5 ,5 3 0
5 ,1 7 0
5,4 2 0
5,0 5 0
5 ,2 1 0
5,080
5,4 0 0
5,2 4 0
5,4 3 0
5 ,2 8 0
5 ,310
5,1 8 0
4,9 1 0
6 ,1 1 0
6 ,2 1 0
6 ,3 0 0
5,8 8 0
6,1 7 0
5,7 5 0
5 ,9 4 0
5,7 9 0
6,1 5 0
5 ,9 6 0
6 ,1 9 0
6,0 1 0
6 ,0 5 0
5,9 0 0
5,5 9 0
8 ,6 4 0
8 ,7 8 0
8 ,9 2 0
8 ,3 2 0
8 ,7 3 0
8 ,1 4 0
8 ,4 0 0
8 ,1 9 0
8 ,7 0 0
8 ,4 4 0
8 ,7 6 0
8 ,5 0 0
8 ,5 6 0
8 ,3 4 0
7 ,9 1 0
3,721
3 ,7 8 2
3 ,7 3 2
3 ,5 3 5
3 ,7 7 0
2 ,0 5 0
2 ,0 8 0
2 ,0 5 0
1,940
2 ,0 7 0
1,950
1,990
1,9 7 0
2 ,1 1 0
2 ,0 0 0
2 ,1 1 0
2 ,0 5 0
2 ,0 4 0
1,990
1,850
3,3 2 0
3,1 9 0
3,3 9 0
3,3 6 0
3 ,3 6 0
3,3 5 0
3,3 3 0
3 ,4 0 0
3,3 4 0
3,6 3 0
3,0 9 0
4,2 0 0
4 ,0 3 0
4,290
4 ,2 6 0
D a lla s , T e x .................................................................................
D u rh am , N - C ..............................................................................
H o u s to n , T e x ..........................................................................
N a s h v ille , T e n n ........................................................................
O rla n d o , F la ............................................................. ...................
W a s h in g to n , D . C . - M d . - V a ....................................................
N o n m e tro p o lita n are a s
.......................................................
2,370
2,280
2,420
2,4 0 0
2 ,400
2,390
2,380
2,430
2,390
2,600
2,210
5,5 6 0
5,3 3 0
5,6 8 0
5,6 3 0
5 ,6 3 0
5 ,6 1 0
5 ,5 7 0
5 ,6 8 0
5 ,5 9 0
6,0 8 0
5 ,1 7 0
6,7 7 4
6,774
6 ,5 0 5
6 ,8 6 3
6,861
6,8 3 8
6,7 9 4
6,9 2 8
6 ,8 2 0
7 ,4 1 9
6 ,3 1 0
7 ,8 6 0
7 ,5 5 0
8 ,0 3 0
7,9 6 0
7 ,9 6 0
7 ,9 3 0
7 ,8 8 0
8 ,0 4 0
7 ,9 1 0
8 ,6 1 0
7 ,3 2 0
3 ,3 6 6
3 ,3 2 2
3,641
3 ,2 7 7
3,421
3 ,3 9 2
4,2 1 0
4,3 0 0
4 ,2 3 0
4 ,6 0 0
3,910
4 ,8 8 0
4,6 8 0
4 ,9 9 0
4 ,9 4 0
4 ,9 4 0
4 ,9 2 0
4 ,8 9 0
4 ,9 9 0
4 ,9 1 0
5,3 4 0
4 ,5 4 0
W est:
B a k e r s fie ld , C a l if .................................................................
D e n v e r, C o lo
...........................................................................
H o n o lu lu , H a w a i i ....................................................................
L o s A n g e le s -L o n g B e a c h , C a l i f .......................................
San D ie g o , C a lif .................................... ...............................
San F ra n c is c o -O a k la n d , C a lif
.......................................
S e a ttle -E v e re tt, W a s h ..........................................................
N o n m e tro p o lita n a r e a s ..........................................................
2,490
2,580
3,020
2,630
2 ,590
2,7 5 0
2,740
2,450
3 ,480
3,6 1 0
4 ,2 3 0
3 .680
3 ,6 3 0
4 ,4 0 0
4 ,5 7 0
5,3 5 0
4 ,6 6 0
4 ,5 9 0
4 ,8 7 0
4 ,8 5 0
4 ,3 5 0
5 ,1 1 0
5,3 0 0
6,2 1 0
5 ,4 1 0
5 ,3 3 0
5 ,6 6 0
5 ,6 3 0
5,5 5 0
5,8 2 0
6 ,0 4 0
7 ,0 7 0
6 ,1 6 0
6 ,0 7 0
6 ,4 5 0
6 ,4 1 0
5 ,7 5 0
7 ,103
7,3 6 3
8,6 2 6
7 ,514
7 ,4 0 5
7 ,8 6 0
7,821
7,0 0 8
8 ,2 4 0
8 ,5 4 0
10,010
8 ,7 2 0
8 ,5 9 0
9 ,1 2 0
9 ,0 7 0
8 ,1 3 0
U rb a n U n ite d S t a t e s .................................................................
M e tro p o lita n a re a s ....................................................................
N o n m e tro p o lita n a r e a s ..........................................................
N o rth e a s t:
B o s to n , M a s s " ............................................................................
B u ffa lo , N . Y ..............................................................................
.......................................................................
H a rtfo rd , C onn
L a n c a s te r, P a ...........................................................................
N ew Y o rk -N o rth e a s te rn New J e r s e y .............................
P h ila d e lp h ia , P a . - N. J .......................................................
P itts b u rg h , P a ............................................................................
P o rtla n d , M a i n e .......................................................................
N o n m e tro p o lita n are a s
.......................................................
N o rth C e n tra l:
C e d a r R a p id s , Iow a .............................................................
C h a m p a ig n -U rb a n a , I II
.......................................................
C h ic a g o , III.-N o rth w e s te rn I n d i a n a ................................
C in c in n a ti, O h i o - K y . - I n d ....................................................
C le v e la n d , O h io .......................................................................
D a y to n , O h io
..........................................................................
D e tr o it, M ich
.......................................................................
G reen B a y , W i s .......................................................................
In d ia n a p o lis , I n d ....................................................................
K a n s a s C ity , M o. - K a n s ....................................................
M ilw a u k e e , Wis .......................................................................
M in n e a p o lis -S t. P a u l, M inn
.............................................
S t. L o u is , M o. - I I I .................................................................
W ic h ita , K a n s ...........................................................................
N o n m e tro p o lita n a re a s
.......................................................
S o u th :
A tla n ta , G a .................................................................................
A u s t in , T e x ..............................................................................
B a ltim o re , M d ...........................................................................
B a to n R ou g e , L a ....................................................................
3 ,8 5 0
3 ,8 3 0
3,4 3 0
4 ,2 5 0
4 ,2 4 0
7,1 1 7
7,491
7 ,4 4 6
7,5 6 8
7,6 8 5
7,1 7 3
7,5 2 5
7,0 1 6
7,241
7,0 5 7
7,5 0 3
7,272
7 ,5 4 7
7,3 2 9
7 ,376
7,1 8 9
6 ,8 1 9
3 ,5 4 5
3 ,6 1 8
3 ,5 8 4
3 ,8 3 2
3 ,6 3 4
3 ,8 3 8
3 ,7 3 3
3 ,7 0 3
3 ,6 1 6
3 ,3 6 0
3,411
3 ,4 9 8
3 ,4 6 7
3 ,801
3 ,051
3 ,5 5 9
3 ,6 7 3
4 ,1 6 8
3 ,7 5 2
3 ,6 1 0
3,921
4 ,0 0 5
3 ,4 6 6
1,850
1,830
2 ,0 0 0
1 ,800
1,880
1,8 7 0
1,880
1,9 2 0
1,910
2 ,0 9 0
1,680
1,960
2 ,0 2 0
2 ,2 9 0
2 ,0 6 0
1 ,990
2 ,1 6 0
2 ,2 0 0
1,910
'E x c lu d e s g if t s an d c o n tr ib u tio n s , lif e in s u ra n c e , o c c u p a tio n a l e x p e n s e s , s o c ia l s e c u r ity and d i s a b ilit y p a ym e n ts , and p e rs o n a l ta x e s .
2 E s tim a te d by a p p ly in g th e r e v is e d e q u iv a le n c e s c a le in ta b le 1 to c o s t o f fa m ily c o n s u m p tio n fo r th e C ity W orker’ s F a m ily B u d g e t (se e fo o tn o te 3 )f and ro u n d in g to n e a re s t
$1 0.
^ E s tim a te s fo r th e 4 -p e rs o n fa m ily d e s c rib e d in C ity W ork er’ s F a m ily B u d g e t for a M o d e ra te L iv in g S ta n d a rd , A u tu m n 19 66 , B L S B u lle tin 1570*1 (1 9 6 7 ), pp . 9-1 2^ E s tim a te s fo r th e R e tire d C o u p le ’ s B u d g e t d e s c rib e d in B L S B u lle tin 1570-3 (19 68 ), pp . 3 -6 .
^ E s tim a te d by a p p ly in g th e r a tio o f th e re v is e d e q u iv a le n c e s c a le v a lu e fo r one p e rso n to hu sb a n d and w ife f a m ilie s , 65 or o v e r, to c o s t o f fa m ily c o n s u m p tio n in R e tire d C o u p le ’ s B u d g e t (se e fo o tn o te 4), and ro u n d in g
to n e a re s t
$1 0.
groups of nonmetropolitan areas23 (table 4). This scale
is also appropriate to use with family income statistics
that are reported generally as total income before taxes,
for example, in the decennial censuses and in Current
Population Surveys conducted by the Bureau of the
Census. Adjusted scale values are not shown for families
headed by persons 65 years and over, because in the
Retired Couple’s Budget it was assumed that most of the
income taxes, deductions for social security, etc., were
not applicable for older families at a moderate living
standard.2
Total Budget Costs
As has been explained, the Revised Equivalence Scale
was derived from the relationship of food expenditures
to income after personal taxes. For some purposes,
however, a scale that more closely approximates total
income requirements for different family types is
needed. Therefore the BLS has adjusted the Revised
Equivalence Scale to include all costs in the CWFB
except State and local income taxes and disability insur
ance. The scale and a statement on its derivation are
presented in appendix A. Differences between the two
scales are relatively minor. The scale adjusted to mea
sure income before taxes is slightly higher than the
Revised Equivalence Scale (table 1) for families of one,
two, or three persons, and a little lower for families
having five members or more. The direction of these
small differences may be attributed to the fact that larger
families have more exemptions than smaller families in
computing taxes for Federal income tax purposes.
2 3In 11 of these areas, such taxes either were not collected or
only in nominal amounts (less than $10). In the remaining
areas, these taxes represented a small fraction of the total budget
costs but estimating the amounts for different family types
would be time consuming and difficult, particularly in metro
politan areas including several tax jurisdictions such as Washing
ton, D.C.-Va.-Md. Payments for disability insurance included in
the CWFB were applicable only in the States of California, New
York, and New Jersey. Users needing more precise budget costs
for different family types within a particular area may derive
their own estimates of these taxes from local tax sources.
The adjusted scale has been applied to the total bud
get costs (excluding State and local personal taxes) for
the CWFB in 39 metropolitan areas and four regional
11
T a b le 4.
E s tim a te d A n n u a l C o s t o f a B u d g e t1 P r o v id in g a M oderate L iv in g
Standard fo r F a m ilie s o f D iffe r in g S ize , T y p e , and A ge
CT U rban U n ite d S ta te s, 39 M e tro p o lita n A re a s and N o n m e tro p o lita n A re a s by R e g io n , A u tu m n , 1966 U
Husbiand and w ife under 35 y e a rs 2
A rea
U rb a n U n ite d S t a t e s .......................................
M e tro p o lita n a re a s ...........................................
N o n m e tro p o lita n a r e a s .................................
N o rth e a s t:
B o s to n , M ass .................................................
B u ffa lo , N Y ....................................................
H a rtfo rd , C o n n .................................................
L a n c a s te r, P a .................................................
N ew Y o r k -N o rth e a s te rn N ew J e rs e y . . .
P h ila d e lp h ia , P a .-N J .................................
P itts b u r g h , P a .................................................
P o r tla n d , M a i n e ..............................................
N o n m e tro p o lita n a r e a s .................................
N o rth C e n tra l:
C e d a r R a p id s , Io w a .......................................
C h a m p a ig n -U rb a n a , I I I .................................
C h ic a g o , 111.-N o rth w e s te rn Indiana* . . .
C in c in n a ti, O h i o - K y . - I n d ...........................
C le v e la n d , O h i o ..............................................
D a y to n , O h i o .....................................................
D e t r o it , M ich
.................................................
G reen B a y , W i s ..............................................
I n d ia n a p o lis , I n d ...........................................
K a n s a s C it y , M o .-K a n s .................................
M iIw a u k e e , W i s ..............................................
M in n e a p o lis -S t. P a u l, M in n .......................
W ic h ita , K a n s .................................................
N o n m e tro p o lita n a r e a s ............. ...................
S o u th :
A tla n ta , G a ........................................................
A u s t in , T e x ....................................................
B a ltim o r e , M d .................................................
B a to n R o u g e , L a ...........................................
D a lla s , T e x ....................................................
D u rh a m , N . C ....................................................
H o u s to n , T e x .................................................
N a s h v ille , T e n n ..............................................
O rla n d o , F l a .....................................................
W a s h in g to n , D . C . - M d . - V a ..........................
N o n m e tro p o lita n a r e a s .................................
W est:
B a k e r s fie ld , C a lif .......................................
D e n v e r, C o l o ....................................................
H o n o lu lu , H a w a i i ..........................................
L o s A n g e le s -L o n g B e a c h , C a l if . . . .
San D ie g o , C a l if ...........................................
San F r a n c is c o -O a k la n d , C a l i f .................
S e a ttle - E v e re tt, W a s h .................................
N o n m e tro p o lita n are a s
..............................
2 c h i Idren
o ld e r
6 -1 5 y e a r s 3
3 c h ild re n
o ld e s t
6 -1 5 y e a r s 2
$ 6 ,4 3 0
6,5 6 0
5 ,8 5 0
$ 7 ,5 1 0
7,6 6 0
6 ,8 4 0
$ 9,051
9 ,2 3 3
8 ,2 4 2
$ 1 0 ,4 1 0
10,620
9 ,4 8 0
6,1 9 0
5 ,8 9 0
7,0 9 0
6,7 5 0
8 ,2 9 0
7 ,8 9 0
6 ,2 0 0
5 ,5 4 0
6,1 9 0
5 ,6 2 0
5 ,4 6 0
5 ,7 4 0
5 ,5 0 0
7,1 0 0
6 ,3 4 0
7 ,0 9 0
6 ,4 4 0
6 ,2 5 0
6,5 7 0
6,3 0 0
8 ,3 0 0
7 ,4 1 0
8 ,2 8 0
7 ,5 2 0
7 ,3 1 0
7 ,6 8 0
7 ,3 7 0
9 ,9 8 6
9 ,5 0 5
1 0 ,000
8 ,9 3 2
1 1,490
10,930
11,500
10,2 7 0
11,480
1 0,430
1 0,130
10,640
10,210
4 ,6 2 0
4 ,6 8 0
4 ,7 5 0
4 ,4 4 0
4 ,6 5 0
4 ,3 4 0
4 ,4 8 0
4 ,3 9 0
4 ,6 5 0
4 ,5 0 0
4 ,7 0 0
4 ,5 6 0
4 ,5 7 0
4 ,4 5 0
4 ,2 2 0
5 ,7 3 0
5,8 0 0
5,9 0 0
5 ,5 0 0
5,7 6 0
5 ,3 8 0
5 ,5 5 0
5,4 4 0
5 ,7 6 0
5,5 8 0
5,8 3 0
5 ,6 6 0
5 ,6 6 0
5,5 2 0
5 ,2 3 0
6 ,5 6 0
6,640
6 ,7 4 0
6,3 0 0
6,600
6 ,1 6 0
6,3 5 0
6 ,2 3 0
6 ,6 0 0
6,3 9 0
6,670
6 ,4 8 0
6,4 8 0
6,3 2 0
5,9 9 0
7 ,6 7 0
7 ,7 6 0
7 ,8 8 0
7 ,3 7 0
7 ,7 2 0
7 ,2 0 0
7 ,4 3 0
7 ,2 8 0
7 ,7 1 0
7,4 7 0
7 ,8 0 0
7 ,5 8 0
7 ,5 8 0
7 ,3 9 0
7 ,0 1 0
9 ,2 3 5
9 ,3 5 0
9 ,4 9 7
8 ,8 7 7
9 ,2 9 7
8 ,6 6 9
8 ,9 4 9
8 ,7 7 6
9 ,2 9 0
9 ,0 0 5
9 ,3 9 6
9 ,1 2 8
9 ,1 3 3
4 ,1 9 0
4 ,0 1 0
4 ,2 9 0
4 ,2 4 0
4 ,2 4 0
4 ,2 4 0
5 ,190
4 ,9 8 0
5,3 3 0
5,2 6 0
5 ,2 5 0
5 ,2 6 0
5,2 0 0
5 ,3 0 0
5 ,2 2 0
5,710
4 ,8 3 0
5 ,940
5,7 0 0
6,1 0 0
6 ,0 2 0
6 ,0 1 0
6 ,020
5 ,9 5 0
6 ,0 7 0
5 ,9 8 0
6 ,5 3 0
5 ,5 4 0
6 ,9 5 0
6 ,6 6 0
7 ,1 3 0
7 ,0 4 0
7 ,0 3 0
7 ,0 4 0
6 ,9 6 0
7 ,1 0 0
6 ,9 9 0
7 ,6 4 0
6 ,4 7 0
8 ,3 7 2
8 ,0 2 5
8 ,5 8 8
8,481
8 ,4 6 9
8 ,4 8 4
8 ,3 8 4
8,551
8 ,4 1 6
9,201
7 ,7 9 7
9 ,7 4 0
9 ,7 6 0
9 ,6 4 0
9 ,8 3 0
9 ,6 8 0
10,580
8 ,9 7 0
5,4 5 0
5 ,6 5 0
6,6 9 0
5 ,7 7 0
5 ,6 9 0
6,0 4 0
5 ,9 9 0
5 ,4 0 0
6,2 5 0
6 ,4 7 0
7 ,6 6 0
6,6 1 0
6,5 1 0
6,9 2 0
6 ,8 6 0
6 ,1 8 0
7,3 0 0
7 ,5 7 0
8 ,7 9 6
9 ,1 1 8
10,7 8 2
9 ,3 1 0
9 ,1 7 5
9,7 4 3
9,6 6 5
8,7 0 2
10,120
10,490
12,4 0 0
1 0 ,710
1 0 ,5 5 0
11,200
11,120
1 0 ,010
No ch i Idren
$ 3 ,3 5 0
3,420
3,050
$ 4,530
4 ,6 2 0
4 ,1 2 0
$ 5 ,6 1 0
5,7 2 0
5 ,1 1 0
3,700
3 ,5 2 0
3 ,700
3,310
3,690
3 ,3 5 0
3 ,260
4 ,9 9 0
4 ,7 5 0
5,0 0 0
4 ,4 7 0
4 ,9 9 0
4 ,5 3 0
4 ,4 1 0
4 ,6 3 0
4 ,4 4 0
3,4 2 0
3,280
3 ,420
3,460
3 ,510
3,2 8 0
3,440
3 ,210
3 ,310
3 ,250
3 ,440
3 ,330
3,480
3,380
3,380
3,300
3 ,120
3,100
2,970
3,180
3 ,140
3 ,130
3,140
3 ,100
3,160
3,110
3,4 0 0
2 ,2 9 0
3 ,260
3 ,370
3 ,990
3,450
3,400
3,610
3,580
3 ,220
4 ,1 9 0
4 ,2 8 0
4 ,2 1 0
4 ,6 0 0
3 ,9 0 0
4 ,4 0 0
4 ,5 6 0
5 ,3 9 0
4 ,6 6 0
4 ,5 9 0
4 ,8 7 0
4 ,8 3 0
4 ,3 5 0
1 c h ild under
6 y e a rs
1T h e b u d g e t c o s ts b e lo w in c lu d e th e c o s t o f goods and s e r v ic e s fo r fa m ily co n s u m p tio n sho w n in ta b le 3, p lu s g ifts and c o n tr ib u te
F e d e ra l in c o m e ta x e s .
H usb a n d and w ife 3 5 -5 4 y e a rs
1 c h ild 6-15
y e a rs 2
S in g le p e rso n ,
under 35
y e a rs 2
2 c h ild re n
o ld e r under
6 y e a rs
8 ,9 5 0
7,7 3 0
7 ,6 2 0
8 ,0 9 0
8 ,0 3 0
7 ,2 3 0
9,981
9 ,0 6 5
8 ,8 0 9
9 ,2 5 4
8 ,8 7 6
8 ,9 0 6
8 ,4 4 0
10,6 2 0
1 0,750
10,9 2 0
10,210
1 0,690
9 ,9 7 0
10,290
1 0,090
1 0,680
10,360
10,8 1 0
1 0,500
10,500
10,2 4 0
9 ,7 1 0
9 ,6 3 0
9 ,2 3 0
9 ,8 8 0
9 ,7 5 0
lif e in s u ra n c e , o c c u p a tio n a l e x p e n s e s , e m p lo y e e c o n tr ib u tio n s fo r s o c ia l s e c u r ity , and
T h e y do n o t in c lu d e p e rs o n a l ta x e s p a id to State and lo c a l g o ve rn m e n ts and pa ym e n ts fo r d i s a b ilit y in s u ra n c e ,
E s t im a t e d by a p p ly in g th e s c a le o f e q u iv a le n t in com e in ta b le A-1 to th e c o s t o f a b u d g e t fo r th e c it y w o r k e r ’ s fa m ily (se e fo o tn o te 3 ), and ro u n d in g to n e a re s t $ 1 0 .
E s t im a t e d to ta l b u d g e t c o s ts le s s p e rs o n a l ta x e s p a id to State and lo c a l go vern m e nts and p a ym en ts fo r d is a b ilit y in s u ra n c e fo r th e 4 *p e rso n fa m ily d e s c rib e d in C ity W o rke r';
A u tu m n 1 9 66 ,
B L S B u lle tin 1 5 7 0 -1 , (1 9 6 7 ) p p . 9 -1 2 .
F a m ily B u d g e t fo r a M o d e ra te L iv in g S ta n d a rd ,
A p p en d ix
A. R e v i s e d S c a l e of E q u i v a l e n t Income b e f o r e T a x e s
CO = Sum of costs of family consumption, other
costs, and occupational expenses (i.e., obtained in
Steps 1 and 2 above)
The Revised Equivalence Scale in table 1 has been
adjusted to provide a scale that could be used with the
total budget costs in the City Worker’s Family Budget
(CWFB) to estimate the cost of living or income before
taxes, for families differing in size, age of head, and
composition. The weighted average costs of renter and
homeowner families, derived from the CWFB for the
Urban United States, were used in the adjustment pro
cess. Steps in the adjustment were as follows:
4.2 is the percentage (applicable in 1966) of gross
income deducted as the employee’s contribution to
social security for Federal old-age, survivors’, disa
bility insurance, and Medicare (OASDHI). For gross
income of $6,600 and over the maximum of $277 was
substituted for .042X in the formula
1. Values in the Revised Equivalence Scale for each
family type except those headed by persons 65 years
or overl were applied to the sum of the cost of Family
Consumption and Other Costs (i.e. Gifts and Contri
butions and Life Insurance) at a moderate living
standard.
F = Federal income tax, estimated by using the In
ternal Revenue Service tax schedules as follows:
Schedule I for 1-person families
Schedule II for husband and wife families
2. The estimated average outlays of $80 for occu
pational expenses in the CWFB were added for all family
types.
Schedule III for one-parent families
4.
Values of X were converted to a scale in which
the value of X ($9,051) for the 4-person family of
husband, age 35-54, wife, and 2 children (older 6-15)
was equal to 100.
3. The following formula was used to estimate in
come before taxes for each family type:
X=CO + .042X + F
For purposes of adjusting the Revised Equivalence
Scale, no attempt was made to estimate State and local
income taxes for which the weighted U.S. urban average
for the CWFB family was $128. Estimates were not
made for payments for disability insurance that were
mandatory in California, New York, and New Jersey.
Experimental computations for San Francisco, Cali
fornia, which had both types of taxes, and Austin,
Texas, which had only nominal ($3) State and local
taxes, indicated that the omission of these taxes made
little difference in the scale value adjustments, because
these taxes were a small fraction of total budget costs.
Where:
X= total budget costs or income before taxes
iN o adjustments in the Revised Equivalence Scale were made
for families headed by persons 65 years or over because in the
Retired Couple’s Budget it was assumed that contributions to
social security and payments on life insurance policies had been
completed before retirement, and that most of the income of
retired couples at the moderate standard was tax-exempt
because of source and the remainder insufficient to require pay
ment of income taxes.
13
T a b le A - l .
R e v is e d S c a le o f E q u iv a le n t In c o m e 1 fo r U rb a n
F a m ilie s o f D if f e r e n t S iz e , A g e , and C o m p o s itio n
|~ 4 -p e rs o n fa m ily - h u s b a n d , ag e 3 5 -5 4 , w if e , 2 c h ild r e n , o ld e r 6 -1 5 = 10(Q
A g e o f head
U nder
S iz e and ty p e o f fa m ily
35
3 5 -5 4
5 5 -6 4
37
38
33
H u s b a n d and w i f e ...........................................................................................
50
61
60
O ne p a re n t and c h i l d .....................................................................................
40
59
62
................................................................
62
69
-
.......................................................................
62
83
89
H u s b a n d , w if e , c h ild 1 6 - 1 7 .......................................................................
-
92
89
H u s b a n d , w if e , c h ild 18 o r o v e r .............................................................
-
83
86
O ne p a re n t, 2 c h i l d r e n .................................................................................
68
77
84
O ne p e r s o n ............................................................................................................
T w o p e rs o n s :
T h re e p e rs o n s :
H u s b a n d , w if e , c h ild u n d e r 6
H u s b a n d , w if e , c h ild 6 -1 5
F o u r p e rs o n s :
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r u n d e r 6 ) .....................................
71
79
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r 6 - 1 5 ) ............................................
76
100
105
-
H u s b a n d , w if e , 2 c h ild r e n , (o ld e r 1 6 - 1 7 ) .........................................
-
114
126
H u s b a n d , w if e , 2 c h ild r e n , ( o ld e r 18 o r o v e r ) ...............................
-
96
110
O ne p a re n t, 3 c h i l d r e n .................................................................................
88
97
—
F iv e p e rs o n s :
-
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t u n d e r 6 ) ..................................
85
95
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 6 - 1 5 ) .........................................
94
115
119
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 1 6 -1 7 )
-
128
138
-
118
124
108
117
—
.....................................
H u s b a n d , w if e , 3 c h ild r e n , ( o ld e s t 18 or o v e r)
...........................
One p a re n t, 4 c h i l d r e n .................................................................................
S ix p e rs o n s or m o re:
H u s b a n d , w if e , 4 c h ild r e n o r m o re , ( o ld e s t u n d e r 6 ) .................
98
-
-
H u s b a n d , w if e , 4 c h ild r e n o r m o re , ( o ld e s t 6 - 1 5 ) ........................
107
130
H u s b a n d , w if e , 4 c h ild r e n o r m o re , ( o ld e s t 1 6 - 1 7 ) ....................
-
145
139
-
H u s b a n d , w if e , 4 c h ild r e n or m o re , ( o ld e s t 18 o r o v e r)
-
149
-
124
137
O ne p a re n t, 5 c h ild r e n o r m ore
. . . .
.............................................................
1 T h e s c a le v a lu e s sh ow n h e re are p e rc e n ta g e s to be a p p lie d to th e to ta l c o s t o f a b u d g e t ( e x c lu d in g S ta te and lo c a l in c o m e ta x e s
and d is a b ili t y p a y m e n ts ) fo r th e b ase fa m ily (4 p e rs o n s — h u s b a n d , age 3 5 -5 4 , w ife , 2 c h ild r e n , o ld e r c h ild 6 -1 5 y e a rs ) to e s tim a te th e
to ta l in co m e re q u ire d to p ro v id e th e sam e le v e l o f liv in g fo r urban fa m ilie s o f d iff e r e n t s iz e , a g e , and c o m p o s itio n .
In a d d itio n to th e
c o s t o f goo d s and s e rv ic e s fo r fa m ily c o n s u m p tio n th e to ta l b u d g e t c o s ts in c lu d e g ift s and c o n t r ib u tio n s , li f e in s u r a n c e , o c c u p a tio n a l
e x p e n s e s , e m p lo y e e c o n tr ib u tio n s fo r s o c ia l s e c u r ity , and F e d e ra l in c o m e ta x e s .
E s tim a te s o f p e rs o n a l ta x e s p a id to S ta te and lo c a l
g o v e rn m e n ts and o f p a ym e n ts fo r d is a b ili t y in s u ra n c e m ay be a dded in th o s e urban a re a s w h e re a p p lic a b le .
SOURCE:
D e riv e d from B L S S u rve y o f C o n su m e r E x p e n d itu re s , 1 9 6 0 -6 1 .
14
A p p e n d i x B.
E x p e r i m e n t a t i o n with F o o d C o n s u m p t i o n a n d Total C o n s u m p t i o n in S c a l e
were substituted for food expenditures and income,
respectively, and the exponent 2/3 replaced Vi in equa
tion (1) and equation (2) as follows:
The Survey of Consumer Expenditures in 1960-61
showed, as had earlier surveys, that families in the lower
income classes, on the average, spent more than their
current year’s income. The class at which income was
more than enough to cover expenditures for current
consumption varied among family sizes and types. For
one-person families it was all after-tax income classes
above $2,000 and for families of 2 persons or more,
above $5,000. Families spending beyond the current
year’s income might use their savings or go into debt to
meet current expenses. At the upper end of the income
scale, families spent less than their income, on the
average, and had a margin for net saving. Another con
sideration is that famiHes may receive food, clothing,
medical care, and other goods and services from relatives,
welfare agencies, etc. The value of such goods and
services received without a corresponding expenditure
may represent a substantial supplement to the level of
living of some families, particularly those having low
income, but such “free” goods were not included in
either the food expenditures or income from which the
BLS has derived its Revised Equivalence Scale. There
fore, some experimentation was undertaken with an
alternative equivalence scale based on the relationship
of the value of food consumption and the value of
total consumption in 1960-61.1
(3) f, = K ,(v/*
<4)A
nv
Substitution of consumption for expenditure/income
averages made comparatively little difference in the scale
values for persons living by themselves and for the hus
band and wife families in which the oldest child was 6
years or older. Values were substantially lower, however,
on the consumption scale than on the expenditure/
income scale for younger families, i.e., the husband was
under 35 and the oldest child was less than 6 years old.
Consumption expenditures averaged higher than after
tax income for these young families across all familysize classes.
This difference among young families raises the
question of how the use of credit may affect compu
tations of scale values. According to the University of
Michigan’s 1965 Surveys of Consumer Finances,2 there
was a preponderance of younger families, and especially
younger families with children, among those making use
of consumer credit. Early in 1965, 49 percent of all
family units (including single persons) owed installment
debt. The proportion varied according to the age of the
family head from 69 percent for families having a head
under 35 years to 12 percent for those having a head 65
and older. In terms of economic level, the largest users
of installment credit were family units having annual
before-tax income between $5,000 and $15,000. In the
Michigan classification by family type the incidence of
The method for deriving a scale based on consump
tion was essentially the same as that using food expen
ditures and income (see page 3 ). The relationship of
food consumption to total consumption for urban fami
lies and single persons was found to be log-linear with a
regression coefficient (or consumption elasticity) close
to 2/3. For each family size-type-age of head class,
food consumption (fj) and total consumption (vj)
2George Katona, Eve Mueller, Jay Schmiedeskamp, and
John A. Sonquist, 1965 Survey o f Consumer Finances (Ann
Arbor, Michigan, University of Michigan, Institute for Social
Research, Survey Research Center, Monograph No. 42, 1966),
pp. 27-38.
See also Dorothy S. Projector and Gertrude S. Weiss, Survey
o f Financial Characteristics o f Consumers, Board of Governors
of the Federal Reserve System, August 1966, pp. 30-31, 126,
and 141.
iFood consumption was defined as the sum of food expendi
tures (y in equation 1, p. 2) and the value of food received with
out expense (i.e., gifts from persons outside the family or allot
ments from public or private welfare agencies) and the value of
home-produced food (usually a nominal amount for urban
families). Total consumption was the sum of expenditures for
current consumption, the value of food and all other goods and
services received without expense, and the value of homeproduced food.
l - l| 3
15
installment debt was highest- 73 percent-among mar
ried couples in which the husband was under 45 and the
youngest child was under 6.3 About a sixth of these
young families reported installment debts of $2,000 or
more early in 1965. They made the greatest use of
credit in buying automobiles. In observing that install
ment debt was most common in the under 45-year
group and in that stage of the life cycle where incomes
are usually rising, the Michigan analysts made cross
tabulations of debt with recent and expected income
changes and noted that persons having a rising trend
borrow more often than persons that have stable or
declining income.
that as the level of living and the use of credit have
risen, in recent years, total consumption varies more
among different types of families than was anticipated.
Use of installment credit by a generally optimistic group
of younger families could result in a substantial increase
in total consumption accompanied by little or no change
in food consumption. However, if a mother with several
dependent children received food allotments as an
income supplement, both food and total consumption
would be increased. The experimentation with the
alternate scale has been useful in highlighting differences
in the results from the two approaches, but closer study
of the causes of divergences between the income and
consumption scales and reexamination of the definition
of total consumption is needed before introducing a
variant of the BLS Revised Equivalence Scale. General
use of a scale based on total consumption would require
current estimates of the total value of consumption. At
present, such estimates are not available; data on
families’ money income are available and used more
universally in research in consumer economics.
Preliminary results of substituting consumption for
income in deriving a family equivalence scale suggest
3For couples under 45 with no children the proportion was
68 percent and for couples whose youngest child was 6 years or
older, 65 percent.
16
A p p e n d i x C. T e c h n i c a l R e f e r e n c e s
1. Barten, A.P., “Family Composition, Prices and Expenditure Patterns,” Proceedings of Six
teenth Symposium of Colston Research Society, April 6-9,1964.
Measurement by mathematical formulas of a system of price effects from cross-sectional
data of families varying in composition.
2. Brady, Dorothy S. and Barber, Helen A., “The Pattern of Food Expenditures,” The Review
of Economics and Statistics, Vol. XXX, August 1948, pp. 198-206.
Reports on an experiment with linear transformations of the food expenditure curve
(i.e., food expenditures expressed as percentage of income) to reduce the difference between
food expenditures of urban families in relation to income for the surveys made between
1901 and 1944.
3. Brady, Dorothy S., “Family Saving 1888 - 1950,” Part II in A Study of Saving in the United
States, Vol. Ill, Princeton, N.J., Princeton University Press, 1956, pp. 149-156.
Discusses income elasticities for food and other categories of expenditures observed in
examination of about 300 family expenditure surveys in different localities of the United
States over the period 1888 - 1950.
4. ____ , “Scales of Living and Wage Earners’ Budgets,” Annals of the American Academy of
Political and Social Science, March 1951, pp. 32-38.
Discusses subjectivity of “standards of living,” influence of Engel’s law, and relationship
of the “living” wage and income levels.
5. Burk, Marguerite C., “Ramifications of the Relationship Between Income and Food,” Journal
of Farm Economics, Vol. 44, No. 1,1962, pp. 115-125.
Outlines the scope of historical application of Engel’s law, and considers further generali
zations needed for analysis of problems involved in food consumption.
6. Clark, Faith, “Changing Patterns of Family Food Spending,” paper presented at 44th Annual
Agricultural Outlook Conference, Washington, D.C., November 16,1966,11 pp.
Presents preliminary results of analysis of income-food expenditure relationships based on
U.S. Department of Agriculture’s 1965 Survey of Household Food Consumption.
7. Cowhig, James D. (U.S.D.A.) Urban and Rural Levels of Living: 1960, Agricultural Economic
Report No. 79, July 1965, 18 pp.
Presents information on five indicators of level of living (e.g. availability of automobile,
telephone) of urban and rural population, based on a special analysis from 1960 Census of
Population and Housing.
8. Crockett, Jean, “Demand Relationships for Food,” Proceedings of the Conference on Consumption and Saving, Vol. I, Philadelphia, University of Pennsylvania, Wharton School of
Finance and Commerce, 1960, pp. 293-310.
Reviews estimates of income elasticity for food from time series of aggregates and from
cross-sectional analyses for a single point of time. Uses data from BLS Survey of Consumer
Expenditures in 1950 to estimate effects of family characteristics such as size, age of head,
and race on elasticity for food.
9. Friedman, Milton, “A Method of Comparing Incomes of Families Differing in Composition,”
in Studies in Income and Wealth, Vol. 15, New York, National Bureau of Economic Research,
1952, pp. 9-20.
Describes a method for obtaining a measure of the economic size of the family, by
equating the requirements of individuals on the basis of actual expenditures rather than on the
17
basis of a standard of need. Uses the food expenditure-income relationship to illustrate the
author’s method, but contains a self-critical note on a possibly crucial defect in the method:
the basic assumption that a scale of equivalence derived from the food-income relation
measures economic welfare.
10. Friedman, Rose D., Poverty Definition and Perspectives, American Enterprise Institute for
Public Policy Research, Washington, D.C. February, 1965.
Presents a scale for estimating equivalent income, defined as the income levels at which
households of different size achieve adequate nutrition. Derives the income levels (at 1962
prices) from reports from the U.S. Department of Agriculture’s 1955 Household Food Con
sumption Survey. Defines nutritive adequacy as 75 percent of the families meeting twothirds of the recommended allowances of the National Research Council.
11. Goldstein, Sidney, Consumption Patterns of the Aged, Philadelphia, University of Pennsylvania,
Wharton School of Finance and Commerce, 1960, Chapters IV-VI, pp. 81-100.
Analyzes consumption differences in 1950 with respect to total consumption, food
expenditures, and housing expenditures for various ages of family heads.
12. Lamale, Helen H., “Present Day Concepts of Income Adequacy,” presented at 86th Annual
Forum of the National Conference on Social Welfare, San Francisco, California, May 28,1959.
Discusses the recent social and economic changes involved in the concept of income
adequacy.
13. Manderscheid, Lester V., “Some Observations on Interpreting Measured Demand Elasticities,”
Journal of Farm Economics, Vol. 46, February 1964, pp. 128-136.
Relates some of the problems in measuring price and income elasticities to the interpre
tations of these measures.
14. Orshansky, Mollie, “Counting the Poor: Another Look at the Poverty Profile,” Social
Security Bulletin, January 1965, pp. 7-9.
Describes method used to define equivalent incomes at a poverty level for families of
different sizes. Bases the scale on food costs for individuals, according to the U.S. Department
of Agriculture’s economy food plan at January 1964 prices.
15. Prais, S.J., “The Estimation of Equivalent Adult Scales for Family Budgets,” Economic
Journal, December 1953, pp. 791-810.
Presents a method to determine scales of adult equivalents, based on an explicit con
sumption function. This method was applied to family budgets in the United Kingdom in
1937-38.
16. Prais, S.J. and Houthakker, H.S., The Analysis of Family Budgets, New York, Cambridge
University Press, 1955.
Surveys the literature on scales, examines the theory of scales of equivalence, and pre
sents results of a method for analyzing the effects of household composition on consumption
as applied to food.
17. Snyder, Eleanor M., “Financing a Family,” Eugenical News, December 1953, pp. 120-129.
Summarizes major contributions to research on costs of rearing children in moderate and
higher income families and to the more general analysis of living standards of different groups
in the population.
18. -------, “The Impact of Long-term Structural Changes on Family Expenditures: 1888-1950”
in Consumer Behavior, New York, Harper and Brothers, 1958, pp. 359-393.
Examines secular changes in consumption functions derived from cross-section surveys of
18
U.S. urban families from 1888 to 1950. Provides historical detail on values of K (the measure
of level of family food expenditures) and of the income elasticities of food expenditures that
are basic to BLS estimates of family equivalence scales derived from expenditure surveys for
1950 and 1960-61.
19. _____, Measures of the Dimensions of Poverty in New York City, Hunter College, Urban
Research Center, June 15,1965.
Presents six selected scales of equivalent incomes by size of family and discusses how the
estimated number and distribution of poor families will vary according to the scale used.
20. Stigler, George J., “The Early History of Empirical Studies of Consumer Behavior,” Journal of
Political Economy, April 1954, pp. 95-113.
Refers briefly (pp. 101-102) to early applications of income elasticity technique of family
budget studies by Del Vecchio (1912) and Ogburn (1919).
21. U.S. Department of Agriculture, Income and Household Size: Their Effects on Food Consumption, Marketing Research Report No. 340, June 1959,152 pp.
Uses data from the USDA’s 1955 Household Food Consumption Surveys for extensive
computations of elasticities of demand with respect to income for all food and major classes of
food, in terms of both quantities of food consumed and value of consumption. Evaluates
effects of household size separately.
22. U.S. Department of Labor, Bureau of Labor Statistics, “Estimating Equivalent Incomes or
Budget Costs by Family Type,” Monthly Labor Review, November 1960, pp. 1197-1200.
Describes a scale for measuring the relative after-tax income required by families of
differing composition to maintain the same level of material well-being, or for estimating com
parable costs of goods and services for families of different age, size, and type.
23. _____, Workers’ Budgets in the United States: City Families and Single Persons, 1946 and
1947, BLS Bulletin 927,1948, 55 pp.
Presents two separate scales for determining the cost of maintaining families of different
size at the same level of material well-being. The scales developed by the BLS for use with its
original calculation of the City Worker’s Family Budget were based: (1) on the percentage of
families with good or fair diets in terms of nutrition and (2) on the percentage of income al
located to savings.
24. Watts, Harold W., “The Iso-Prop Index: An Approach to the Determination of Differential
Poverty Income Thresholds,” Journal of Human Resources, Winter 1967, pp. 2-18.
Describes procedure for constructing an index to measure equivalent levels of poverty
for families of varying size in different regions and in urban and rural areas. Uses the share
of income devoted to particular categories of consumption as the basis for defining equiva
lence (e.g. families spending an equal fraction on food or on necessities are considered
equally poor). Investigate the properties and suitability of alternative forms of Engel curves
and uses data from the BLS Survey of Consumer Expenditures, 1960-61, in regression analysis.
25. Wetzler, Elliot, Determination of Poverty Lines and Equivalent Welfare, Research Paper P-277,
Institute for Defense Analyses, September 1966, 23 pp.
Presents results of a study undertaken for Office of Economic Opportunity to construct
poverty cut-off levels that take into account size of family, farm/nonfarm differences, and
age of the family head. Bases the method for calculating welfare-equivalent income levels on
the assumption that families are at equivalent welfare levels when the percentage of their
income spent on food is identical. Derives two general types of food-consumption equations
by regression analysis from data from the BLS Survey of Consumer Expenditures, 1960-61.
19
26. Woodbury, Robert Morse, “Economic Consumption Scales and Their Uses,” Journal of
American Statistical Association, December 1944, pp. 455-468.
Describes a technique employed by Edgar Sydenstricker and W.I. King in 1921 to develop
a consumption scale based on actual expenditures on food and on all items by families of
varying composition (in preference to scales having a nutrition or calorie basis) and reviews
the direction of research in the 20 years following publication of their study, “The Measure
ment of the Relative Economic Status of Families.” Contains source references and annotated
tables bringing together scales estimated by various methods.
27. Zimmerman, Carle C., Consumption and Standards of Living, New York, Van Nostrand, Co.,
1936.
Includes references to early research on scales of adult equivalents in the United States and
other countries.
20
A p p e n d i x D. R e s e a r c h on S c a l e s o u t s i d e the B u r e a u of L a b o r Statistics
( N u m b e r s in b r a c k e t s [ ] refe r
to a p p e n d i x C, T e c h n i c a l R e f e r e n c e s )
Almost all of the numerous equivalence scales cited in
the present report or in the technical references listed in
appendix C refer to Engel’s work and have used food as
the point of departure for estimating equivalent costs.
Some have used actual expenditures on food; others,
requirements to maintain specified standards of nutri
tional adequacy. Some, including the BLS scales based
on the 1950 and 1960-61 expenditure surveys, have
relied primarily or exclusively on a food relationship;
others have used food and nonfood expenditures. The
extensive quotations that follow have been selected to
indicate that in approximately 45 years of research, no
consensus has emerged on a method that is objective
and operationally practical. The latter consideration
probably accounts for the preponderance of scales de
rived from a food expenditures-income relationship.
clothing-expenditure units and other-items-expenditure units
following the procedure first suggested by Kirkpatrick in
1921-22. This method was followed also, for example, in
the U.S. Wage Earner Study of 1934-36.2
This technique suggests two important points. First, that
all-items scales can be constructed by weighting specific
scales for the component elements of the budgets as well
as by a direct technique. Secondly, this draws attention
immediately to the inequality of coverage of the different
elements of the budget: food and clothing are relatively
well covered, but rent and miscellaneous items almost not
at all. If these latter enter into the final all-items scale with
a weight of approximately 50 percent, the inadequacy of
coverage is serious. To these difficulties must be added the
further fact that the determination of scale values in the
case of expenditures which are family rather than individual
in character, such as rent, household expenditures and cer
tain miscellaneous items may involve arbitrary judgments or
exclusions.
Sydenstricker and King published in 19211 “The
Measurement of the Relative Economic Status of Fami
lies,” which Prais and Houthakker in 1955 [16] charac
terized as a “fundamental paper.” Referring to these
authors Woodbury wrote in 1944 [26]: *
A second reason for the relative lack o f all-items scales
lies in the technical difficulties of preparing a new all-items
scale in time for use in analyzing the data of the study on
which it is based. . . .
Finally, the adoption of the classification according to
family type has led to a somewhat lessened emphasis upon
all-items scales. 3 The latter have served various purposes,
one of which has been to express in numerical relation the
demand for consumption goods represented by different
family members or additions to the family. But the demand
for consumption goods represented by infants or very young
children, for example, in families of man, wife and one child
can be studied more closely and the results presented more
convincingly by an analysis in which families of this type are
segregated for examination than by a technique which
merely adds their consumption unit value to that of other
family members in all types of families. It follows, however,
that in the analysis by family type each type group is studied
separately, and no attempt is made to summarize or cumu
late the results.
Sydenstricker and King rejected a nutrition or calorie
basis for an economic or expenditure scale; and moved in
the direction of greater specificity in adopting separate scales
for food expenditures, for expenditures on all other items
than food and for general expenditures. Their scale for
general expenditures was derived from the other two by
weighting by the average expenditure on food and all other
items. . . .(p. 457)
After reviewing work on expenditure scales in the 20
years since the Sydenstricker-King paper, Woodbury
observed [26]:
The paucity of all-items scales is in marked contrast to the
relative abundance of new food expenditure scales; the latter
reflect the increased attention being paid to diets and paral
lels the development of specific scales for different nutrients.
. . .(pp. 460-61)
When the mass of material permits, detailed study of hab
its of consumption and expenditure can be made for each
important family type; the types chosen are, for example,
families with two adults only, families with man, wife and
one child, families with man, wife and two to four children,
families with man, wife and five or more children, etc..........
Obviously, also with the greater degree of specificity in the
families selected for study, a larger total mass o f material is
required to yield a sufficient volume for the detailed groups,
(pp. 461-63)
An important reason for the paucity of all-items scales on
the same level of technical elaboration as those for food and
clothing is the tendency observed in a number of recent
studies to calculate the number of consumption units in
each family, not from the sex and age composition in con
junction with an all-items scale, but as a weighted harmonic
average of the number of specific food-expenditure units,
^This reference is to Money Disbursements o f Wage Earners
and Clerical Workers, 1934-36, Summary Volume, U.S. Depart
ment of Labor, Bureau of Labor Statistics, Bull. 638, pp. 362-66.
^Woodbury’s note: “In the U.S. Consumer Purchases Study,
1935-36, the analysis according to all-items expenditure units
was dropped.”
lln Quarterly Publications of the American Statistical Asso
ciation, Vol. XVII, No. 125, September 1921, pp. 842-57.
21
Wetzler outlined three alternative techniques generally
employed to measure incomes needed to yield equiva
lent levels of welfare for different groups:
Prais and Houthakker in 1955 [16] referred to
Woodbury’s survey of economic consumption scales.
They presented a method for the analysis of the effects
of household composition on consumption and applied
the analysis to data from 1937-39 British expenditure
surveys to yield scales for six food groups. The follow
ing quotations from their “conclusions” and “implica
tions for further research” are similar to Woodbury’s.
1. Estimate physical needs for one or more commo
dities (food; or food, clothing, shelter, etc.) of males and
females in different age categories, based on standard
criteria, and then convert these physical needs into
dollars, using market prices to obtain the equivalent
dollar need. (Wetzler cited Orshansky’s scale [14] as
an example)
Obviously the next step in research along these lines is to
obtain comparable estimates for various non-food expendi
tures; . . .But the straightforward application of the method
of this chapter (i.e., 9) would be inadequate for most non
food items on account of the existence of economies of
scale to a significant extent, (p. 145)
2. Use actual expenditures on necessities such as
food, or food and clothing, by families of different age
and sex composition; calculate expenditures of each
family per “consumption unit;” and then classify fami
lies into “expenditures-per-consumption-unit” groups.
The concept of economies of scale gives expression to the
possibility that, with given levels of income per person, a
larger household may be able to attain a higher standard of
living than a smaller household. . . .(p. 146)
3. Use the BLS method based on the 1950 CES [22].
As indicated at the beginning of this book, a given piece of
research work can hope to fill in only a small portion of any
field of knowledge................There is, it will be apparent,
considerable scope in our case for a synthesis of the various
developments presented in the previous chapters which
should lead directly to improvements in almost all the
estimates presented in this book. The most obvious of these
required extensions is the simultaneous estimation o f unitconsumer scales and the coefficients of economies of scale
so as to bring together the approaches of Chapters 9 and 10.
(p. 167)
Wetzler’s evaluation follows:
. . . Any one of these measures, from a theoretical stand
point, is arbitrary since they all make interpersonal-and
intergroup—utility comparisons. From an operational or
practical point of view, it is necessary to use a method, pre
ferably simple, which can be generally accepted as giving a
good approximation of equivalent levels of welfare.
A good approximation of equivalent levels of welfare
appears to be given by the method adopted by the Bureau of
Labor Statistics. . . .The BLS method appears to be some
what less subjective than the first approach. Whereas the
first approach tries to make a comparison of welfare which
is based on an opinion of physical requirements, the BLS
approach is based on the actual market behavior of the
groups involved. The main advantage of the BLS method
over the second approach is that it is easier to apply in
practice, (pp. 2-3)
Prais and Houthakker concluded their extensive analy
sis with three observations summarized below:
1. Analyses for food commodities have been more
successful than those for nonfoods; future research
should be directed to bringing analyses for nonfoods to
a comparable level.
Wetzler continues with a comparison of the BLS
method and the method he used for the Institute of
Defense Analysis (IDA):
2. Analyses should begin by grouping nonfood com
modities as broadly as possible and then carrying out
analyses on successively finer subdivisions.
The method used by IDA to determine equivalent income
scales was similar to the BLS method, but differed from it in the
following respects:
3. For the successful analysis of the demand for
many nonfoods, such as consumers’ durables, reliable
information is desirable on current, past, and expected
incomes. “Its absence has been at any rate part of the
reason for our not taking the inquiries into nonfoods
further than we have done and for the relative over
attention given to foodstuffs.” (p. 168)
1. Less restrictive types of equations were used by IDA. The
BLS exponent on the income variable was not allowed to vary
(being always set equal to Vi) whereas the IDA exponent was
permitted to change with family size. In effect, this allowed for
variations, which were to be expected, in the percentage change
in food consumption associated with a given percentage change
in income for different sized families.
2. The IDA equations also permitted estimates to be made, if
the need arose, for family types not included in the available
data, which was not the case for the BLS or other studies. In
other words, IDA equivalent income scales could be derived for
any size family (and for any age of head-of-family).
Two recent approaches to finding equivalent levels of
income have used data published in BLS reports on the
Survey of Consumer Expenditures, 1960-61. (See
Wetzler [25] and Watts [24].
22
3.
Since the BLS took average values to determine its coeffi
cients (a’s), it had no numerical estimate of the ‘explanatory
power’ of the food-consumption equation it used or of the
degree of confidence it could place in the values derived for the
a’s. By using regression analysis, it was possible to determine the
degree of ‘explanatory power’ of our equations and the amount
of confidence that could be placed in our coefficients.” (pp. 3-4)
Watts devised “The Iso-Prop Index” [24] which he
explained as:
In his concluding remarks, Watts stated:
The name Iso-Prop is an abbreviation for iso-proportional,
suggested from the general category of index numbers based
on equivalence in terms of the fraction of income (or some
other total available for disposition) allocated to a class of
expenditures (or subset of possible dispositions), (p. 1)
Further empirical work is needed to explore the Iso-Prop
Index for inter-city variations. This would provide a more
convenient way of graduating the equivalence scales at the
borders. For this it would be desirable to use the individual
observations from the Consumer Expenditure Survey, instead
of the grouped data used here. The city tabulations provide
means for income classes or family size classes, but they are
not cross-classified.^
Watts also reviewed the literature on scales and ex
plained his specific interest in deriving geographic differ
entials:
In view of the non-constancy of income elasticities,5 it
would also be useful to carry out further research on other
forms of the Engel curve. When the elasticity is not con
stant, the income and expenditure data should be deflated
by an equivalence index before the relation is estimated.
Perhaps an iterative scheme could be used here to obtain
successive approximations to an appropriate index, (p. 18)
In the theoretical and empirical analysis which follows, the
Wetzler-BLS-Friedman [25, 22, 9] approach is examined as a
method for arriving at geographic differentials. It is prob
ably impossible to give an entirely rigorous or even convinc
ing argument that this procedure adequately reflects all the
factors which relate to locational differentials. . . .
The procedure’s most certain advantage lies in its objectivity—it can be calculated directly from measures o f observable
household behavior as reflected in available data. Its most
serious deficiency, in the view of those who prefer to base
equivalence on technically prescribed levels of minimum
adequacy (e.g., for nutritional intake), is that it may not pro
duce threshold levels which admit the possibility of attaining
all such minimum levels, (p. 6)
^Editor’s note: Unpublished cross-tabulations o f income after
taxes and family size are avaliable for individual cities in the
BLS Division of Living Conditions Studies.
5Tests carried out by Watts rejected the hypothesis that in
come elasticity is constant, (p. 13). It should be noted that
this conclusion refers to income elasticities among geographic
areas and not among different types o f families.
Watts used published summaries of the CES 1960-61
to carry out regressions for two categories of expendi
tures: for food and for a group roughly corresponding
to necessities-food, housing, clothing, and transpor
tation. He carried out preliminary regressions using
income before tax and income after tax as alternative
income measures. The results were quite similar, but
only the pre-tax income regressions were reported
because they corresponded with the officially recog
nized Orshansky thresholds of poverty.
23
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