1962 SURVEY OF CONSUMER FINANCES GEORGE KATONA CHARLES A. LININGER RICHARD F. KOSOBUD

Transcription

1 1962 SURVEY OF CONSUMER FINANCES GEORGE KATONA CHARLES A. LININGER RICHARD F. KOSOBUD

2 1962 SURVEY OF CONSUMER FINANCES

3 1962 SURVEY OF CONSUMER FINANCES BY GEORGE KATONA CHARLES A. LININGER RICHARD F. KOSOBUD MONOGRAPH NO. 32 SURVEY RESEARCH CENTER INSTITUTE FOR SOCIAL RESEARCH THE UNIVERSITY OF MICHIGAN

4 Copyright by The University of Michigan 1963 All rights reserved Library of Congress Catalog Card No Printed by Malloy Lithographing, Inc., Ann Arbor, Michigan Manufactured in the United States of America

5 PREFACE THIS volume is the third in a series of monographs which began with the i960 Survey of Consumer Finances. These monographs are intended to make available the basic findings of the regular surveys conducted by the Economic Behavior Program of the Survey Research Center. In 1962 there were four such surveys, the annual financial survey conducted in January and February of that year, and three additional periodic surveys of consumer attitudes and inclinations to buy conducted in May, August-September, and November-December. The annual Survey of Consumer Finances in January-February 1962 was intended in part to carry forward basic trends on such topics as consumers' income, major purchases, installment debt, housing, and medical expenses and medical debt. The results appear in Part One of this monograph. An additional objective of the 1962 survey was to obtain information on consumers' balance sheets including a measure of their net worth. No information of this character had been collected since A major new feature of this volume, therefore, is the comparison of consumers' balance sheet position at the beginning and end of this nine-year period. New information about expenditures on vacation trips is presented in another chapter of the 1962 Survey of Consumer Finances. Continuing in the tradition of the two earlier monographs the authors present in Part Two a permanent record of the findings of periodic surveys of consumer attitudes and inclinations to buy. While press reports of the results of these investigations are released promptly after the completion of each survey, they contain only a summary of major findings; the detailed data on changes in consumer attitudes between the fall of 1961 and the fall of 1962 are published here for the first time.

6 vi 1962 Survey of Consumer Finances The survey data collected form the basis of extensive statistical analysis. Some of the analytical studies are presented in this volume; others will be published in periodicals and other books. It is hoped that this monograph will stimulate additional studies by other investigators. The Survey Research Center is greatly indebted to the Ford Foundation which granted funds to cover a substantial part of the basic cost of the 1962 Survey of Consumer Finances. The Economic Behavior Program of the Survey Research Center is directed by George Katona in association with James N. Morgan, John B. Lansing, and Eva Mueller. Charles A. Lininger had the major responsibility for conducting the financial survey early in In addition the following staff members participated in the analysis of survey data reported here: Judith A. Agard, Henry Altings, Richard Kosobud, Albert M. Marckwardt, Stuart Schultz, Wilber Vary, Wallace Wilson, and Margaret Wood. This volume was edited by Jean King.

7 CONTENTS PART ONE. FINANCIAL DATA 1. Income and Employment Distribution of income by size 4 Impact on income of the number of earners in the spending unit 5 Impact on income of the number of people in the spending unit 6 Types of income 6 Extent of employment 7 Reported change in income from 1960 to Income expectations for Consumer Durable Goods Highlights 33 Purchases of automobiles 34 Automobile ownership 35 Trade-ins 36 Furniture and household appliances Major expenditures on automobiles and durables Installment Debt Highlights 61 Aggregate installment debt 62 Incidence of installment debt 62 Debt by income-age groups 63

8 viii 1962 Survey of Consumer Finances Relationship to liquid asset holdings Debt payment/income ratio 63 Installment debt for automobiles Housing 75 Housing market activity 76 Current housing status 77 Expenditures for additions and repairs.. 78 Intentions to buy a house Medical Expenses and Medical Debt 95 Highlights 95 Type of medical expense 95 Amount of personal medical expenses Insurance coverage 98 Method of handling medical expenses Medical debt 101 Methodological notes Net Worth 117 Highlights 118 Net worth 118 Relationship to income 121 Composition of net worth 121 Variable value assets and net worth Components of net worth 123 Cohort analysis Vacation Trips 143 Highlights 143 Relationship to level of income 144 Relationship to life cycle stage 145 Number of vacation trips 145 Effects of time and children 145 Relationship to education and place of residence 146 Maximum distance from home 147 Questions asked 148 Comparison with other estimates 148 Estimate of aggregate outlay 148

9 Contents ix PART TWO. CONSUMER ATTITUDES AND INCLINATIONS TO BUY 8. Fifteen Years of Experience in the Measurement of Consumer Expectations 161 The predictive value of expressed attitudes 161 Fulfillment of buying intentions 167 Survey methods 172 References The Outlook for Consumer Demand, November 1961 and February November 1961, highlights 177 The Index of Consumer Attitudes 179 International tensions 180 Information about business trends and unemployment 184 Economic outlook of consumers 186 Attitudes toward personal finances Attitudes toward prices, market conditions, and debts 188 Attitudes toward automobile purchases February 1962, highlights 192 Distribution of income 194 The Index of Consumer Attitudes 195 Intentions to buy 195 General economic outlook 197 Attitudes toward personal finances Market conditions The Outlook for Consumer Demand, May Highlights 199 The Index of Consumer Attitudes 202 Attitudes toward personal finances Expectations regarding business conditions 206 People's reactions to recent economic news 207

10 x 1962 Survey of Consumer Finances Attitudes toward prices and buying conditions 209 Plans to buy major durable goods and houses 211 Possible consumer reactions to the stock market decline The Outlook for Consumer Demand, September Highlights 215 The Index of Consumer Attitudes 217 Attitudes toward personal finances Expectations regarding business conditions 220 Demand for automobiles 223 Prices and market conditions 224 Reactions to the stock market decline Attitudes toward Tax Reduction 255 Comprehension of issues 256 Reasons for opinions 256 Proposed uses of money saved by a tax cut 257 PART THREE. METHODOLOGICAL APPENDIX 13. Survey Methods 267 Number of interviews 267 Selection of respondents 268 Sampling errors of attitudinal variables 268 Scores and relatives of scores Questionnaires Bibliography 305

11 TABLES AND CHARTS CHAPTER 1 Table 1-1 Table 1-2 Table 1-3 Table 1-4 Table 1-5 Table 1-6 Table 1-7 Table 1-8 Table 1-9 Table 1-10 Table 1-1 i Table 1-12 Table 1-13 Distribution of Spending Units and Distribution of Total Money Income before Taxes, by Income Groups 10 Distribution of Families and Distribution of Total Money Income before Taxes, by Income Groups 11 Means and Shares of Spending Unit Income and Lowest Income within Deciles 12 Distribution of Spending Units and Distribution of Disposable Income, by Income Groups 13 Median Income for Age and Occupational Groups 14 Number of Income Earners in Married Spending Units, by Life Cycle Stage of Such Units 15 Income Quintiles of Spending Units within Specified Groups Total Income of Wife, by Total Income of the Head of the Spending Unit 18 Mean Income, Proportion of Total Income, and Proportion of Population, by Number of Persons in the Spending Unit 19 Recipients of Various Types of Income, by Income Quintiles 20 Means and Shares of Wage and Salary Income, by Income Deciles 21 Means and Shares of Capital Income, by Income Deciles 22 Means and Shares of Transfer Payments, by Income Deciles 23

12 xii 1962 Survey of Consumer Finances Table 1-14 Table 1-15 Extent of Employment by Occupation of Spending Unit Head 24 Extent of Employment by Age of Head of Spending Unit 25 Table 1-16 Reported Change in income over Past Year Table 1-17 Recalled Total Income for Previous Year, by Income Groups 27 Table 1-18 Income Change Reported by Specified Groups.. 28 Table 1-19 Income Expectations by Income Groups 29 Table 1-20 Income Change Expected by Specified Groups.. 30 Table 1-21 Relationship of Income Expectations to Reported Income Change 31 CHAPTER 2 Table 2-1 Automobile Purchases 39 Table 2-2 Table 2-3 Table 2-4 Table 2-5 Table 2-6 Prices Paid and Net Outlays for New and Used Automobiles 40 Automobile Purchasers by Income, Occupational, and Age Groups 41 Ratio of Number of New Automobiles Purchased to Number of Spending Units in Income Quintile 42 Ratio of Number of Used Automobiles Purchased to Number of Spending Units in Income Quintile 43 Automobile Ownership by Spending Units, Families, and Households 44 Table 2-7 Automobile Ownership by Income Quintiles Table 2-8 Table 2-9 Table 2-10 Automobile Ownership by Place of Residence 46 Automobile Ownership by Distance from Center of Central City 47 Trade-ins or Sales in Connection with New and Used Car Purchases 48

13 Tables and Charts xiii Table 2-11 Purchases of Household Durable Goods 49 Table 2-12 Table 2-13 Table 2-14 Table 2-15 Table 2-16 Table 2-17 Table 2-18 Table 2-19 Table 2-20 Chart 2-1 Amounts Spent for Furniture and Household Appliances in Specified Years 50 Amounts Spent for Furniture and Household Appliances, by Age Groups 51 Purchasers of Furniture and Household Appliances, by Income, Age, and Life Cycle Groups 52 Purchasers of Furniture and Specified Household Appliances, by Income Groups Methods of Financing Purchases of Furniture and Household Appliances, by Income Groups 54 Major Expenditures for Automobiles, Furniture, and Household Appliances 55 Mean Major Expenditure and Percentage of Income Spent on Durables, by Age Groups Mean Major Expenditure and Percentage of Income Spent on Durables, by Life Cycle Groups 57 Mean Major Expenditure and Percentage of Income Spent on Durables, by Income Groups.. 58 Cash and Credit Purchases of New Automobiles, CHAPTER 3 Table 3-1 Table 3-2 Table 3-3 Table 3-4 Incidence of Installment Debt within Various Groups Changes in Number of Debtors, Size of Mean Installment Debt, and Aggregate Installment Debt 68 Proportion of Spending Units with Installment Debt, by Age and Income 69 Amount of Installment Debt Outstanding, by Liquid Asset Holdings 70

14 xiv 1962 Survey of Consumer Finances Table 3-5 Table 3-6 Table 3-7 Table 3-8 Ratio of Annual Installment Debt Payment Rate to Previous Year's Disposable Income, by Income Groups 71 Ratio of Annual Installment Debt Payment Rate to Previous Year's Disposable Income, by Age Groups 72 Ratio of Annual Installment Debt Payment Rate to Previous Year's Disposable Income, by Housing Status and Duration and by Income Expectations 73 Installment Debt Incurred on New and Used Automobiles, by Income and Age Groups 74 CHAPTER 4 Table 4-1 House Purchases, Mortgage Debt Incurred, and Expenditures for Additions and Repairs by Nonfarm Families 80 Table 4-2 Prices Paid for Nonfarm Houses 81 Table 4-3 Table 4-4 Annual Mortgage Payment Rate of Nonfarm Families 82 Monthly Mortgage Payments of Nonfarm Families, by Income Groups 83 Table 4-5 Monthly Rent Paid by Nonfarm Families 84 Table 4-6 Table 4-7 Table 4-8 Table 4-9 Table 4-10 Table 4-11 Monthly Rent Payments of Nonfarm Families, by Income Groups. 85 Housing Status of Nonfarm Families, by Income Groups 86 Housing Status of Nonfarm Families, by Life Cycle Groups 87 Housing Status of Nonfarm Families, by Place of Residence 88 Housing Status of Nonfarm Families by Occupational, Racial, and Age Groups 89 Nonfarm Houses Classified by Value and Mortgage Debt 90

15 Tables and Charts xv Table 4-12 Table 4-13 Table 4-14 Table 4-15 Mortgage Debt of Nonfarm Families, by Income Groups 91 Value of Houses Owned by Nonfarm Families, by Income Groups 92 Expenditures for Additions and Repairs Made by Nonfarm Home-owning Families, by Income Groups 93 Expenditures for Additions and Repairs Made by Nonfarm Home-owning Families, by Purchase Date of Present House 94 CHAPTER 5 Table 5-A Table 5-1 Table 5-2 Table 5-3 Table 5-4 Table 5-5 Table 5-6 Table 5-7 Table 5-8 Medical Expenses by Insurance and Personal Medical Obligations 99 Type of Large Medical Expense and Amount of Such Expense Not Covered by Insurance, by Age, Income, and Life Cycle Groups Type of Large Medical Expense, by Amount of Such Expense Not Covered by Insurance Amount of Large Medical Expense Paid by Insurance, by Amount of Such Expense Not Paid by Insurance 107 Amount of Large Medical Expense Paid by Insurance and Relative Size of Personal Medical Obligations and Medical Payments, by Age and Income Groups Method of Handling Large Medical Expense Not Covered by Insurance, by Age and Income Groups and by Liquid Asset Holdings Method of Handling Large Medical Expense Not Covered by Insurance, by Amount of Such Expense 112 Amount of Medical Debt in Selected Years. 113 Amount of Medical Debt by Income Groups

16 xvi 1962 Survey of Consumer Finances Table 5-9 Amount of Medical Debt, by Amount of Large Medical Expense Not Covered by Insurance 115 Table 5-10 Amount of Medical Debt by Age Groups 116 CHAPTER 6 Table 6-1 Net Worth and Gross Worth 128 Table 6-2 Net Worth by Age Groups 129 Table 6-3 Net Worth by Income Quintiles 130 Table 6-4 Distribution of Spending Units, New Worth, and Income, by Net Worth Groups and Income Quintiles 131 Table 6-5 Relation of Net Worth to Income 132 Table 6-6 Table 6-7 Table 6-8 Relation of Net Worth to Income, by Age Groups 133 Relation of Net Worth to Income, by Income Quintiles 134 Composition of Net Worth by Net Worth Groups 135 Table 6-9 Composition of Net Worth by Age Groups Table 6-10 Table 6-11 Table 6-12 Composition of Net Worth by Income Quintiles 137 Relation of Gross Variable Value Assets to Net Worth, by Age Groups and Income Quintiles 138 Ownership of Assets and Debt Liability, by Income Quintiles 139 Table 6-13 Size of Net Worth Components 140 Table 6-14 Net Worth by Age Cohort Groups 141 Table 6-15 Composition of Net Worth by Age Cohort Groups 142

17 Tables and Charts xvii CHAPTER 7 Table 7-1 Table 7-2 Table 7-3 Table 7-4 Table 7-5 Table 7-6 Table 7-7 Table 7-8 Amount Spent on Vacation Trips, by Income Groups 150 Mean Amount Spent on Vacation Trips, by Income Groups 151 Mean Amount Spent on Vacation Trips, by Life Cycle Groups 152 Number of Vacation Trips Taken, by Amount Spent on All Vacation Trips 153 Number of Vacation Trips Taken, by Income Groups and Place of Residence 154 Number of Vacation Trips Taken, by Education and Life Cycle Groups 155 Maximum Distance from Home Reached on a Vacation Trip, by Income Groups 156 Maximum Distance from Home Reached on a Vacation Trip, by Amount Spent on That Trip 157 CHAPTER 8 Table 8-A Table 8-B Table 8-C Forecasting Expenditures for Consumer Durable Goods, by Attitudes and Financial Variables Realization of Intentions to Buy Automobiles, by Income Groups and Income Change Planning Periods of Purchasers of New Automobiles, by Intentions to Buy 171 CHAPTER 9 Table 9-A Table 9-B Table 9-C Expectations of War ' 182 Opinions about the Effects of the Federal Deficit on Business 184 Opinions about Financing Increased Cold War Expenditures 185

18 xviii 1962 Survey of Consumer Finances Table 9-D Attitudes toward New Automobile Models Table 9-E Attitudes toward Prices of New Automobiles Table 9-F Expectations about Automobile Prices 194 CHAPTER 10 Table 10-A Major Reason for Saving 205 Table 10-B Intentions to Buy Automobiles, by Ownership Groups 212 CHAPTER 11 Table 11-A Table 11-B Table 11-C Table 11-D Chart 11-1 Table 11-1 Table 11-2 Table 11-3 Table 11-4 Table 11-5 Consumer Sentiment as Reflected by the Index of Consumer Attitudes 219 Difference Between Proportion Saying Business Conditions Are Better and Proportion Saying They Are Worse Than a Year Earlier 221 Attitudes toward Business Conditions a Year Earlier and a Year Hence 223 Perception of Effect of Stock Market Decline on Personal Finances 227 Trend of Consumer Attitudes and Durable Goods Sales, Index of Consumer Attitudes and Inclinations to Buy 230 Consumers' Evaluations of Present Business Conditions as Compared with Those a Year Earlier 231 Information on Recent Change in Business Conditions 232 Information about Recent Stock Market Developments 233 Information and Expectations about Unemployment, by Income Groups

19 Table 11-6 Table 11-7 Tables and Charts xix Business Conditions Expected during the Next Twelve Months, a Year Hence, and for the Next Five Years Opinions about Likelihood of Depression and Recession during the Next Five Years Table 11-8 Recent Income Change 239 Table 11-9 Consumers' Evaluations of Their Financial Progress and Prospects 240 Table Frequency of Financial Worries 241 Table Opinions about Price Changes Table Table Table Table Table Table Table Reactions to Prospective Price Developments, within Price Expectations Opinions about Buying Conditions for Automobiles, Houses, and Household Appliances Buying Intentions at the Beginning of Calendar Years 245 Intentions to Buy Automobiles in the Next Twelve Months 248 Intentions to Buy Housing and Household Appliances in the Next Twelve Months Special Expenditures People Would Like to Make in the Next Twelve Months 249 Opinions about Possibility of Increasing Monthly Installment Payments, by Income Groups 252 Table Opinions about Wisest Place to Invest Money Chart 11-2 Relative Gains of Consumer Attitudes during Last Three Economic Upturns 254 CHAPTER 12 Table 12-1 Opinions on the Advisability of a Tax Reduction 261

20 xx 1962 Survey of Consumer Finances Table 12-2 Table 12-3 Reasons for Attitudes toward Tax Reduction 262 Indicated Use of Funds from a Hypothetical Income Tax Reduction 263 CHAPTER 13 Table A-l Table A-2 Table A-3 Table A-4 Sampling Errors of the Major Attitudinal Variables, Based on 1350 Cases 268 Distribution and Total Number of Spending Units and of Family Units 270 Number of Nonfarm Family Units in Specified Groups of the 1962 Survey of Consumer Finances 271 Number of Spending Units in Specified Groups of the 1962 Survey of Consumer Finances Approximate Sampling Errors of Survey Findings 274 Table A-5 Sampling Errors of Differences 275 Table A-6 Standard Errors of Scores and Relatives of the Index of Consumer Attitudes and Its Components 276

21 PART ONE FINANCIAL DATA

22 1 I INCOME AND EMPLOYMENT THE Survey of Consumer Finances, conducted annually at the beginning of the year, yields information on the distribution of income among different population groups. This information complements well-known aggregate data on trends in total personal income. Comparing the distribution of income by size in 1961 with that in 1960, some increase is found in the proportion of people in the lowest and in the highest income groups. Some population groups lost ground: in 1961 the median income of the unskilled, semiskilled, and clerical workers declined. These losses were over compensated by income gains of other population groups, however. Comparing the distribution of income in 1961 with that obtained several years earlier, the most striking change is the substantial increase in the proportion of spending units and family units with incomes of $10,000 or more. Periods of recession do not, of course, coincide with calendar years. The last recession began sometime in the fall of 1960 and ended sometime in the spring of Aggregate incomes increased considerably over most of Survey data on income received in the calendar year 1961 reflect, nevertheless, some effects of the recession, as well as some of the effects of later income gains. First of all, they reflect an uneven course in the income recovery of different population groups. The median income of several population groups was found to be lower in 1961 than in This is true not only of the lower occupational groups but also of older people and of people with less education. On the other hand, units whose heads were professional men or managers, or who have had higher education, showed a sizable income gain in The increase in the proportion of spending units in the top income group resulted in further concentration of income.

23 Survey of Consumer Finances Comparison of the mean or median incomes of different population groups in 1961 with those in 1960 is one source of information on change in income. The other source of information was to askthe respondents in the representative sample whether their incomes went up, remained the same, or went down in Both income increases and income decreases were reported more frequently from 1960 to 1961 than from 1959 to 1960, reflecting a larger proportion of income change in The proportion of spending units that expected income increases from 1961 to 1962 is smaller than the proportion that reported income increases from 1960 to 1961, and the same is true of expected and reported income declines. Distribution of income by size Table 1-1 presents the distribution of income by size for spending units and Table 1-2 for family units. Both tabulations reflect small increases in the proportion of units in the highest and in the lowest income groups. The mean spending unit income and the mean family income show sizable gains. Yet the median spending unit income appears to have declined somewhat. Although this decline is statistically not significant, it may be viewed with some confidence because the median income of several sizable subgroups of the population has declined. When total income (rather than all spending units) is divided among income groups, some increase in the concentration of income among the highest income groups is shown for 1961 (Tables 1-1 and 1-2). The same findings are reflected in Table 1-3 where spending units are divided into income deciles. Spending units in the highest decile had incomes of $10,600 or more in 1961; their mean income exceeded $18,000; and 30 per cent of total income accrued to these units. Thirteen percent of all spending units have incomes of $10,000 or more before income taxes (Table l-l), compared with 7 per cent with incomes of $10,000 or more after taxes (Table 1-4). This difference indicates that a sizable proportion of units with incomes of $10,000 or more before taxes receive only slightly more than $10,000 in disposable income. Nevertheless, the concentration of income is not greatly affected by income taxes: The share of total income going to these two groups is 35 per cent and 23 per cent respectively; the relation from 13 to 35 per cent is not substantially different from the relation from 7 to 23 per cent. In Table 1-5 the population is broken into age groups and

24 Income and Employment 5 occupational groups. It is apparent that the only sizable gains in median income from 1960 to 1961 occurred in the professional, managerial, and farm operator groups, and in the group of spending units whose head was 45 to 54 years of age. For most of the groups where median income was lower, the declines were small. Nevertheless, it is noteworthy that many age and occupational groups did not have higher medians from 1960 to The detailed statistical data presented in Table 1-7 on the distribution of income of several other groups by income quintiles confirm the evidence just presented. The tabulations show that only a very small proportion of the nonwhite population falls into the highest quintile. Particularly striking are the differences in the income distribution of educational groups. Of the spending units whose heads went to college, 41 per cent were in the highest income quintile in Only 18 per cent of those who went to high school, and 6 per cent of those who had a grade school education or less had incomes of similar size. Impact on income of the number of earners in the spending unit Table 1-7 indicates that practically all spending units with no regular wage earner had low incomes. While this finding is as expected, the finding about the impact of the number of earners in the spending unit on income is of special significance. (An earner is defined as a person who received at least $600 in earned income in 1961.) Forty per cent of all units with two or more earners fall in the top quintile and an additional 30 per cent in the second quintile. In most cases the second earner in the unit is the wife, and in Table 1-6 we have analyzed the frequency of two or more earners among married couples. About 70 per cent of all spending units contained a married couple. Among such spending units, 10 per cent had no earners (mostly retired people), and 63 per cent had only one earner. There were 27 per cent with two or more earners. When the analysis units are modified to conform to census family units of two or more members, the proportion that had two or more major income earners was about 30 per cent. The figure would be even larger if all earners rather than major earnerswere tabulated. Table 1-6 also shows that there was a second earner in about 60 per cent of younger spending units with no children at home. As expected, married women work least frequently when they are old or when their youngest child is under six years of age.

25 Survey of Consumer Finances The contribution of wives to spending unit income is analyzed further in Table 1-8 which shows the income of wives from all sources. Wives with income are relatively frequent when the income of the spending unit head falls between $2000 and $10,000 but infrequent in lower and higher income groups. It does not follow, however, that wives in low income spending units rarely have income. Many of the low income units are young or old and consist of single persons. Only among low-income people do more than half of the wives receive income. Table 1-8 shows that on the whole women do not contribute very much to spending unit income. Among the spending units in which wives have income, about 60 per cent make a contribution of less than $2000 a year. Nevertheless, two-earner families have, on the average, much larger incomes than one-earner families: in twoearner families, when the income of the spending unit head is between $3000 and $10,000, the income of the wife is much larger than it is in lower income groups. Impact on income of the number of people in the spending unit In Table 1-9 data are presented about the very great difference between the average income of one-person spending units and the average income of spending units consisting of more than one person. One-person units can, of course, contain only one earner, but the difference in these averages also results from the fact that most of the people who make up one-person units are either quite young or quite old. Table 1-9 shows that units consisting of more than six people (that is, units with a large number of children) have lower incomes than other units. Types of income The proportion of units having different kinds of incomewages and salaries, capital income, transfer payments, and other income is shown separately by income quintiles in Table The frequency of recipients of different kinds of income remained fairly constant in 1959, I960, and We have, therefore, analyzed the 1961 data in greater detail. This is done for earned income in Table 1-11, for capital income in Table 1-12, and for the receipt of transfer payments in Table Capital income is most

26 Income and Employment 7 concentrated among upper income groups, but the concentration of earned income is also sizable among high income receivers. Transfer payments accrue primarily to lower income groups. Extent of employment For several years the Survey Research Center has published data on the number of weeks worked by employed people during each calendar year. These tabulations are continued in Tables 1-14 and Those not employed for a full year (that is, those employed less than 50 weeks) are not necessarily unemployed or seasonal workers. Each year at least 10 per cent of the employed heads of spending units state that they were not employed a full year because of personal reasons. The proportion not employed for job-related reasons was 13 per cent in 1961 and 16 per cent in 1960 (Table 1-14). These figures are much higher than the proportion of unemployed at any time during those years because unemployment hit6 different people at different times. Unemployment is, of course, most frequent among unskilled workers and among heads of spending units who are years of age. Reported change in income from 1960 to 1961 Data on income changes from one year to the next are studied in two forms: distribution of income by size for successive years (reported above) and respondents' reports of income change. Members of the representative samples were asked how the incomes they received in the most recent year compared with their incomes the year before. Table 1-16 shows that 46 per cent of all spending units reported larger incomes in 1961 than in 1960 and 21 per cent reported smaller incomes in Comparing these reports with those obtained a year earlier, we find that both the proportion reporting income increases and the proportion reporting income decreases were fairly high in Here again we find evidence that the change in income from 1960 to 1961 was highly uneven among different population groups. The ratio of income increases to income decreases in 1961 appears to be as favorable as it was following the 1958 recession but less favorable than it was in 1956 or in several earlier years. In every year a substantial proportion of people report unchanged

27 Survey of Consumer Finances income, reports which no doubt include small changes in both directions. Table 1-17 indicates that the income of the great majority of spending units fell in the same brackets in 1961 as in The incomes of other units most frequently increased by one bracket. Substantial differences in reported income changes are evident among different educational, occupational, and age groups (Table 1-18). The higher the education, the more frequent are income increases and the less frequent is unchanged income. Among occupational groups, professional and managerial people showed income increases most frequently in The younger the people, the more frequent are income increases and the less frequent is unchanged income. Income declines are reported with about equal frequency by all age groups. Income expectations for 1962 After each respondent's 1961 income had been determined, he was asked to compare the income he expected for 1962 with the income he received in Thirty-eight per cent of the respondents expected income increases and 10 per cent expected income decreases. About half of all respondents replied that their 1962 income would not differ significantly from that of On the whole, income expectations are relatively insensitive to changing circumstances: Changes in the distribution of income expectations from one year to the next are relatively minor. Table 1-19 compares income expectations with reported 1961 incomes. We find that most people believe that their 1962 income will fall in the same bracket as their 1961 income. This tendency is more pronounced for income expectations than for reported income change (Table 1-17). Expected favorable income changes predominate among young people, the better educated people, and the higher occupational groups (Table 1-20). The relationship of reported income change to income expectations is shown in Table The table shows that slightly over one-half of the respondents expect the trend they experienced in 1961 to continue in 1962: A sizable group which made income gains from 1960 to 1961 expects further income gains from'1961 to 1962, and so on. In addition, 23 per cent of the families expect changes from 1961 to 1962 that are less favorable than the changes experienced from 1960 to 1961 (for instance, some of them reported an income increase in 1961 and expected unchanged income in 1962). Finally, the expectations of 22 per cent of the respondents are more

28 Income and Employment 9 favorable than their recent income changes; these are mostly people who made no income gain in 1961 but whoexpect such a gain in Since the last two groups are equal in proportion, the income expectations expressed for 1962 cannot be considered very favorable. The largest difference between the distributions of reported and expected income change is to be found in the fact that relatively few people expect lower incomes in This finding, however, is not necessarily a reflection of the state of expectations in Earlier studies (including a survey conducted in January-February 1959) also show that expectations of income declines are less frequent than reports of income declines. Since many income declines are the result of illness or other unforeseen circumstances and since people have generally been optimistic in the postwar decade, these findings are not surprising. In several earlier studies, but not in 1959, it was also found that expectations of unchanged income are much more frequent than reports of unchanged income. The relation between expectations of income increases and reports of income increases has fluctuated in the past. On the whole, the 1962 findings cannot be judged as too favorable: only 38 per cent of the sample expected income gains in 1962 while 46 per cent reported income gains in 1961 (Table 1-21). In spite of their relative insensitivity, the importance of income expectations should not be underestimated. People who expect income gains differ in their behavior from those who expect unchanged or falling income. Plans to buy automobiles and other durable goods are much more frequent among those who expect income increases than among other people. Those who expect unchanged income express buying intentions least frequently. This relationship has been repeatedly observed in the past. Possibly many people who report that they expect income declines are thinking of transitory unfavorable trends that have already begun but which they do not expect will continue for long. Other influences must also be taken into account. For example, people who expect unchanged incomes are frequently old and therefore do not buy durables. Similarly those who expect income gains are frequently young, and young people buy durables more often than older people.

29 Table 1-1 DISTRIBUTION OF SPENDING UNITS AND DISTRIBUTION OF TOTAL MONEY INCOME BEFORE TAXES, BY INCOME GROUPS (Percentage distribution of spending units) Spending units Share of total money income Total money income to c "* n> Under $ $ $ $ d $ $ $ A $ d $10,000-14, $15,000 or more Total b Median income $4350 $4400 $4860 $5170 $5000 Mean income c $5160 $5150 $5660 $5830 $6050 a A spending unit consists of all related persona living together who pool their incomes. ^Median"income of the middle spending unit in a ranking of all units by size of total money income. c Mean income is obtained by dividing aggregate money income before taxes by number of spending units. d Revised. For data for 1955 through 1958, see Table l-l, 1960 Survey of Consumer Finances

30 Table 1-2 DISTRIBUTION OF FAMILIES AND DISTRIBUTION OF TOTAL MONEY INCOME BEFORE TAXES, BY INCOME GROUPS (Percentage distribution of family units) Family units Share of total money income Total family income* Under $ * * 1 $ $ $ $ $ $ $ $10,000-14,999 ) 1 I L 1 1 $15,000 or more f Total Mean family income'* $5650 $5580 $6080 $6230 $6480 Leas than one-half of one per cent. a A family unit consists of a l l related persons living in the same dwelling unit. A single person who is unrelated to the other occupants of a dwelling unit or who lives alone is a family unit by himself. ^Mean income ia obtained by dividing aggregate money income before taxes by the number of family units. 3 ci O 3 ft 8. I I* 3 3 For data for 1948 and for 1954 through 1958, see Table 1-2, 1960 Survey of Consumer Finances.

31 Table 1-3 MEANS AND SHARES OF SPENDING UNIT INCOME AND LOWEST INCOME WITHIN DECILES Share of total money income (in per c< ent) Mean income of decile Lowest income in decile Income decile Lowest decile $ 600 b $ 770 $ 850 # # # Second decile $ 1240 $ 1400 $ 1330 Third decile U0 b Fourth decile Fifth decile Sixth decile Seventh decile Eighth decile Ninth decile Highest decile ,360 16,040 18,310 10,300 10,510 10,600 to Ms IN) on o o 3 Co K Total # Data not available. Deciles were obtained by ranking spending units according to total money income before taxes. a Revised. b For data for 1956 through 1958, see Table 1-3, 1960 Survey of Consumer Finances.

32 Table 1-4 DISTRIBUTION OF SPENDING UNITS AND DISTRIBUTION OF DISPOSABLE INCOME, BY INCOME GROUPS (Percentage distribution of spending units) Disposable income Spend ins units Share of total disposable income of spending unit Under $ $ $ $ $ $ $ $ $10,000-14, $15,000 or more Total Mean disposable income $4500 $4540 $4940 $5100 $5210 a Federal Income taxes are estimated for each spending unit and subtracted from total income to obtain d isposable income.

33 Survey of Consumer Finances Table 1-5 MEDIAN INCOME FOR AGE AND OCCUPATIONAL GROUPS Group characteriseic Median Income' 1959 I960 b 1961 Age of spending unit head and over $3340 $3510 $ Occupation of spending unit head Professional Managerial \ Other self-employed I Clerical and sales Skilled Semiskilled Unskilled and service Farm operators Retired , a Median income of the middle spending unit in a ranking of a l l units within the group by size of money income before taxes. ^Median incomes of occupational groups in 1960 have been revised. For data for 1956 through 1958, see Table 1-5, 1960 Survey of Consumer Finances.

34 Income and Employment 15 Table 1-6 NUMBER OF INCOME EARNERS IN MARRIED SPENDING UNITS, BY LIFE CYCLE STAGE OF SUCH UNITS (Percentage distribution of married spending units) Life cycle stage of head of married spending unit 8 Under age 45 Number of persons in SU earning $600 or more Three or Tota1 None One Two more Per cent of sample Married, no ^;.Ildren b Married, children Youngest under Youngest 6 or over or over Married, children Married, no children^ Head in labor force Head retired All married SU's a Less than one-half of one per cent. There were 2117 spending units in the 1962 Survey of Consumer Finances; 1448 of these units contained married couples. In the 1962 survey there were 1967 family units that contained one or more spending units. ^Spending units that do not contain children under 18 years of age.

35 Survey of Consumer Finances Table 1-7 INCOME QUINTILES OF SPENDING (Percentage distribution 1961 income quintile Group characteristic Total Lowest Second Third Fourth Highest Age of SU head and over :cupatlon of SU head Profess ional 100 I Managerial and self-employed Clerical and sales Skilled Semiskilled Unskilled, service Farm operator Retired eg ion Northeast North Central West South spending units For data for 1960, see Table 1-5, 1961 Survey of Consumer Finances. For data for 1950 and 1959 on age, education, occupation, and race, see Table 1-4, 1960 Survey of Consumer Finances.

36 Income and Employment 17 UNITS WITHIN SPECIFIED GROUPS of spending units) 1961 Income quintile Group characteristic Total Lowest Second Third Fourth Highest Education of SU head 8 years or less High school College Size of place Central cities 12 largest SMSA's 8 Other SMSA's, 50,000 and over Urban places 10,000-49, Rural In an SMSA 8 Not m an SMSA Number of persons in SU earning $600 or more None One Two or more Race White Nonwhite All spending units "Standard Metropolitan Statistical Area.

37 Table 1-8 TOTAL INCOME OF WIFE, BY TOTAL INCOME OF THE HEAD OF THE SPENDING UNIT (Percentage distribution of spending units) Wife's total income in 1961 s All SU's Under $1000 Total income of head of spending unit in 1961 $1000- $2000- $3000- $5000- $ $10,000 or more No wife U. Wife present, no income Wife present $ $ $ $ $5000 or more 1 * * * Total Per cent of sample *Less than one-half of one per cent. a I n this table we relate total income of wife to that of her husband ; in Table 1-6 the number of persons in a married spending unit receiving earned income was described.

38 Income and Employment 19 Table 1-9 MEAN INCOME, PROPORTION OF TOTAL INCOME AND PROPORTION OF POPULATION, BY NUMBER OF PERSONS IN THE SPENDING UNIT (Percentage distribut ion) Numbe r of persons in spending unit Per cent Per cent Mean Per cent of a l l of a l l income of of total SU's persons SU SU income One 21 $ Two Three Four Five Six Seven 5300 Eight or more 4950 Total Grand mean $6050

39 Table 1-10 RECIPIENTS OF VARIOUS TYPES OF INCOME, BY INCOME QUINTILES (Percentage of spending units that receive types of income specified) Wage and salary income Capital income c Transfer pavments d Other* 5 Income quintile* Lowest quint lie Second quintile Third quintile o 8 9 O o S K 3 Fourth quintile Highest quintile ft Co All spending units Z b e Income quintiles were formed by ranking spending units on total income. I n addition to wages and salaries, includes income from a profession or a trade and from odd jobs. c Includes income from rent, interest, dividends, and trust funds. ^Includes social security, unemployment compensation, public welfare, veterans' benefits, and other transfer income. Includes farm income of farmers and nonfarmers, unincorporated business income, and income from roomers and boarders.

40 Table 1-11 MEANS AND SHARES OF WAGE AND SALARY INCOME, BY INCOME DECILES Mean Share SU's with wage and salary Standard Mean of aggregate wage and salary income of deviation of wage and salary wage and salary 1961 income 0 SU's with such wage and salary income of income Income decile a (in per cent) income income a l l SU's (in per cent) Lowest decile AO $ $ Second decile Third decile Fourth decile Fifth decile HID Sixth decile Seventh decile Eighth decile Ninth decile Highest decile 93 14, c 13, All spending units 80 $ $ Income deciles were formed by ranking spending units on total income. In addition to wages and salaries, includes income from a profession or a trade and from odd jobs. c The range of wage, salary and related income in the tenth decile was from $8400 to about $70,000.

41 Table 1-12 MEANS AND SHARES OF CAPITAL INCOME, BY INCOME DECILES Mean Share SU's with capital income Mean of aggregate 1961 capital incomg of SU's capital income capital income income decile a (in per cent) with such income of a l l SU's (in per cent) Lowest decile 17 $ 300 $ 50 2 Second decile Third decile Fourth decile Fifth decile Sixth decile Seventh decile Eighth decile Ninth decile Highest decile All spending units 29 $ 830 $ Income deciles were formed by ranking spending units on total income. a ^Capital income includes income from rent, interest, dividends, and trust funds.

42 Table 1-13 MEANS AND SHARES OF TRANSFER PAYMENTS, BY INCOME DECILES 1961 Income decile 8 SU's receiving ^ transfer payments (in per cent) Mean transfer income of SU's with such income Me an transfer income of a l l SU's Share of aggregate transfer income (in per cent) Lowest decile 59 $ 800 $ Second decile Third decile Fourth decile Fifth decile Sixth decile Seventh decile Eighth decile 0 4 Ninth Highest decile decile All spending units Income deciles were formed by ranking spending units on total income. a ^Includes social security, unemployment compensation, public welfare, veterans' benefits, and other transfer income. The three highest deciles were combined because too few respondents in the sample received transfer c income to make separate calculations for these deciles $ $ I" CO CO

43 Table 1-14 EXTENT OF EMPLOYMENT BY OCCUPATION OF SPENDING UNIT HEAD (Percentage distribution of employee spending units) CO 1-4 vo to All Occupation etnplo yee Profess Clerical Semi Unskilled Extent of employment SU's 6 ional Managerial and sales Skilled skilled- and service of employee SU head Full year (50-52 weeks) Less than f u l l year Job-related reasons 0 26 weeks or less 4 5 * * * * weeks * weeks ? CO O o Co S 3 «> Personal reasons 0 39 weeks or less weeks Total Less than one-half of one per cent. Spending unit heads who were in the labor force, other than the self-employed, are classified as employee spending unit heads. Includes some people not included in detail. Job-related reasons were inability to find work, seasonal unemployment, strike, and temporary layoff. Personal reasons include illness or disability, school attendance, leave of absence, vacation without pay, staying home to keep house, and similar reasons. a c For data for 1957 through 1959, see Table 1-9, 1960 Survey of Consumer Finances.

44 Table 1-15 EXTENT OF EMPLOYMENT BY AGE OF HEAD OF SPENDING UNIT (Percentage distribution of employee spending units) Age of head of spending unit Extent of employment ' and over of employee SU head I Full year (50-52 weeks) Less than f u l l year Job-re lated reasons'* 26 weeka or less * weeka * weeks * Personal reasons'* 39 weeks or less weeks Total Less than one-half of one per cent. Spending unit heads who were in the labor force, other than the self-employed, are classified as a employee spending unit heads. b Job-related reasons were inability to find work, seasonal unemployment, strike, and temporary layoff. Personal reasons include illness or disability, school attendance, leave- of absence, vacation without pay, staying home to keep house, and similar reasons. For dats for 1957 through 1959, see Table 1-9, I960 Survey of Conaumer Finances to O CO a & to 3 3 CO s

45 Survey of Consumer Finances Table 1-16 REPORTED CHANGE IN INCOME OVER PAST YEAR (Percentage distribution of spending units) Comparison with Year for which income change was reported 8 previous year's income Income reported to be larger during year Income reported to be about the same Income reported to be smaller during year Uncertain; not ascertained Total a For the years 1957 and 1958 farm units were excluded. Note: After being asked questions about sources of income and number of income earners for the year juat over at time of interview, the respondent was asked how that income compared with the income of the year before.

46 Table 1-17 RECALLED TOTAL INCOME FOR PREVIOUS YEAR, BY INCOME GROUPS (Percentage distribution of spending units) Income of spending unit in SU income Total Under $1000 $ $ $ $ $ $ $10,000-14,999 $15,000 or more Under $1000 $ * 1 * 2 * * $ $ $ $ $ $10,000-14,999 $15,000 or more * * * * * * * * * * * * * * * * * Not Less ascertained than one-half of one per cent a Total income reported in answer to a general recall question asked in early 1962 about calendar year 1960 income to 3 O 3 to 3- ^Total income reported in early 1962 about 1961 income in reply to detailed questioning of sources of income and number of income recipients.

47 Survey of Consumer Finances Table 1-18 INCOME CHANGE REPORTED BY SPECIFIED GROUPS (Percentage distribution of spending units) 1961 income compared to 1960 income Group characteristic Total 8 Age of SU head and over 100 Education of SU head 8 years or less 100 Some high school 100 Completed high school 100 Some college 100 Completed college 100 Occupation of SU head Professional 100 Managerial 100 Self-employed 100 Clerical and sales 100 Skilled 100 Semiskilled 100 Unskilled and service 100 Farm operators 100 Retired 100 Smaller About the same Larger All spending units Cases for which Income change waa not ascertained were excluded from the denominators of the frequencies.

48 Table 1-19 INCOME EXPECTATIONS BY INCOME GROUPS (Percentage distribution of spending units) Total spending unit Income expected in 1962 Total Income Under $1000 $2000 $3000 $4000 $5000 $7500 $10,000 $15,000 of SU in 1961 s Total $ ,999 or more Under $ * 7 1 * * $ * * * $ * * * * $ * * $ * * $ * * * $ * * * * * $10,000-14, * * I $15,000 or more 100 * * * * * r\ \j 3 TO Less than one-half of one per cent. a Total 1961 income reported in early 1962 in reply to detailed questioning of sources of income and number of income recipients. b Total reported in early 1962 in reply to a general question, "About how much would you expect your 1962 income to be... for you and others in the family (SU)?"

49 Survey of Consumer Finances Table 1-20 INCOME CHANGE EXPECTED BY SPECIFIED GROUPS (Percentage distribution of spending units) Expected level of 1962 income compared to 1961 income Don't Group characteristic Total Lower Same HiRher know 8 Age of SU head and over Education of SU head 8 years or less Some high school Completed high school Some college Completed college Occupation of SU head Professional Managerial * Self-employed Clerical and sales Skilled Semiskilled Unskilled and service Farm operators Retired All spending units *Less than one-half of one : per cent. "includes respondents for whom income expectations were not ascertained.

50 Income and Employment 31 Table 1-21 RELATIONSHIP OF INCOME EXPECTATIONS TO REPORTED INCOME CHANGE (Percentage distribution of spending units from the 1962 Survey of Consumer Finances) 1961 Income compared to 1960 income 8 Total Expected level of 1962 income compared to 1961 income" Don't Lower Same Higher know 1 Higher Same * Lower Don 1 1 know 1 * * * i Total Lesa than one half of one per cent. a Reported income change from 1960 obtained in answer to a general recall question asked after detailed questions about number of income recipients and sources of income in ^Expected income change reported in answer to a general question asked after detailed questions about number of income recipients and sources of Income in c Includes respondents for whom income expectations were not ascertained.

51 2 CONSUMER DURABLE GOODS Production of all consumer goods in 1961 increased only slightly over 1960, from 114 to 116 by the Federal Reserve Board Index. It thereby failed to maintain the increase achieved in the previous year. The production of home goods was steady through 1959 and 1960 and increased somewhat during 1961, but the production of automobiles was volatile, rising from 97 in 1959 to 117 in 1960 and declining again to 97 for Aggregate consumption of durable goods, as reported by the Department of Commerce, declined in 1961 to a level below that of Although the decline was largest for automobiles and parts, furniture and household equipment also followed the same pattern. With these data as background, the annual Survey of Consumer Finances provides data on a cross-section of American consumers and allows us to investigate whether particular groups of consumers are primarily responsible lor the aggregate changes, or whether they resulted from changes that were generally uniform among all consumers. On such information expectations for the future can be more firmly based. Highlights Total expenditures on new automobiles fell in 1961 as the number of cars bought by private consumers declined from the previous year and the average price paid also declined. The sales and expenditures on used cars did not fall, however. The top income groups were primarily responsible for the declines in private car sales. Data as of early 1962 suggest an interruption in the trend of increasing multiple car ownership. A decline in ownership in the largest central cities was apparent for the third successive year. Spending on furniture and household appliances during 1961 did not keep pace with the population and income increases of the period.

52 Survey of Consumer Finances Purchases of automobiles New car purchases by private consumers declined from 5.4 million cars in 1960 to 4.6 million cars in The average price paid by private consumers also declined from $3010 to $2830, resulting in an over-all decline in their total expenditures on new cars of more than $3 billion (Table 2-1). The purchases of used cars did not decline, however. Eleven million used cars were bought in 1961, the same number as in The average price per used car bought remained the same, and there was no decline in total expenditures for used cars. The net outlay for cars (price less the value of trade-in) declined less than the price paid. The average net outlay per new car in 1961 was $1980, down $40 from the previous year; for used cars the net outlay was $620 in both 1960 and Trade-ins are very important in paying for new cars as evidenced by the $850 difference between average price and net outlay for new cars, compared with a difference of only $170 for used cars. The distribution of the price paid and net outlay for new and used cars provides further indication of the importance of trade-ins for new cars. Forty per cent of the privately purchased new cars cost $3000 or more, whereas after the deduction for the trade-in allowance, the net outlay for only 6 per cent of the new cars was $3000 or more (Table 2-2). It is well known that new car purchases are highly related to income; it is less well known that the year-to-year changes in the proportion of consumers purchasing new cars are largely in the upper income groups. For example, from 1960 to 1961 the shift in the proportion buying new cars was significant only in the two highest income groups. Among the spending units with incomes $ and $10,000 or more, the declines were 2 and 5 percentage points respectively (Table 2-3). Among occupational and age groups, the largest declines in the proportion purchasing in 1961 were among the clerical and sales workers and those in the middle age range of years. Over the past ten years the major fluctuations in the purchase of new ears occurred among the upper income groups. Purchases 1 From 1960 to 1961 new car registrations also declined from 6.6 to 5.9 million cars. These figures are larger than survey estimates because sales to incorporated business and to federal, state, and local governmental units are not included in the consumer survey data.

53 Consumer Durable Goods 35 tabulated by income quintiles for the past ten surveys show that for all quintiles except the lowest the peak purchasing was done in 1955 (Table 2-4). The decline which followed continued through The increase in new car purchases in 1959 and 1960 was primarily in the highest quintile although the initial increases were somewhat more widespread. During 1961 the increases were not maintained, and purchases in the highest quintile declined to the 1959 level. Chart 2-1 shows that the purchase of new cars on credit declined for three years after the 1955 peak and recovered only for the one year following the 1958 recession. In 1960 the proportion buying on credit decreased somewhat from 1959, and it further decreased in Turning to used cars, a shift appears to have occurred. In 1960 and 1961 the rate of purchase of used cars was somewhat higher than in most of the 1950's (Table 2-5). This was true even among the two highest income quintiles. Automobile ownership Data about automobile ownership from our surveys may be tabulated on three different bases: households, families, and spending units. Table 2-6 shows what is almost necessarily true, that a higher proportion of households than families and a higher proportion of families than spending units own cars. 2 The proportion who own two or more cars is about 3 per cent higher for families than for spending units, but only a little larger on a household basis. The proportion of spending units who own automobiles increased steadily until about 1960, but it has leveled off in recent years. The highest income quintile had reached per cent ownership by 1956, and has remained at about that level since that time (Table 2-7). The next highest quintile has fluctuated around 89 per cent since then, with little tendency toward increasing ownership. In the second quintile the proportion of spending units that own cars has generally increased, while in the lowest income quintile the proportion of ownership has fluctuated at a low level. This relationship is not surprising since there may be two (or more) families in a household and if one of the two owns a car the household is counted as owning a car. In the same way if one of two (or more) spending units in a family owns a car, then the family is counted as owning. In early 1962, 71.7 per cent of spending units owned at least one car; 74.6 per cent of all households were owners.

54 Survey of Consumer Finances The increase in the proportion owning two or more cars has averaged almost one per cent each year over the past ten years. Since 1954 the proportions of spending units in the two lowest income quintiles who are multiple owners have been low and steady. Each higher quintile has shown both higher proportions of multiple owners and larger increases. There is no clear evidence that the proportion of multiple owners is leveling off although in the highest quintile early in 1962 there was no increase over early 1961 in the proportion of spending units owning two or more cars. Table 2-8 shows that ownership in the twelve largest central cities is considerably lower than in other areas, and ownership and multiple ownership is highest in the suburban areas of larger cities. 3 The proportion of spending units in the twelve largest central cities who own cars has declined for the third consecutive year. Declines in ownership also occurred among those with less than a high school education, over 65 years of age, and in the middle income range of $ '* The distance from the center,o the central city was determined for sample addresses in the Standard Metropolitan Statistical Areas. Both car ownership and multiple car ownership increase with the distance from the city center up to 15 miles (Table 2-9). Subsequent analysis will elaborate on neighborhood characteristics in the belief that these characteristics and their changes influence the need for private transportation. Trade-ins New car purchases have an associated trade-in or sale much more frequently than do purchases of used cars (Table 2-10). The proportions changed very little from Some of the purchases without an associated trade-in or sale represent new multiple ownership. Many more of these purchases were made by people who did not own a car. Such purchases are predominantly used cars. Still others replace stolen cars or cars that have been scrapped. 3 Larger cities are defined as the central cities of Standard Metropolitan Statistical Areas. 4 For data on automobile ownership by income, age, education, and life cycle for January-February 1961, see Table 2-13, 1961 Survey of Consumer Finances.

55 Consumer Durable Goods 37 Furniture and household appliances Spending on major household durable goods, as measured by survey data, remained at $8.8 billion in 1961, the same level as in 1960 (Table 2-11). Thirty-seven per cent of all spending units purchased furniture or household appliances during 1961, a percentage which is somewhat lower than that for The aggregate expenditure remained steady, however, because there was an increase of almost one million in the total number of spending units and a small increase in the average expenditure of spending units purchasing household durables. The size distribution of spending unit expenditures for household durable goods changed little from 1960, although the proportion of spending units purchasing household durables continued to decline (Table 2-12). Purchases were made by over half of those units whose head Is 25 to 34 years old, but the proportion of spending units purchasing is smaller in each older group (Table 2-13). The recent decline in the proportion of spending units purchasing household durables was least pronounced among those under 35 years of age (Table 2-14). The proportion of spending units purchasing furniture and household appliances is positively related to income. A comparison of the proportion purchasing in 1961 with 1959 shows a decline in every income group except the highest. In 1960, the larger proportion of the top income group that purchased household durables was generally offset by declines in the proportions purchasing in the two lowest income groups. This was reversed in 1961 when the proportion purchasing in the top income group declined and the proportions in the two lowest income groups increased. The percentages of spending units purchasing specific household durable goods are shown in Table The rate of purchase of furniture varies more with income level than do the rates for television sets, washing machines, and refrigerators. For these three household appliances the rate of purchase is decidedly low among spending units with incomes under $3000, but at higher incomes there are no systematic changes in purchase rates. Purchasers of household durables in 1961 used credit somewhat more often than purchasers in 1960: 48 per cent in 1961 as against 45 per cent in In 1961 almost half of the purchasers with incomes under $2000 used credit; in the income groups from $2000 to $6000 about six in ten used credit. The use of credit declined at higher income levels (Table 2-16).

56 Survey of Consumer Finances Major expenditures on automobiles and durables The proportion of spending units that made combined net outlays (price minus trade-in) for new cars, used cars, furniture, and household appliances of at least $100 fell to 46 per cent in 1961 (Table 2-17). In 1959, the last year in which these special tabulations were prepared, the proportion of spending units that made such expenditures was 49 per cent. Despite an increase in the total number of spending units during this period, about one million fewer spending units made such expenditures in 1961 than in The mean expenditure of spending units that purchased durables did not increase, however, although their mean income rose by more than $700. From 1959 to 1961, the proportion of spending units in the age groups that made major purchases declined less than the proportions purchasing in younger and older age groups (Table 2-18). In 1959 and 1961 the proportion making major expenditures was highest for the age group 25-34, and in each older age group the proportion spending was lower. The difference in the proportion spending between age groups is greatest at the older age levels. The percentage of income spent on durable goods in 1961 was highest for the youngest age group, although their mean expenditure was relatively low. Of the various life cycle groups, spending units in which the head was under 45 and single or childless, together with spending units in which the head was retired, spent the largest proportion of their incomes for automobiles and household durable goods (Table 2-19). These data refer to the proportion of income spent of those who made expenditures; it should be remembered that for spending units in which the head was retired the proportion making expenditures is much lower than it is for spending units in other life cycle stages. The proportion of spending units at each income level that made major expenditures increased with the level of income, except at the highest income level (Table 2-20). The average expenditure tended to increase with income level. Of those who made expenditures, however, the proportion of income spent declined as the level of income increased. Purchasers with incomes of less than $3000 spent, on the average, one-fourth or more of their income on durable goods. The proportion of income expended on durables by purchasers in the top income groups was just under 10 per cent.

57 Consumer Durable Goods 39 Table 2-1 AUTOMOBILE PURCHASES Automobile purchases Per cent of spending units purchasing Number of Average automobiles expenditure r a in millions per car Estimated total outlay (in billions) New $3010 $2830 $16.4 $13.1 Used $790 $790 $8.7 $8.7 Includes a l l automobiles owned at the time of interview in January- February that were purchased during the calendar year. Some spending units bought more than one car.

58 Survey of Consumer Finances Table 2-2 PRICES PAID AND NET OUTLAYS FOR NEW AND USED AUTOMOBILES (Percentage distribution of purchases) New automobiles Price Net outlav a Amoun t Under $1000 * * 4 7 $ * $ $ $ $ $3500 or more ) 8 6 J Used automobiles Price Net outlay 8 Amount Under $ $ $ $ $2000 or more *Less than one-half of one a After per cent. deduction for trade -in or sale of automobile. Note: Table is based on a l l automobiles owned at the time of interview in January-February 1961 or 1962 that were bought during the previous calendar year.

59 Table 2-3 Consumer Durable Goods 41 AUTOMOBILE PURCHASERS BY INCOME, OCCUPATIONAL, AND AGE GROUPS (Purchasers as a percentage of spending units in specified group) Group characteristic Purchasers 8 New automobiles Used automobiles Income Under $1000 $ $ $ $ $ $ $ $10,000 or more 3 * * * Occupation of SU head Professional Managerial and self-employed Clerical and sales 13 8 Skilled 12 9 Semiskilled 7 5 Unskilled and service 3 1 Farm operator 5 8 Retired Age of SU head or more U All spending units Less than one-half of one per cent. "Spending units that purchased more than one automobile during the year were tallied by the most expensive car. For data for 1957 through 1959, see Tables 2-4 and 2-11, 1960 Survey of Consumer Finances.

60 Table 2-4 RATIO OF NUMBER OF NEW AUTOMOBILES PURCHASED TO NUMBER OF SPENDING UNITS IN INCOME QUINTILE M to Ol Co Income quintile g> Lowest quintile * * ^ Second quintile ^ O o Third quintile ^ K 3 Fourth quintile » Highest quintile Ninth decile Top decile All spending units Less than one-half of one per cent. Note: The ratios are calculated by dividing the total number of new automobiles bought by each group during the calendar year by the number of spending units in the group. Automobiles purchased during the year that were disposed of prior to interviewing time were not included in this table

61 Table 2-5 RATIO OF NUMBER OF USED AUTOMOBILES PURCHASED TO NUMBER OF SPENDING UNITS IN INCOME QUINTILE Income quintile Lowest quintile Second quintile Third quintile ' Fourth quintile Highest quintile «Ninth decile Top decile All spending units * I Note: The ratios are calculated by dividing the total number of used automobiles bought by each group ^ during the calendar year by the number of spending units in the group. Automobiles purchased during the year that were disposed of prior to interviewing time were not included in this table. w 3 to >*

62 Survey of Consumer Finances Table 2-6 AUTOMOBILE OWNERSHIP BY SPENDING UNITS, FAMILIES, AND HOUSEHOLDS (Percentage distributions) Automobile ownership Spending units Households Spending Families units Families House' holds Own cars One Two or more Do not own Total Number of SU's, families, or households (in millions) Number of automobiles owned (in millions) Note: Households conform to the 1950 Census definition of occupied dwelling units, and consider all persons residing in an occupied dwelling unit as part of the same household, Irrespective of relationship. When persons residing together are separated into clusters of persons related by blood, marriage or adoption, the units are families By this definition a family may consist of only one person. Families may be further subdivided in some cases into units that have separate incomes, keep their finances separate, and pool less than half of their income for joint expenses; this defines spending units In most dwellings the household, family, and spending unit are identical.

63 Table 2-7 AUTOMOBILE OWNERSHIP BY INCOME QUINTILES (Owners as a percentage of spending units in specified group) Income quintile All automobile owners Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Top decile All spending units Owners of two or more automobiles Lowest quintile 1 * Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Top decile All spending units

64 Survey of Consumer Finances Table 2-8 AUTOMOBILE OWNERSHIP BY PLACE OF RESIDENCE (Percentage distribution of spending units) Place of residence Total Number of automobiles owned, early 1962 One Two or more None Central cities Of 12 largest SMSA's 1 Of other SMSA's, 50,000 or over Suburban areas Of 12 largest SMSA's Of other SMSA's, 50,000 or over Adjacent areas 4 * Outlying areas e e Place of residence determined on the basis of the 1960 Census data. ^Standard Metropolitan Statistical Area. c Suburban areas include all portions of Standard Metropolitan Statistical Areas exclusive of the central cities. ^Adjacent areas include all areas (other than those classified as suburban) that lie within 50 miles of the central business district of a central city. e 0utlying areas include all territory that is not part of a central city, suburban area, or adjacent area.

65 Consumer Durable Goods 47 Table 2-9 AUTOMOBILE OWNERSHIP BY DISTANCE FROM CENTER OF CENTRAL CITY (Percentage distribution of spending units in Standard Metropolitan Statistical Areas only) Distance from center of central city (in miles) Automobile ownership, earlv more Own a car Iii One Two or more Do not own Total

66 Survey of Consumer Finances Table 2-10 TRADE-INS OR SALES IN CONNECTION WITH NEW AND USED CAR PURCHASES (Percentage distribution of automobiles) New automobiles Used automobiles Trade-in or sale No trade-in or sale Total

67 Consumer Durable Goods 49 Table 2-11 PURCHASES OF HOUSEHOLD DURABLE GOODS Purchases of furniture and household appliances Spending units purchasing Percentage Estimated number (In millions) Expenditures^ Mean amount (buyers only) $390 $400 Estimated total (in billions) $8.8 $8.8 Includes purchases of new and used household appliances. ^Before deduction for trade-in; includes amounts borrowed. For data for 1953, 1955, 1958, and 1959, see Table 2-2, 1960 Survey of Consumer Finances.

68 Survey of Consumer Finances Table 2-12 AMOUNTS SPENT FOR FURNITURE AND HOUSEHOLD APPLIANCES IN SPECIFIED YEARS (Percentage distribution of spending units) Amount spent 3 I959 b Zero $ $ $ $ $ $ $1000 or more Amount not ascertained 1 I 1 Total Before deduction for trade-in; includes amount borrowed. Revised figures. For data for 1948, 1950, 1951, 1953, and 1955 through 1958, see Table 12-13, 1960 Survey of Consumer Finances.

69 Consumer Durable Goods 51 Table 2-13 AMOUNTS SPENT FOR FURNITURE AND HOUSEHOLD APPLIANCES, BY AGE GROUPS (Percentage distribution of spending units) Ase of head of spending unit Amount spent in 1961 a or 65 over Zero $ $ $ $ $ $ $1000 or more * Amount not ascertained * * * 1 * * Total Less than one-half of one per cent 'Before deduction for trade-in; includes amount borrowed.

70 Survey of Consumer Finances Table 2-14 PURCHASERS OF FURNITURE AND HOUSEHOLD APPLIANCES, BY INCOME, AGE, AND LIFE CYCLE GROUPS (Purchasers as a percentage of spending units in specified group) Group characteristic 1959 Year of purchase Income Under $1000 $ $ $ $ $ $ $ $10,000 or more Age of SU head or over Life cycle stage of SU head Under age 45 Single 31 Married,.no children 8 56 Married, children or "over Married, children 50 Married, no children 8 35 Single All spending units Spending units that do not contain children under 18 years of age. For data for 1955 and 1958 for income and life cycle groups, see Table 2-14, 1960 Survey of Consumer Finances.

71 Table 2-15 Consumer Durable Goods 53 PURCHASERS OF FURNITURE AND SPECIFIED HOUSEHOLD APPLIANCES, BY INCOME GROUPS (Purchasers as a percentage of spending units in income group) 1961 income Furniture Televis Ion set Washing machine Refrigerator Under $ * 3 $ $ $ $ $ $ $ $10,000 or more All spending units Mean amount spent 8 $460 $210 $205 $225 *Less than one-half of one per cent *Mean amount spent before deduction Includes amount borrowed. for trade-- in, for buyers only, For data for 1960, see Table 2-10, 1961 Survey of Consumer Finances; for 1955, 1958, and 1959, see Table Survev of Consumer Finances.

72 Survey of Consumer Finances OF Table 2-16 METHODS OF FINANCING'PURCHASES FURNITURE AND HOUSEHOLD APPLIANCES, BY INCOME GROUPS (Percentage distribution of spending units that purchased) 1961 Income Total Cash 8 Credit Under $ $ $ $ $ C $ $ $10,000 or more All spending units Purchasers included in the percentages under "Cash" may have paid part of the grosb price by trading in old articles. Purchasers of two items, one for cash and one involving credit, are classified as credit purchasers. For data on all spending units for 1960, see Table 2-4, 1961 Survey of Consumer Finances; for 1957 and 1958, see Table 2-6, 1960 Survey of Consumer Finances. The revised figures for 1959 are cash purchasers, 53 per cent and credit purchasers 47 per cent.

73 Consumer Durable Goods 55 Table 2-17 MAJOR EXPENDITURES FOR AUTOMOBILES, FURNITURE, AND HOUSEHOLD APPLIANCES Spending units making ma lor expenditures Percentage Estimated number (in millions) Mean major expenditure $930 $900 Mean income $6710 $ A major expenditure is defined as a combined net outlay of $100 or more for automobiles, furniture, and household appliancea. For data for 1948, 1951, 1957, and 1958, see Table 2-3, 1960 Survey of Consumer Finances.

74 Survey of Consumer Finances Table 2-18 MEAN MAJOR EXPENDITURE AND PERCENTAGE OF INCOME SPENT ON DURABLES, BY AGE GROUPS Age of SU head Percentage Spending units making major expenditures* Mean major Mean expenditure income in 1961 in 1961 Percentage of 1961 income spent $ 680 $ or over All spending units $ 900 $ A major expenditure is defined as a combined net outlay of $100 or more for automobiles, furniture, and household appliances. Mean major expenditure of each age group as a percentage of the mean income of purchasers In the group. For data for 1955, 1957, and 1958 on frequency of major expenditures by age groups, see Table 2-4, 1960 Survey of Consumer Finances.

75 Consumer Durable Goods 57 Table 2-19 MEAN MAJOR EXPENDITURE AND PERCENTAGE OF INCOME SPENT ON DURABLES, BY LIFE CYCLE GROUPS Life cycle status of SU head SU's makind maior expenditures in 1961* Percentage Mean major Mean of income Percentage expend iture inc ome spent 0 Under age 45 Single 41 S 970 $ Married, no children Married, children Youngest under Youngest 6 or over or over Married, children Married, no children 0 Head in labor force , Head retired Single Head in labor force Head retired Other d All spending units 46 $ 900 $ a A major expenditure is defined as a combined net outlay of $100 or more for automobiles, furniture, and household appliances. ^Mean major expenditure of each life cycle group as a percentage of the mean income of purchasers in the group c Spending units that do not contain children under 18 years of age. ^Includes heads of spending units who are not now married or living with spouse but who have children. Also includes cases for which relevant data were not ascertained.

76 Survey of Consumer Finances Table 2-20 MEAN MAJOR EXPENDITURE AND PERCENTAGE OF INCOME SPENT ON DURABLES, BY INCOME GROUPS 1961 Income Percentage SU's making major expenditures ln 1961 f Mean major expenditure Mean income Percentage of income spent Under $ $ 410 $ $ $ $ $ $ $ $10,000-14, ,560 9 $15,000 or more ,810 8 All spending units 46 $ 900 $ A major expenditure is defined as a combined net outlay of $100 or more for automobiles, furniture, and household appliances. Mean major expenditure of each income group as a percentage of the mean income of purchasers in the group.

77 Ch.rt 2-1 Ca»h and Credit Purchaiei of New Automobiles, All Purchases l_ Credit Purchases Cash Purchases _l L J L I Year of Purchase

78 3 INSTALLMENT DEBT Highlights Survey data on installment debt among consumers early in 1962 are presented in this chapter. As is well known, aggregate installment debt showed a slight increase from early 1960 to Nevertheless, the proportion of spending units with installment debt declined slightly during that time. There was, however, some increase in the average amount of debt outstanding per spending unit with debt. Considering the increase in the population during this period the increase in the total amount of installment debt outstanding was very small; there was no increase at all if one adjusts for price increases and for increases in national income. There was a small decline in the average amount of automobile installment debt outstanding, but again, considering the shifts in the proportion with such debt and the increase in the population, the total amount of installment debt outstanding for automobiles has remained unchanged since early In the highest income groups there was a slight decline in the proportion of spending units with installment debt, and in the middle income group the proportion of units with debt increased. An increase in the proportion with installment debt was also reported by the older age groups. Among both homeowners and renters, those who have moved recently are more likely to have installment.debt. Spending units that expect their incomes to increase are also above average in the proportion having installment debt. Information about installment debt has previously been published by the Survey Research Center in monographs entitled 1960 Survey of Consumer Finances and 1961 Survey of Consumer Finances. Since there has not been much change in the over-all pattern of the incidence of installment debt, this chapter emphasizes

79 Survey of Consumer Finances data on aggregate installment debt, changes from 1961 to 1962, and the incidence of installment debt among population groups not previously considered. Aggregate installment debt The data cited above and presented in Table 3-2 should be considered in combination with the changes in aggregate installment debt reported by the Federal Reserve Board. The most important information concerns the year-to-year changes in debt. In this respect the two series substantially agree. But the aggregate amount outstanding estimated from the Survey of Consumer Finances is about 55 per cent of the total consumer installment debt estimated by the Federal Reserve Board; automobile installment debt estimated by the survey is about 75 per cent of the amount reported by the Board. Some understatement of debt by the survey respondents is to be expected, but the magnitudes of the discrepancies indicate that there are other important differences between the two series. Some debt incurred for business purposes, including some debt incurred by dealers and by unincorporated businesses, is probably included in the data of the Federal Reserve Board but is not considered personal installment debt in the consumer surveys. Furthermore, some debt classified as installment debt by the financial institutions reporting to the Board is not considered installment debt by consumers. In this category are revolving credit and department store credit. Despite the differences in the aggregates, the same procedures used each year in the consumer surveys allow comparisons of changes over time. Incidence of installment debt Young married spending units and older married spending units with children at home are most likely to have installment debt, but only one-fourth of the older married spending units with children have debts of $500 or more. The low proportion with Installment debt among spending units in which the head has little education is probably associated with the fact that these units also have low incomes or are older. Installment debt is quite uncommon among farmers and retired people. Self-employed businessmen and artisans report having installment debt less frequently than do other nonfarm occupational groups.

80 Installment Debt 63 Installment debt is also more common among nonwhite than among white spending units, although white spending units more frequently report having amounts of installment debt of $500 or over (Table 3-1). The findings for regional groups show that installment debt is least common among spending units living in the northeast. Spending units living in the central cities of the twelve largest metropolitan areas and in rural areas not in a metropolitan complex report having installment debt less frequently. With regard to housing status, people who have recently moved into their own homes and into rental housing have higher frequencies of installment debt and of debt of $500 or more. Debt by income-age groups In Table 3-3 the incidence of installment debt is examined for groups classified by both income and age. Among spending units with incomes of $ in which the head is under 45 years of age, more than two-thirds report having installment debt. The variation in the proportions reporting installment debt with different incomes is least marked for spending units in which the head is under 35. Young people are apparently willing to incur debt regardless of their income level. Furthermore, at each income level the incidence of installment debt declines with increasing age. Relationship to liquid asset holdings The analysis of installment debt according to standard demographic characteristics can be supplemented this year by a study of additional variables. Many people who have installment debt also have liquid assets (Table 3-4). As would be expected, however, the proportion with installment debt tends to decline with increasing liquid assets. Of those who have no liquid assets, 47 per cent have some installment debt, but these people rarely have large amounts of debt. Table 3-4 illustrates the well-known fact that people frequently buy on credit even though they could have paid cash for their purchases. Debt payment/income ratio For several years the ratio of annual installment debt payments to the previous year's disposable income has been calculated

81 Survey of Consumer Finances as a measure of the burden of installment debt. In 1956, 15 per cent of all spending units had one-fifth or more of their incomes committed to installment debt repayment. By early 1961 this proportion had declined to 10 per cent of all units, but it increased to 12 per cent in 1962 (Table 3-5). The spending units whose debt burden has apparently increased from 1961 to 1962 are those with very low incomes (under $2000) and those in the middle income range ($ ). In the top income groups, however, the incidence of installment debt rose sharply up to 1961 and then declined during that year. In 1961 there was an increase in the proportion with debt for those in the middle income group ($ ). The age groups headed by persons and years of age had the largest increases in the proportions of units that had one-fifth or more of their incomes committed to installment debt repayment (Table 3-6). The proportion of units that have at least one-fifth of their incomes committed to installment debt repayment is highest for those in which the head is years of age and tends to decline with increasing age. High debt payment/income ratios are found among related secondary spending units and among renters who have moved recently (Table 3-7). Spending units that expect their incomes to increase are more likely to have installment debt than those that expect the same or lower incomes during the next year (Table 3-7). This difference is equally large when considering those with a substantial debt burden. It appears that many people budget their debt burden according to their income expectations. Installment debt for automobiles Table 3-8 provides information on installment debt incurred with the purchase of automobiles. About 30 per cent of all automobiles bought during 1961 and still owned at the time of the interview were new when purchased. Of all these new cars, more than 40 per cent (14 out of 31 per cent) were bought without the use of installment credit. More than 50 per cent of all the used cars bought during 1961 were bought without the use of installment credit. Installment debt of $1000 or more was incurred in conjunction with 24 per cent of all automobile purchases: 16 per cent in conjunction with used cars. The proportion of automobiles purchased which are new cars increases sharply with income. Aside from spending units with

82 Installment Debt 65 incomes under $3000, there is little variation among income levels in the percentage incurring debt in purchasing a car. There is, however, great variation among income groups in the percentage reporting installment debt for automobiles of $1000 or more. Practically no low income spending units reported incurring debt of $1000 or more, whereas 35 per cent of those spending units with incomes of $ and over 30 per cent with incomes of $7500 or more incurred debt of this size. Table 3-8 also shows that the use of installment credit for the purchase of new automobiles declines with increasing age; there is much less variation among age groups in the use of credit by buyers of used cars. Very young people frequently pay cash for their inexpensive used cars.

83 Survey of Consumer Finances Table 3-1 INCIDENCE OF INSTALLMENT (Debtors as a percentage of spending Group characteristic SU's with installment debt outstanding, Jan,-Feb Any amount $500 or more Life cycle stage of SU head Under age 45 Single Married, no children 3 Married, children Youngest under 6 Youngest 6 or over 45 or over Married, children Married, no children 3 Single Education of SU head 8 years or less Some high school High school graduate Some college College degree Occupation of SU head Profess ional, technical Managers, offic iais Self-employed businessmen, Clerical, sales Craftsmen, foremen OperatIves Laborers, service workers Farmers Retired artisans Race White Nonwhite All spending units Spending units that do not contain children under 18 years of age. ^Standard Metropolitan Statistical Area. "Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent.

84 Installment Debt 67 DEBT WITHIN VARIOUS GROUPS units in specified group) Group characteristic SU's with installment debt outstanding. Jan.-Feb Any amount $500 or more Region Northeast North Central South West Place of residence Central cities Of 12 largest SMSA's Other SMSA's, 50,000 or over Other cities 10,000-49, Rural areas In an SMSA Not in an SMSA Housing status and duration Primary owner Purchased Purchased before 1959 Primary renter Moved in, Moved in before 1959 Related secondary spending units 0ther c Extent of employment of SU head 26 weeks or less weeks weeks weeks All spending units For data for 1961 on incidence of installment debt among educational, occupational, regional, and race groups and by extent of employment and place of residence, see Tables 3-3 through 3-8, 1961 Survey of Consumer Finances.

85 Survey of Consumer Finances Table 3-2 CHANGES IN NUMBER OF DEBTORS, SIZE OF MEAN INSTALLMENT DEBT, AND AGGREGATE INSTALLMENT DEBT Jan. -Feb. Jan.-Feb, Jan.-Feb. Installment debt All Installment debt SU's with installment debt Per cent of all SU's Number (in millions) Mean installment debt, debtors only $800 $830 $860 Survey estimate of aggregate Installment debt (in billions) $21.8 $22.4 $23.3 Installment debt on automobiles SU's with installment debt on automobiles Per cent of all SU's Number (in millions) Mean installment debt on automobiles, automobile debtors only $970 $930 $900 Survey estimate of aggregate installment debt on automobiles (in billions) $12.7 $12.2 $12.5 Note: The Federal Reserve Board estimated the aggregate installment debt outstanding at $39.4, $41.1, $42.8 billion for 1960, 1961, and 1962 respectively, and aggregate auto installment debt at $16.6, $17.2, $16.9 for the same yeara.

86 Installment Debt 69 Table 3-3 PROPORTION OF SPENDING UNITS WITH INSTALLMENT DEBT, BY AGE AND INCOME (Debtors as a percentage of spending in specified Income-age group) units Spending unite with installment debt in January-February SU income before taxes All Under $3000- $5000- $7500 Age of SU head SU's $ or more Under or over AIL spending units There were too few cases over 65 years of age with incomes of $7500 or more on which to base data.

87 Table 3-4 AMOUNT OF INSTALLMENT DEBT OUTSTANDING, BY LIQUID ASSET HOLDINGS (Percentage distribution of spending units) Amount of All Liquid asset holdings. January-February, 1962 installment debt, spending $1- $100- $200- $500- $1000- $2000- $5000- Jan.-Feb units None $10,000 or more None $ * $ $ * $ $ * $2000 or more Total Per cent of all units Less than one-half of one per cent. For data for 1960, see Table 8-8, 1960 Survey of Consumer Finances.

88 Installment Debt 71 Table 3-5 RATIO OF ANNUAL INSTALLMENT DEBT PAYMENT RATE TO PREVIOUS YEAR'S DISPOSABLE INCOME, BY INCOME GROUPS (Percentage distribution of spending units) Annual debt payment rate, Jan.-Feb. 1961, I960 spending unit income before taxes as per cent of All Under $2000- $5000- $7500- $10,000 I960 income SU's $ or more No installment debt Under or more * * * Not ascertained Total Per cent of all units Annual debt payment as per cent of All Under $2000- $5000- $7500- $10, income SU's $ or more No ins tallment debt Under ' or more * * * Not ascertained 1 * * Total Per cent of all units Less than one-half of one per cent. a Includes a few cases of zero or negative income. For data on debt payment/income ratios for 1960/1959 by income groups, see Table 3-9, 1961 Survey of Consumer Finances; for 1959/1958, see Table 8-6, 1960 Survey of Consumer Finances. For data on all spending units for 1955/1954 through 1959/1958, see Table 8-2, 1960 Survey of Consumer Finances.

89 Survey of Consumer Finances Table 3-6 RATIO OF ANNUAL INSTALLMENT DEBT PAYMENT RATE TO PREVIOUS YEAR'S DISPOSABLE INCOME, BY AGE GROUPS (Percentage distribution of spending units) Annual debt payment rate, Jan.-Feb. 1961, Aae of head of SU, Jan.-Feb as per cent of All 65 or 1960 income SU's over No installment debt b 43 b Under b or more a * Not ascertained * * Total Per cent of all units Annual debt payment rate, Jan.-Feb. 1962, Age of head 1 of SU, Jan.' -Feb as per cent of All 65 or 1961 income SU's over No installment debt Under or more Not ascertained 1 * Total Per cent of all units Less than one-half of one per cent. ^Includes a few cases of zero or negative Income. b Revised. For data on debt payment/income ratios by age groups for 1959/1958 and 1960/1959, see Table 8-7, 1960 Survey of Consumer Finances.

90 Table 3-7 RATIO OF ANNUAL INSTALLMENT DEBT PAYMENT RATE TO PREVIOUS YEAR'S DISPOSABLE INCOME, BY HOUSING STATUS AND DURATION AND BY INCOME EXPECTATIONS (Percentage distribution of spending units) Housing status and duration Expectations about Annual debt payment Primary owner Primary renter Related 1962 income rate, Jan.-Feb. 1962, Purchased Purchased Moved in secondary as related to as per cent of before Moved in, before spending 1961 income D 1961 income units Other 3 Smaller Same Larger No installment debt Under or more c 1 I Not ascertained * 1 * * 1 1 Total Per cent of all units Less than one-half of one per cent. 3 Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent. b Excludes cases for which data about income expectations were not ascertained. c Includes cases of zero or negative income.

91 Table 3-8 INSTALLMENT DEBT INCURRED ON NEW AND USED AUTOMOBILES, BY INCOME AND AGE GROUPS (Percentage distribution of all automobiles purchased in 1961) Amount of All 1961 spending unit Income before taxes Age of head of spending unit installment debt auto Under $3000- $ $7500- $10, or incurred mobiles 3 $ or more over New automobiles i None $ * * $ * * $ * * $ * * $2500 or more 2 * * * * Not ascertained * * * * 3 * * 2 * * * to a TO O o a to a 3 Used automobiles None $ * * 2 $ $ $ * $ * * $2000 or more 1 * * 3 * 1 * 2 1 * * * Total *Less than one-half of one per cent. Includes all automobiles pu rchased in 1961 which were still owned at the time of interview, January - February a

92 4 HOUSING The data presented in this chapter were obtained from the 1962 Survey of Consumer Finances in which about 2100 spending units and about 2000 family units were interviewed a sample that was representative of all such units in the United States. Table A-3 in the appendix to this book presents information on the number of interviews with families in various groups. SURVEY data about activity in the housing market during 1961 indicate that consumer purchases of newly built houses for owner occupancy declined compared to such purchases in the year (The year 1961 is compared with 1959 because both were years of recovery following a recession.) This decline may in part reflect the increasing proportion of housing units constructed for rent. Survey data also show that the number of used houses purchased in 1961 was at least as large as, if not larger than, in Fewer families reported that they had made expenditures for additions and repairs during 1961 than Naturally, families who own their houses reported considerably higher expenditures for additions and repairs than families who rent. Among home-owning families, those with higher incomes and those who purchased their houses more recently tended to make larger expenditures for additions and repairs. About 8 per cent of all spending units reported that they intended to buy houses during The proportion in 1959 (9 per cent) was slightly higher, but the difference is not statistically significant. Plans to buy houses were considerably more frequent among renters with high incomes than among homeowners. Those intending to buy houses reported they had moved into their present rental housing or bought their present home more recently than other spending units.

93 Survey of Consumer Finances Housing data are presented for family units. A family unit consists of all persons living in the same dwelling unit who are related by blood, marriage, or adoption; it may consist of only one person. A family contains one or more spending units depending on how many people in the family 18 years of age or older receive income and maintain their finances independently. Early in 1962 there were an estimated 54.9 million family units and 58.8 million spending units in the United States; among them there were an estimated 52.2 million nonfarm family units and 55.9 million nonfarm spending units. Housing market activity The average price paid for all houses purchased in 1961 remained about the same as in the recovery year of 1959 (Table4-1). The differences between the two years can be accounted for by small sample variation in percentages. The average and median prices of used houses appear to have increased in 1961 over The prices paid for used houses in 1961 fell much more frequently in the middle price ranges than they did in prior years (Table 4-2). In 1961, a large proportion of purchasers (89 per cent) acquired their houses by incurring debt. The average amount of mortgage debt on houses purchased in 1961 was $10,200, an increase of more than $1000 over the mean mortgage debt on houses purchased in The volume of such mortgage debt incurred in 1961 was substantially larger than the volume in Fewer families made expenditures for additions and repairs in 1961, and the volume was well under that of The mean expenditure on all types of housing in 1961 was approximately $500, an average that was about the same or somewhat smaller than in In the postwar period the proportion of homeowners having mortgage debt has steadily increased (Table 4-3) and the trend continued in early 1962 at which time 62 per cent of home-owning families reported mortgage debt. Half of those with debt had annual mortgage payment rates of $1000 a year or more, a marked increase over prior years. It is clear from Table 4-4 that families with higher incomes incur higher monthly mortgage payments. As family Income increases, monthly mortgage payments increase but not proportionately to income. The median monthly payment for families with incomes below $3000 who have mortgages is about $50, whereas families with incomes of $10,000 to $14,999 pay about twice as much.

94 Housing 77 Monthly rent payments have steadily increased in size in the postwar period (Table 4-5). Early in 1962 about one-third of nonfarm families paying rent reported paying $75 a month or more, another third paid monthly rents of $50 to $75, and the rest paid less than $50 a month. As family income increases, the rents paid tend to increase but by not as much as income (Table 4-6). As family income increases, the dispersion of the distribution of rents also increases. For example, of families with incomes below $3000 the largest proportion paid rents of $25-$49 a month. Some paid less than $25 or up to $74, but very few paid $75 or more. Of families with incomes from $7500 to $9999, about one-third paid $75-$99, 6 per cent paid less than $50, and 13 per cent paid $125 or more. Current housing status The proportion of nonfarm families owning their own houses remained at 56 per cent early in 1962 (Table 4-7). (It was 51 per cent in 1950). About 4 out of 10 families rent their housing units. The remainder include families who live in trailers, rent part of another family's housing unit, receive their housing as part of compensation or otherwise have housing provided for them. Home ownership is related to income, and the proportion of families owning their houses in each income class has remained relatively stable over time (Table 4-7). The over-all increase in the proportion of homeowners has come about mainly as a result of increased income of families rather than the spread of home ownership to lower income groups. The proportion of young families without children who own houses is relatively low (Table 4-8). This proportion is quite high among young families with children and it remains high for older married people. Home ownership is relatively frequent in the suburbs and outlying areas (Table 4-9). Yet the suburbs of the twelve largest standard metropolitan areas do contain a substantial proportion of rental housing: almost 40 per cent of all families in these areas rent dwelling units. The frequency of home ownership increases with the age of the family head up to retirement age and then drops a small but significant number of percentage points (Table 4-10). Between 1954 and 1962 the proportion of families in the middle age groups owning their homes has increased. Among all occupational groups (except unskilled and service

95 Survey of Consumer Finances workers) a majority of families own their homes. Families whose heads are professional and semiprofessional workers are homeowners less frequently than their incomes would indicate. Families headed by nonwhites are homeowners much less frequently than other families. The proportion of nonwhite homeowners appears to have declined since The mean value of owner-occupied houses continued to rise in 1961: the current estimate is about $14,500 (Table 4-11). Each year the families interviewed are asked to give an estimate of the current market value of their houses. Validity studies carried out in the past based upon independent appraisals indicate that family estimates are rather accurate. 1 The mean mortgage debt continued to rise in 1961 and is currently estimated to be about $7900. The ratio of mean mortgage debt to mean house value has increased rather steadily from.41 in 1949 to.54 in This increase reflects the steady decline in the proportion of homeowners who own their homes mortgage free, a proportion which fell from 55 per cent in 1949 to 37 per cent in The proportion of families with mortgage debt varies considerably with income (Table 4-12). Low income families tend to own their houses debt free more frequently than do high income families. Low income families are older on the average, have had a longer time to retire debt, and own houses of smaller reported market value. A comparison of median mortgage debt (Table 4-12) with median house value (Table 4-13) indicates further that for low income homeowners who do have debt, the ratio of debt to house value is smaller than it is at higher incomes. For example, the median amount of mortgage debt for families in the lowest income groups who own houses is about one-third of house value; the median amount among the highest income groups is about three-quarters of house value. Expettditures for additions and repairs Larger expenditures for additions and repairs are made by relatively more families in higher income brackets (Table 4-14). Half of the aggregate expenditures on owner-occupied houses are ^ohn Lansing and Leslie Kish, "Response Error in Estimating the Value of Homes," Journal of the American Statistical Association, XLIX (September 1954),

96 Housing 79 made by about 10 million nonfarm owner families in the income brackets between $7500 and $15,000. In Table 4-15 expenditures are related to length of residence in owner-occupied housing. Families who purchased their homes before World War II are less likely to make additions or repairs than are more recent purchasers and their expenditures tend to be smaller. The median expenditure on additions and repairs in 1961 for families who purchased before World War II was about $200 as compared to about $500 for families who purchased their homes in Intentions to buy a house Families were asked about their intentions to purchase housing during Intentions to buy houses are more frequently expressed by higher income families; however, the highest frequencies are expressed by renter families in the upper middle income brackets. The length of time families have resided in their present housing appears to be related to plans to buy houses, for intentions to buy a house are more frequent among people who have moved within the past several years than among others.

97 Table A-l HOUSE PURCHASES, MORTGAGE DEBT INCURRED, AND EXPENDITURES FOR ADDITIONS AND REPAIRS BY NONFARM' FAMILIES Housing transactions Purchases of houses Per cent of nonfarm families buying 0 Mean purchase price Median purchase price c Aggregate expenditure (in billions) Mortgage debt Per cent of nonfarm buyers with mortgage Mean mortgage debt Median mortgage debt Aggregate mortgage debt (in billions) Additions and repairs Per cent of nonfarm families making such expenditures Mean amount spent Aggregate expenditures (in billions) New and used houses 5.0 $14,070 $12,880 $ $9080 $10,690 $ $540 $ transactions 1961 transact ions New and New Used used New houses houses houses houses' 1.8 $16,710 $14,370 $ $10,850 $11,560 $ $12,580 $11,810 $ $8080 $10,050 $ $13,730 $13,040 $ $10,200 $9900 $ $490 $ Used houses 3.7 $12,950 $12,250 $ $10,150 $10,050 $17.72 o Co tn 3 TO ^oo few cases to report detail. b A family consists of all persons living in the same dwelling unit who are related by blood, marriage, or adoption; it may consist of only one person. c Medians were estimated by interpolation. For data for 1957 and 1958, see Table 3-1, 1960 Survey of Consumer Finances.

98 Housing 81 Table 4-2 PRICES PAID FOR NONFARM HOUSES (Percentage distribution of nonfarm purchasers) Price paid All houses Used houses Under $ d $ $ $10,000-12, a U 23 a 33 $12,500-14, $15,000-19, a $20,000 or more Total "Revised. For the distribution of the prices paid for all houses in 1948 and for new houses for 1953, 1958, and 1959, see Table 3-2, 1960 Survey of Consumer Finances.

99 Survey of Consumer Finances Table 4-3 ANNUAL MORTGAGE PAYMENT RATE OF NONFARM FAMILIES (Percentage distribution of nonfarm home-owning families) Annual mortgage payment rate Zero (no mortgage) Under $ $ b 28 b $1000 or more No regular payment or payment not ascertained Total Vonthly mortgage payments at time of interview multiplied by 12, except for 1949 when respondents were asked for amount of annual payment. b Rev ised.

100 Table 4-4 MONTHLY MORTGAGE PAYMENTS OF NONFARM FAMILIES, BY INCOME GROUPS (Percentage distribution of nonfarm home-owning families) All nonfarm 1961 family income before taxes Monthly home-owning Under $3000 $5000 $6000 $7500 $10,000 $15,000 mortgage payment 3 families $ or more Have no mortgage Have mortgage $ * 1 1 * * $ $ a 6 $ I $ $ * * * $150 or more 3 * * 3 * No regular payment or payment not ascertained Total Interpolated median monthly mortgage payment for those making payments $90 $51 $74 $75 $80 $90 $100 $125 Less than one-half of one per cent. Monthly mortgage payment at time of interview, January-February For data for 1960, see Table 3-4, 1960 Survey of Consumer Finances.

101 Survey of Consumer Finances Table 4-5 MONTHLY RENT PAID BY NONFARM FAMILIES (Percentage distribution of nonfarm rent-paying families) Monthlv rent $ $ $ $ $ b 32 b 33 $ $100 or more Not ascertained Total Rents are tabulated for all nonfarm renters, including those who rent part of another family's dwelling; data are as of date of interview, early in each year a b Revised.

102 Monthly rent 3 Table 4-6 MONTHLY RENT PAYMENTS OF NONFARM FAMILIES, BY INCOME GROUPS (Percentage distribution of nonfarm rent-paying families) All nonfarm rent-paying families Under $ familv income before taxes $3000 $5000 $6000 $ $10,000 or more $ * 1 1 $ $ $ $ * $ $150 or more 5 * Not ascertained * * 1 1 Total All nonfarm rent-paying fantil les Interpolated median monthly rental payment $65 $43 $60 $65 $75 $85 $100 Lesa than one-half of one per cent. 'Rents are tabulated for all nonfarm renters, including those who rent part of another family unit's dwelling; data are as of date of interview, January-February For data for 1960, see Table 3-6, 1960 Survey of Consumer Finances.

103 Survey of Consumer Finances Table 4-7 HOUSING STATUS OF NONFARM FAMILIES, BY INCOME GROUPS (Percentage distribution of nonfarm families) Family t ac Housing status* me 3 c Own Re^t Other before taxes 8 Total All nonfarm families Under $ $ $ $3000 $ $ $ \ 71 \ 26 $10,000-14, ) ) $15,000 or more 100 / 76 / 24 *Less than one-half of one per cent. a Family income for any column refers to the annual income of the For data for I960, see Table 3-8, 1960 Survey of Consumer Finances. preceding year. ^Housing status as of time of interview early in year indicated. c Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent.

104 Housing 87 Table 4-8 HOUSING STATUS OF NONFARM FAMILIES, BY LIFE CYCLE GROUPS (Percentage distribution of nonfarm families) Life cycle stage of family head Under age 45 Total Housing status a Own Rent Other 1 Single Married, no children c Married, children Youngest under 6 Youngest 6 or over or over Married, children Married, no children Head in labor force Head retired Single Head in labor force Head retired All nonfarm families a As of time of interview, January-February ^Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent. c Includes families whose children are 18 years of age ot over, and families who have no children living at home. For data for 1960, see Table 3-9, 1960 Survey of Consumer Finances.

105 Survey of Consumer Finances Table 4-9 HOUSING STATUS OF NONFARM FAMILIES BY PLACE OF RESIDENCE (Percentage distribution of nonfarm families) Place of residence Total Housing status a Own Rent Other Central cities Of L2 largest SMSA's c 100 Of other SMSA's 50,000 or over 100 Suburban areas'* Of 12 largest SMSA 1 a 100 Of other SMSA's Adjacent and outlying areas e All nonfarm families As of time of Interview, January-February ^Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent. c Standard Metropolitan Statistical Area. ^Suburban areas include all portions of metropolitan areas exclusive of the central cities. They also include any parts of the county in which the central city is located that are not urban. e Adjacent areas include all areas (other than those classified as suburban) that lie within 50 miles of the central business district of a central city. Outlying areas include all territory that is not part of a central city, a suburban area, or an adjacent area.

106 Table 4-10 HOUSING STATUS OF NONFARM FAMILIES BY OCCUPATIONAL, RACIAL, AND AGE GROUPS (Percentage distribution of nonfarm families) Group characteristic Total Age of family head or over 100 Occupation of family head Professional or semiprofessional 100 Managerial 100 Self-employed businessman 100 Clerical and sales 100 Skilled 100*1 SeraiBkilled 100/ Unskilled and service 100 Retired 100 Race of family head White 100 Nonwhite 100 All nonfarm families 100 Housing status, 1962' Own Rent Other a As of time of interview, January-February D Includes trailer owners, families that rent part of another family's dwelling, and families that neither own nor rent. For data for 1960, see Table 3-7, 1960 Survey of Consumer Finances } ) 43/

107 Survey of Consumer Finances Table 4-11 NONFARM HOUSES CLASSIFIED BV VALUE AND MORTGAGE DEBT (Percentage distribution of nonfarm owner-occupied houses) Value a Mortgage debt D Amount Zero $ d $ d $ d $ $10,000-12, $12,500-14, * $15,000-19, d 20 * * J 6 $20,000 or more * * Total Mean (in thousands) $9.1 $10.7 $12.9 $14.5 $3.7 C $4.8 C $6.6 C $7.9 C *Less than one -half of one per cent. As valued by respondents early in year indicated, except that houses purchased during preceding year were valued at purchase pr ice. b Early in year indicated. an mortgage debt for mortgaged houses only. d Revised. For data for 1960, see Table 3-10, i960 Survey of Consumer Finances.

108 Amount of mortbane debt 3 Table 4-12 MORTGAGE DEBT OF NONFARM FAMILIES, BY INCOME GROUPS (Percentage distribution of nonfarm home-owning families) All nonfarm home -own ing famillee Under $3000 $ familv income before taxes $5000 $6000 $ $10,000-14,999 $15,000 or more None $ $ $ $ $10,000-12, $12,500-14,999 4 * $15,000 or more 6 * * 5 * Total All nonfarm homeowners Interpolated median mortgage debt for those with such debt $7500 $2500 $4800 $6900 $8200 $8000 $10,300 $12,200 Less than one-half of one per cent. a As of time of interview, January-February For data for 1960, see Table 3-13, 1960 Survey of Consumer Finances

109 Table 4-13 VALUE OF HOUSES OWNED BY NONFARM FAMILIES, BY INCOME GROUPS (Percentage distribution of nonfarm home-owning families) All nonfarm home familv income before taxes House value 3 families $ ,999 or more owning Under $1000 $2000 $3000 $4000 $5000 $6000 $7500 $10,000 $15,000 Under $ * * $ * $ $10,000-12, ; $12,500-14, * $15,000-19, * $20,000-24, $25,000 or more Total All nonfarm homeowners Interpolated median house value $12,400 $7100 $8300 $7800 $7800 $iopoo $12,000 $11,900 $14,400 $16,600 ii Less than one-half of one per cent, ata not available. a As valued by respondents at time of interview, January-February For data for 1960, see Table 3-12, 1960 Survey of Consumer Finances.

110 Housing 93 Table 4-14 EXPENDITURES FOR ADDITIONS AND REPAIRS MADE BY NONFARM HOME-OWNING FAMILIES, BY INCOME GROUPS Percentage of Mean nonfarm home- owning expenditure Share of 1961 families ma king of aggregate family income expenditures for those making expendlture before taxes additions and repairs expenditures fin per cent) Under $ $221 3 $ $ $ $ $ $ $10,000-14, $15,000 or more Total Grand mean $550

111 Table 4-15 EXPENDITURES FOR ADDITIONS AND REPAIRS MADE BY NONFARM HOME-OWNING FAMILIES, BY PURCHASE DATE OF PRESENT HOUSE Expenditures In for additions and repairs All nonfarm home-owning families 1939 or ear 1 ier Year in which present house was purchased : None $ $ $ $ $ $1000 or more Amount not ascertained 1 * 4 1 * * Total Per cent of all nonfarm homeowning families Lees than one-half of one per cent.

112 5 MEDICAL EXPENSES AND MEDICAL DEBT Highlights In 1961, 40 per cent of all spending units in the United States had what they called "large medical expenses." Almost half of the units with large medical expenses either had no medical insurance or had insurance that did not cover any of the expenses, yet almost 7 in 10 were insured. Two out of three units reporting large medical expenses mentioned hospital expenses, and a somewhat greater proportion reported expenses for doctors and for drugs and other medical needs. About one-fourth of all spending units in the country owed money to a doctor, a dentist, or a hospital in early Debt to financial institutions or other lenders for medical expenses is not included. Type of medical expense Forty per cent of the spending units in the United States reported that they had had large medical expenses in Almost all of these units indicated that they had expenses for doctors. Three-fourths had had expenses for drugs and other items, about two-thirds reported hospital expenses, and less than one in five had ""The respondents were asked: "Did you and your family have any large medical expenses in 1961 for doctors, nurses, hospitals, and things like that, including expenses covered by medical insurance?" (If yes) "Were these expenses for doctor bills, nurses, hospitals, drugs or other medical expenses?" What was considered a "large expense" depended on the judgment of the respondent.

113 Survey of Consumer Finances incurred expenses for nurses (Table 5-1). (The value of medical care from veterans' facilities, welfare or other free clinics is not included.) For spending units with large expenses, the average number of different types of large expenses reported was more than two per spending unit. The incidence of large medical expenses varied somewhat with age, but these data should be considered jointly with the average number of persons in each age group (Table 5-1). Compared with the youngest age group (18-24), the average number of persons and the proportion of units with large medical expenses increased sharply in the next oldest group (25-34). These increases resulted in part from the high frequency of children born to this group and the almost universal use of medical care and hospitalization for childbirth in this country. The data by life cycle groups bear this out even more strongly: the proportion with large medical expenses went up sharply from the young single group to the young married spending units, and the highest incidence of large medical expenses occurred in the young married spending units with children under 6 years. The proportion of spending units with large medical expenses declined in the next age group (35-44), despite an increase in the average number of persons in that group. It appears that the incidence of large medical expenses was lower for the year age group and considerably higher among those 65 years of age or older. The average number of persons per spending unit declined steadily at each older age group. Using this as a measure of exposure to large expenses, it is clear that the frequency of large medical expenses for the age group 65 and over was significantly higher than in the younger groups (Table 5-1). The proportions reporting expenses for doctors and drugs (including miscellaneous expenses) varied among age groups in much the same way as the proportions of large medical expenses varied, whereas expenses for hospitals were mentioned relatively less frequently among the middle age groups (35-64). Reports of large expenses for doctors and drugs were highest for senior citizens (65 or over), and they also reported large expenses for hospitals more frequently than did the preceding age group. Large expenses for nurses were reported most frequently in the year age group. The incidence of large medical expenses varied substantially among life cycle groups (Table 5-1). It was lowest for spending units in which the head is single, partly because these units also contain few people. The proportion reporting large medical expenses went up with retirement, and except for expenses for nurses, retired

114 Medical Expenses and Medical Debt 97 families mentioned each type of expense more frequently. The average number of persons per unit is slightly smaller for retired people than for comparable units in the labor force. The incidence of large medical expenses showed no systematic variation with income (Table 5-1), although expenses for hospitals appear to increase with income up to the $6000 level. Amount of personal medical expenses Every spending unit reporting large medical expenses in 1961 had large expenses that, at least in part, were not covered by insurance. The amount of personal obligation was elicited by the question: "Thinking of your family's total medical bills lor the entire year 1961, how much were they altogether, not counting bills paid by medical or hospital insurance?" Only those who reported large medical expenses were asked for the amount of medical expense not paid by insurance (Table 5-1). The amounts covered by insurance were also asked about, and these data are discussed below. Since the two amounts were reported separately in dollar brackets ("under $200," "$ ," etc.), it was not possible to add them in order to get the total amount of medical expenses. (Table 5-3 shows the relationship between the amount of large medical expenses paid by insurance and the amount not paid by insurance.) Fourteen per cent of all spending units had personal medical bills amounting to less than $200 (Table 5-1). The proportion reporting personal medical obligations of various amounts did not appear to vary systematically with age except that generally lower expenses were reported for spending units in which the head was or years old. Retired spending units reported having had medical expenses of $200 or over more frequently than their counterparts in the labor force. The proportion of units in the young married groups with personal medical obligations of $500 or more increased substantially with children, and tended to remain around 10 per cent for those at the later stages of married life. Spending units with incomes of $5000 or more that had had large medical expenses reported large personal medical obligations of $500 or over more frequently than those with lower incomes (Table 5-1). Personal obligations of $500 or more were reported most frequently by the highest income groups. The incidence of small personal obligations (under $200) tended to decline with income. It should be borne in mind, however, that a respondent's definition of "large medical expenses" may vary with his income

115 Survey of Consumer Finances level, and some spending units with high incomes that had small personal medical obligations may not have reported them. In Table 5-2 the various types of medical expenses incurred are shown in relation to the size of personal medical obligations. At all levels of personal obligation, over 90 per cent of the units with large medical expenses reported expenses for doctors. The proportion reporting expenses for nurses, hospitals, and drugs increased sharply with increases in total personal obligations. Insurance coverage The survey questions about large medical expenses defined these expenses as including those covered by medical insurance. Nevertheless, as we noted above, every unit reporting large medical expenses in 1961 had some personal liability for such expenses. This section presents information on the amount of such expense paid by insurance. 8 Twelve per cent of all spending units had large medical expenses but no medical or hospital insurance, and another 6 per cent had insurance that did not cover any part of the large medical expenses which they incurred in 1961 (Table 5-A). Of the spending units that reported large medical expenses, 31 per cent (about 12/40ths) had no medical insurance, 3 and an additional 16 per cent (about 6/40ths) had insurance that did not cover any expenses. Only 13 per cent had at least $500 of their large medical expenses paid by insurance (Table 5-3). The proportion whose insurance paid $500 or more was greater for those spending units with very large personal medical bills, suggesting that the amount paid by insurance and the amount paid personally tended to rise together. 2 The following questions were asked of those spending units that reported having large medical expenses: "Do you have insurance coverage for medical or hospital expenses, such as Blue Cross, Blue Shield, or others like that?" (If yes) "Did your medical insurance pay for any expenses during 1961 to you directly or to a doctor or hospital?" (If yes) "About how much did your insurance pay during 1961? Which was larger, your family medical bills or the amount paid by insurance, or were they about the same?" 'According to the 1960 Patterns of Family Change survey, the national average of spending units with no hospitalization Insurance is 30 per cent, indicating that the spending units that reported having large medical expenses in this survey are like the national population in this respect.

116 Medical Expenses and Medical Debt 99 Table 5-A MEDICAL EXPENSES PAID BY INSURANCE AND PERSONAL MEDICAL OBLIGATIONS (Percentage distribution of spending units) Medical expenses paid by insurance Medical expenses not paid by insurance Had large medical expenses 40 Had large medical expenses 40 Had no insurance 12 Amount paid by insurance Amount not paid by insurance Zero 6 $ $ $ $ $ $ $1000 or more 2 $1000 or more 3 Not ascertained 1 Not ascertained 1 Had no large medical Had no large medical expenses 60 expenses 60 All spending units 100 All spending units 100 About 3 per cent of all spending units (about 1.8 million units) reported medical expenses not covered by insurance of $1000 or more. Thirty-five per cent of the units with medical expenses of $1000 or more had no insurance coverage for these expenses (Table 5-3). For units reporting large medical expenses, medical insurance coverage declined with increasing age from the age group (Table 5-4), as did the proportion who had any expenses paid by insurance. Of the units reporting large medical expenses in which the head was 65 years of age or older, half had no insurance and another 13 per cent had insurance which did not cover any part of their large medical expenses in Among age groups, the proportion that had had $500 or more of medical expenses covered by insurance was lowest (3 per cent) for spending units in which the head was years old. For other age groups (25-64), the proportions were about 15 per cent and did not vary systematically with age. For senior citizens (65 years or older), the frequency of insurance payments of at least $500 was 10 per cent.

117 Survey of Consumer Finances Among the spending units with large medical expenses, the proportion with insurance increased with income (Table 5-4). There was also a tendency for the proportion that had had $500 or more paid by insurance to be larger at higher income levels. This appears to be more a reflection of the proportion insured than of any other factor. Method of handling medical expenses The following questions were asked to ascertain how spending units handled the financial burden of large medical expenses: "To take care of these expenses did you take anything out of your savings? Do you still owe part of it? Did you borrow money? Did you pay any out of current income? Did you raise money any other way? What was that?" Each question was asked successively for the respondent to answer "yes" or "no." Most people paid part of their large medical expenses out of income (Table 5-5). In addition, of the spending units with large medical expenses 10 per cent (4 per cent of all units) borrowed money, 25 per cent took money from their savings, and 30 per cent still owe money. (Additional data on medical debt is discussed below.) About 5 per cent of the spending units with large medical expenses reported receiving public or private assistance. In answer to a question in the 1961 survey concerning anticipated methods of handling a large medical expense, 8 per cent of all spending units mentioned that they would probably require public or private assistance. The use of savings to handle large medical expenses increased with age (Table 5-5), probably because older people have had more time to accumulate financial reserves. The proportion reporting that they still owed money or that they had borrowed money declined with age, perhaps because older people are known to have less favorable attitudes toward borrowing. Senior citizens typically cannot replace assets used for current expenditures because their incomes are low and not increasing. Of those with large medical expenses, the proportion that paid out of current income tended to increase with income (Table 5-5). Spending units in the middle income range were more likely to report that they had borrowed or still owed money than units whose incomes were either very low or very high. Of those with incomes under $1000 per year, 3 per cent had large medical expenses and reported receiving public assistance and 6 per cent had large medical expenses and reported receiving private help.

118 Medical Expenses and Medical Debt 101 Among those with large expenses, those who had higher liquid asset reserves reported using money from their savings more often than others (Table 5-5). They borrowed or owed money for large medical expenses much less frequently than other units. Table 5-6 shows the relationship of the method of handling large medical expenses to the amount of personal medical obligation. Most of the methods of handling expenses were reported more frequently at higher levels of personal obligation. The proportion who borrowed or who still owed money was much higher for those with larger personal obligations. Yet for those whose personal medical obligations were less than $200, one in four reported that they still owed or had borrowed money. For those whose personal obligations were $1000 or more in 1961, 48 per cent still owed some of the original bill in January-February 1962, and 30 per cent had borrowed money to pay medical expenses. None of the units with very high medical expenses reported receiving public assistance, although 6 per cent received some private help. Medical debt* Twenty-four per cent of all spending units owed money to doctors, dentists, or hospitals early in 1962 (Table 5-7). This proportion is somewhat higher than it was in 1957 and earlier years when identical questions were asked. The distribution of amounts owed has not changed markedly, however, although the average amount of medical debt outstanding for units with such debt increased from $115 in 1957 to.$175 in The change from 1957 to 1962 in the proportion of units with medical debt are largely among spending units with incomes of $10,000 or more (Table 5-8). An increase in the mean amount owed to doctors, dentists, and hospitals was found among all income groups, however. Borrowing from banks, credit unions, or other financial Institutions to pay medical bills is not included in the debt figures reported herein. ''we have presented in previous sections of this chapter data about persons witn large medical expenses in 1961 who borrowed money to pay those expenses or who still owed them; the medical debt question, which was asked of all respondents, inquired about debt owed to doctors, dentists, or hospitals, and did not include debts to financial institutions or other lenders for medical purposes. 5 See last paragraph of this chapter for a discussion of the significance of these findings.

119 Survey of Consumer Finances Although those who reported large medical expenses during 1961 were more likely to have medical debt outstanding, 15 per cent of those with no large expenses in 1961 owed doctors, dentists, or hospitals in early 1962 (Table 5-9). These debts resulted, for the most part, from expenses incurred before 1961 or from 1961 expenses that were not considered large. Table 5-9 also shows that the amount of debt outstanding and the proportion with debt is very strongly related to the amount of personal medical obligation incurred by spending units in 1961 that was not covered by insurance. About one-third of the units that in 1961 had large medical expenses of $500 or more not paid by insurance still owed $200 or more to doctors, dentists, or hospitals early in The proportion that reported owing medical debt was smaller for older people than for young people (Table 5-10), but the amount of debt outstanding does not appear to be less at older age levels. Methodological notes Questions about medical expenses were asked in both the 1961 and 1962 Surveys of Consumer Finances. The questions used were intentionally different, however, in view of differences in..objectives. As a result, it is possible to observe the effect of the wording of the questions on the data obtained. In the 1961 survey, after questions about purchases of household durables, the respondent was asked: "Have you had other large expenses during 1960 that you have not mentioned? Things like boats, motors, trailers, or hobby items? Vacations, weddings, or travel? Medical, hospital, or funeral expenses? Other house furnishings or jewelry items?" (If any yes) "What was it? How much did it cost? Do you still have anything left to pay on it? How much are the payments? How many more payments do you have left to make?" The sequence was intended to elicit information about any unusually large outlays and to contribute to the data on debt. The 1962 survey directed much more time and attention to medical expenses. An entire page of questions was used and the respondents were asked to consider various medical expense items separately, including expenses for nurses, drugs, and other medical needs. 8 The proportion of respondents reporting hospital expenses "Special questions concerning medical expenses, insurance, and debt were added to the 1962 Survey of Consumer Finances with the financial support of the American Medical Association.

120 Medical Expenses and Medical Debt 103 was larger in 1962 than it was in Expenses for doctors were reported more often in 1962 than "medical" expenses were in As expected, detailed questioning elicited more comprehensive replies, and as a result the data on medical expenses reported in the 1961 and 1962 surveys are not comparable. The questions about medical debt that were asked in 1962 are the same as those used in 1953,1955, and Data from the 1962 survey may, however, have been affected by the fact that in the 1962 questionnaire the questions on medical debt followed questions on medical experience that were not asked in earlier years. Some of the increase in the average amount of medical debt from 1957 to 1962 (see Table 5-7) can probably be attributed to the fuller medical context of the 1962 interview, but, even allowing for this effect, the proportion of people with medical debt has evidently increased during the past five years. 7 The questions used in the 1961 survey on medical debt are not comparable with those used in the other surveys.

121 Survey of Consumer Finances Table 5-1 TYPE OF LARGE MEDICAL EXPENSE AND AMOUNT OF SUCH EXPENSE (Percentage distribution Mean number of No person expense Expense Group characteristic in SU Total in 1961 in 1961 Age of SU head or over Life cycle stage of SU head Under age 45 Single Married, no children Married, children Youngest under Youngest 6 or over years or over Married, children Married, no children* 5 Head in labor force Head retired Single Head in labor force Head retired Income of SU in 1961 Under $ $ $ $ $ $ $ $ $10,000-14, $15,000 or more All spending units *Less than one-half of one per cent. Detail doeb not add to total having large medical expenses because some people reported more than one type of expense. Spending units that do not contain children under 18 years of age. c Includes cases not included in detailed classification of life cycle stage, such as single, widowed, divorced or separated persons with children. They average 1.2 adults and 2.3 children per spending unit.

122 Medical Expenses and Medical Debt 105 NOT COVERED BY INSURANCE, BY AGE, INCOME, AND LIFE of spending units) CYCLE GROUPS Doctors Type of expense Nurses Drugs and other items Hospitals $1-199 Amount of expense not by insurance $ $ $1000 or more paid Amt. N.A * * * * I * The questions were: "Did you and your family have any large medical expenses in 1961 for doctors, nurses, hospitals, and things like that, including expenaes covered by medical insurance?" (If yes) "Were these expenses for doctor bills, nurses, hospitals, drugs or other medical expenses?" "Thinking of your family's total medical bills for the entire year 1961, how much were they altogether, not counting bills paid by medical or hospital insurance?"

123 Survey of Consumer Finances Table 5-2 TYPE OF LARGE MEDICAL EXPENSE, BY AMOUNT OF SUCH EXPENSE NOT COVERED BY INSURANCE (Per cent of spending units with large medical expense) Type of expense in 1961 a Amount of expense not paid by insurance 0 $1- $200- $500- $ Doctors Nurses Hospitals Drugs and expenses not included above "Per cent of sample "^any people reported more than one type of expense - D Does not include cases for which amount of personal medical obligation was not ascertained. The questions were: "Did you and your family have any large medical expenses during 1961 for doctors, nurses, hospitals, and things like that, including expenses covered by medical insurance?" (If yes) "Were these expenses for doctor bills, nurses, hospitals, drugs or other medical expenses? Thinking of your family's total medical bills for the entire year 1961, how much were they altogether, not counting bills paid by insurance?"

124 Medical Expenses and Medical Debt 107 Table 5-3 AMOUNT OF LARGE MEDICAL EXPENSE PAID BY INSURANCE, BY AMOUNT OF SUCH EXPENSE NOT PAID BY INSURANCE (Percentage distribution of spending with large medical expense) units SU's with large Amount of expense medical not paid by insurance Amount paid by expense $1- $200- $500- $1000 insurance in 1961 a or more Zero b $ $ $ $1000 or more Amount not ascertained 2 1 * 1 4 Total Per cent of sample Less than one-half of one per cent. a Includes cases for which the amount of personal medical obligation was not ascertained. ''Had no medical insurance or insurance did not cover any medical expenses. large

125 Survey of Consumer Finances Table 5-4 AMOUNT OF LARGE MEDICAL EXPENSES PAID BY INSURANCE AND MEDICAL PAYMENTS, (Percentage distribution of spending Had no Had Per cent medical medical Group of insurance insurance characteristic sample Total in 1961 in 1961 Age of SU head or over SU income Under. $ $ $ $ $ $ $ $ $10,000-14, $15,000 or more SU 1 s with large medical expense Less than one-half of one per cent. 'Spending units that had medical insurance and large medical expenses but whose Insurance did not cover any part of these expenses.

126 Medical Expenses and Medical Debt 109 AND RELATIVE SIZE OF PERSONAL MEDICAL OBLIGATIONS BY AGE AND INCOME GROUPS units with large medical expenses) Personal medical obligations in 1961 compared to medical expenses paid by insurance Personal Amount paid by insurance expenses larger $1000 No About Personal $1- $200- $500- or insured Insured the expenses Amt. Zero* more N.A. expense expense same smaller N.A * * * * The questions asked of those who reported large medical expenses were: "Do you have insurance coverage for medical or hospital expenses, such as Blue Cross, Blue Shield, or others like that?" (If yes) "Did your medical insurance pay for any expenses during 1961 to you directly or to a doctor or hospital?" (If yes) "Which was larger, your family medical bills or the amount paid by the insurance, or were they about the same? About how much did your insurance pay during 1961?"

127 Survey of Consumer Finances Table 5-5 METHOD OF HANDLING LARGE MEDICAL EXPENSES NOT COVERED (Percentage distribution Per cent No Group of expense Expense characteristic sample Total in 1961 in 1961 a Age of SU head or over SU income Under $ $ $ $ $ $ $ $ $lo,000-lvf, $15,000 or more Total liquid assets None $ $ $ $ $ $ $ $10,000 or more All spending units Leas than one-half of one per cent. 'Detail does not add to total because some people reported using more than one method.

128 Medical Expenses and Medical Debt 111 BY INSURANCE, BY AGE AND INCOME GROUPS AND BY LIQUID ASSET HOLDINGS of spending units) Method of handling expense Used St i l l Used Sold Rece ived Rece ived Used sav- owe Borrowed current prop- private public other ings money money income erty help assistance method * * 1 * * * * 1 * * 1 1 * * * * * * 1 * * * * * * * * * * * The questions asked of those who reported large medical expenses were: "To take care of these expenses, did you take anything out of your savings? Do you s t i l l owe part of it? Did you borrow money? Did you pay any out of current income? Did you raise any money any other way? What was that?"

129 Table 5-6 METHOD OF HANDLING LARGE MEDICAL EXPENSES NOT COVERED BY INSURANCE, BY AMOUNT OF SUCH EXPENSES Amount not covered by insurance (Percentage Per cent of sample distribution of spending units with large medical expenses) Expense In 196l a Used savings Still owe money Method of handling expense Used Sold Received Borrowed current property private money income help Received public ass istance $ $ I 2 * 4 $ Used other method CO K CO O o 0) (ft $1000 or more Per cent of 5ample 40 b CO Less than one-half of one per cent. a Detail does not add to total because some people reported using more than one method. ^Includes cases for which amount of personal medical obligation was not ascertained. The questions asked of those who reported large medical expenses were: "To take care of these expenses, did you take anything out of your savings? Do.you still owe part of it? Did you borrow money? Did you pay any out of current income? Did you raise money.any other way? What was that?

130 Medical Expenses and Medical Debt 113 Table 5-7 AMOUNT OF MEDICAL DEBT IN SELECTED YEARS (Percentage distribution of spending units) Amount of medical debt None $ $ $ $ $1000 or more * * * 1 Not ascertained * * 1 1 Total Number of cases Mean b $105 $115 $115 $175 Less than one-half of one per cent. a Debt owed to doctors, dentists, or hospitals which was outstanding at the time of interview in January-February of the year indicated. b For those with medical debt.

131 Survey of Consumer Finances Table 5-8 AMOUNT OF MEDICAL DEBT BY INCOME GROUPS (Percentage distribution of spending units) Income of 9' pendina unit before taxes $10,000 Amount of Under $5000 $ $ or more medical debt a None $ $ $ $ * * $1000 or more * * * 1 * * * 3 Not ascertained 1 1 * * * * 1 1 Total Mean b $115 $165 $115 $185 $95 $135 $95 $250 Median 0 $80 $75 $75 $85 $70 $85 $80 $160 Per cent of s amp1e Less than one-half of one per cent. Debt owed to doctors, dentists, or hospitals that was outstanding at the time of interview in January-February of the year indicated. 'For those with medical debt; medians were estimated by interpolation.

132 Medical Expenses and Medical Debt 115 Table 5-9 AMOUNT OF MEDICAL DEBT, BY AMOUNT OF LARGE MEDICAL EXPENSE NOT COVERED BY INSURANCE (Percentage distribution of spending units) Amount of No medical debt, All expense early in 1962 a SU's b in 1961 Amount of expenses in 1961 not paid by insurance?1- $200- $500- $ None $ $ $ $ * * * 5 15 $1000 or more 1 * * * 8 7 Not ascertained 1 * * Total Per cent sample of Less than one-half of one per cent. 'Debt owed to doctors, dentists, or hospitals that was outstanding at the time of interview, January-February 'includes cases for which amount of personal medical obligation was not ascertained.

133 Survey of Consumer Finances Table 5-10 AMOUNT OF MEDICAL DEBT BY AGE GROUPS (Percentage distribution of spending units) Amount of medical debt, early in 1962 a Afte of head of spendina unit All SU's or over None $ $ i $ $ * 1 $1000 or more 1 * * * Not ascertained 1 * Total Mean $175 $85 $230 $175 $195 $75 c Median* 5 $85 $70 $80 $95 $100 $65 c Less than one-half of one per cent. Debt owed to doctors, dentists, or hospitals which waa outstanding at time of interview, January-February b For those with debt; medians were estimated by interpolation. Too few cases. However, data from this survey and from earlier surveys suggest that both the mean and median are higher than comparable figures for the group that is 55 to 64 years old. c

134 6 NET WORTH In this chapter the findings of a survey of a national probability cross-section sample of American consumers completed early in 1962 are compared with findings from a similar study done in early THE major purpose of studies of net worth of households is to obtain data on distributions and on relations between variables at different points of time. Several methodological studies have indicated that surveys carried out with representative samples of the population do not obtain accurate information on the total amount of savings held by the American people. Savings are underestimated primarily because of inadequate coverage of top asset holders and because other respondents do not report some assets. When distributions and medians are presented, rather than aggregates and means, the errors and omissions are less damaging. When the relation of the distribution of net worth to income or age is studied, the errors are likewise less important. The most valuable data about net worth are comparisons of distributions and relations obtained at two different points of time, because biases and errors probably remain constant. Such data give useful indications of financial trends. The data in this chapter show that several major relations The initial report of the 1953 survey appeared in the Federal Reserve 1 Bulletin, September 1953, pp Data on total assets held in early 1960, published in the monograph 1960 Survey of Consumer Finances, are not comparable. The 1960 data were based on a less inclusive definition of assets and, in that survey, amounts were asked for in brackets (classes).

135 Survey of Consumer Finances have remained unchanged during a nine-year period (1953 to 1962) and that changes in other relations can be explained on.the basis of a variety of data. Highlights The distribution of net worth of American households showed little change from 1953 to 1962, despite the fact that this was a period of general prosperity, rising incomes and productivity, and moderate increases in prices. Three of every ten spending units had less than $1000 equity in stocks, real estate and housing, automobiles, bonds, bank accounts and related reserve funds in 1953, and this proportion did not decline during the intervening years. There was, however, an increase in the proportion of spending units whose net worth is $10,000 or more: from 29 per cent in 1953 to 34 per cent early in This increase is small when compared with the increase in the proportion with annual incomes of $7500 or more: 9 per cent in 1952 versus 25 per cent in Assets were accumulated most rapidly by age groups under 55 years of age, according to estimates of holdings of the same groups made nine years apart. Debt, outstanding as a proportion of net worth doubled during the period, and rose most rapidly for the younger groups. Net worth The distribution of consumer net worth 3 showed little change from 1953 to 1962 (Table 6-1). One half (49 per cent) of American 2 Gross worth is defined here as the value of private holdings of the following items: owner-occupied houses and farms; other real estate; mortgages and land contracts; livestock and farm equipment; automobiles; unincorporated businesses; savings accounts in banks, savings and loan associations, and credit unions; savings bonds and other government securities, including those of state and local governments; and stocks, bonds, and shares of privately held corporations. In order to arrive at net worth, debt associated with any of these assets together with any medical and general purpose debt was deducted. Among the items not included in gross worth are the cash value of life insurance policies, pensions, jewelry, clothing, house furnishings, trust accounts, and currency.

136 Net Worth 119 spending units had net worth of $5000 or more in 1962 compared with 46 per cent of the units in The proportion that had net worth of less than $1000 remained almost the same 31 per cent in 1953 and 30 per cent in The proportion of spending units with net worth of $10,000 or more increased during this period from 29 to 34 per cent. The increase in the proportion of the more wealthy units is, however, very small considering that both prices and gross national product have risen substantially during the period. The values of many of the important consumer assets such as real estate and common stock are related to the price level. Mean and median net worth both increased from 1953 to 1962 and the increase in the mean was proportionately larger. Mean net worth in 1962 ($14,600) was three times as large as median net worth ($4700), indicating a distribution greatly skewed toward the high values. The aggregate net worth holdings of households increased much more than is indicated by the increase in average holdings because the number of spending units also increased during the period. The distribution of gross worth 2 is similar to that of net worth. A substantial proportion of units have less than $1000worth of assets. There has been no significant reduction in this proportion over the period from 1953 to 1962, but there has been an increase in the proportion with high wealth ($10,000 or more). The increase in the top gross worth classes is greater than the corresponding increase in the net worth classes. This indicates an increase in the indebtedness of these people, which will be discussed later in this chapter. Comparisons of the distribution of net worth in 1953 and 1962 by groups based on the age of the head of the spending unit indicate that there is little change in the distribution of net worth for the group under 25 years of age and the group aged 65 or over (Table 6-2). In 1962 the year old group had generally lower net worth (including higher proportions with negative amounts) than the group of similar age in The proportions that had negative or low amounts of net worth in the year old group did not change from 1953 to 1962, but the proportion that held large amounts ($10,000 or more) increased. The distributions of net worth for the age groups 45-54, and years show a general shift toward larger holdings from 1953 to 1962.* 3 The age distribution of spending unit heads showed almost no change from 1953 to The proportion of units headed by a person aged 65 or more was somewhat higher in 1962 and there was a smaller increase in the proportion of units whose heads were under 25 years of age. Most of the decline wae in the proportion of units headed by persons years of age.

137 Survey of Consumer Finances Comparisons of the median holdings in both years generally confirm these changes, for median net worth increased from 1953 to 1962 for the three age groups from years, and declined for the younger and older groups. The substantially higher levels of median net worth held by successively older age groups in both 1953 and 1962 indicate extensive asset accumulation up through the year old age level. In 1962 the median net worth of the year age group was about the same as for the next younger group. Median net worth of those units headed by someone 65 years or over was somewhat smaller. These data suggest that the middle years are the years in which most people accumulate assets. In later years, even before retirement, the group averages (medians) did not increase further. Comparisons of the distribution of net worth of spending units by income quintiles are presented in Table 6-3. The modest changes in the distributions of net worth in 1953 and 1962 are reflected in somewhat uneven changes in the distributions of net worth by income quintile groups. Most of the increase from 1953 to 1962 in the proportion of units with net worth of $25,000 or more is accounted for by the second and third quintiles. The lowest quintile was no better off in 3962 than it was in In the top income quintile there was no significant shifmn the proportion that.had $25,000_or.more of.net worth, despite generally prosperous years and rising incomes. Concentration of net worth in the highest income quintile was no more pronounced in 1962 than in 1953 (Table 6-4). In both years almost one-half of reported net worth was held by the spending units in this quintile. The one-tenth of the spending units with the highest incomes held about 40 per cent of total net worth. However, both of these measures show that net worth is more highly concentrated among the top income receivers than is before-tax money Income. The distribution of net worth by net worth size groups reveals a very strong concentration among the top net worth holders. 4 No large shift toward greater concentration occurred from 1953 to 1962 (Table 6-4). Eleven per cent of the spending units in 1953 held 60 per cent of the total net worth; 14 per cent of the spending units in 4 Wealth is known to be highly concentrated among the relatively small groups of top asset holders. These people are not adequately represented in a nationwide cross-section sample. Data about their wealth have been obtained through special purpose surveys and will be reported in an article by George Katona and John B. Lansing in a forthcoming issue of the Review of Economics and Statistics.

138 Net Worth held 68 per cent of net worth. One-half of all spending units in 1962, as in 1953, held only about 5 per cent of net worth. These spending units received 35 to 40 per cent of annual income, however, indicating again that net worth is more highly concentrated than income. Half of all spending units share little in the material wealth of the country except as it affects their income, and they are dependent on current income for their well-being. Relationship to income How did the relationship of net worth to income change for individuals from 1953 to 1962? There was a small increase in the proportion of spending units whose net worth was less than their annual incomes; correspondingly, there was a small decline in the proportion whose net worth was equal to or greater than their annual incomes (Table 6-5). In 1962 the spending units headed by persons under 35 years of age had fewer assets in relation to their incomes than did similar spending units in 1953 (Table 6-6). These younger persons account for most of the increase in the proportion of all spending units whose assets are small in relation to their income. The decline in the proportions that have large net worth in relation to income was spread among all age groups except the very youngest. In the middle ranges of net worth to assets (50 to 199 per cent of income), there were fewer young people (under 35 years) and more older people (55 years and over); the proportion in the middle ranges changed little for the year age groups. The decline in the proportion with large net worth in relation to annual income (200 per cent or more) was among both the middle and the upper income quintiles (Table 6-7). Thus the increasing proportion of high income units (such as income over $15,000) does not alone account for the decline. In the two lowest quintiles the proportion with zero or negative net worth showed a small increase, although the proportion with net worth less than annual income remained about the same. From 1953 to 1962 the proportion in the middle quintile with net worth less than income increased from 55 to 63 per cent; in the highest quintile, from 33 to 43 per cent. Composition of net worth The composition of net worth did not remain constant from 1953 to Gross worth in 1953 was 113 per cent of net worth in

139 Survey of Consumer Finances that year. The difference was debt (13 per cent of net worth in 1953) and included mortgage debt, personal installment and noninstallment debt, and debt related to farming and owner-operated businesses (Table 6-8). Gross worth in 1962 was 127 per cent of net worth, and the difference (27 per cent of net worth) was debt. Debt as a percentage of net worth more than doubled from 1953 to Debt is very large in relation to net worth for those whose net worth is small. These people appear to own houses and cars in which they have little equity but on which they have large debt. The assets held have been classified into variable value assets and fixed value assets. Variable value assets are items whose price (value) can fluctuate in the market, and fixed value assets are those items which represent fixed money claims. (The classification is necessarily arbitrary to some degree; for example, many bonds which are fixed money claims and are classed with the fixed value assets do in fact have a market in which their prices vary somewhat over time.) The variable value assets are further subdivided into consumer capital goods (nonfarm homes and automobiles) and business and investment assets (farms, businesses, and corporate stock). Fixed value assets as a proportion of net worth did not increase from 1953 to Business and investment assets, which were noticeably larger than consumer capital goods in 1953, increased less from 1953 to 1962 than did consumer capital goods. The data on the values of common stock and businesses are subject to particularly large errors because relatively few people own a substantial share of investments. Asset holdings and their changes are quite dissimilar by population subgroups. Turning first to groups formed by net worth size (Table 6-8), it can be seen that consumer capital goods as a proportion of net worth is much larger among the lowest net worth groups and that this proportion showed a much greater increase from 1953 to 1962 for these groups than for the groups with larger net worth. Fixed value assets as a percentage of net worth showed very little change except for the lowest net worth group where the percentage declined from 50 per cent in 1953 to 44 per cent in Business and investment assets as a proportion of net worth remained about the same for the top net worth group and increased slightly for the other groups. A comparison of the composition of net worth in 1953 and 1962 for groups formed on the basis of the age of the spending unit head shows that debt as a proportion of net worth increased substantially for all the groups from 25 through 64 years of age (Table 6-9). Debt as a percentage of net worth is highest (66 per cent) for the year group and decreases with increasing age. From 1953 to 1962 debt increased least for the youngest and oldest groups.

140 Net Worth 123 Fixed value assets are smallest in relation to net worth among the middle age groups and no significant trends are revealed in the change in holdings. The percentage of net worth that was held as business and investment assets declined somewhat from 1953 to 1962 for the two oldest age groups but increased for each group from 18 to 54. For the youngest age group consumer capital goods as a proportion of net worth declined from 1953 to 1962, although it increased for all other age groups. In both years consumer capital goods as a proportion of net worth was highest for the age group and was generally lower at each older age level. Net worth composition by income quintiles is not available in similar detail for From Table 6-10, however, it can be seen that debt as a percentage of net worth increased for each income quintile group and increased the most for the upper income quintiles. Fixed value assets in 1962 are a larger percentage of net worth for the three lowest quintiles than for the two top quintiles. Business and investment assets are a larger percentage of net worth for higher income quintile groups. Consumer capital goods as a percentage of net worth reach a peak in the fourth quintile. Variable value assets and net worth In 1953 there was much concern with inflation and its impact on consumers. There is perhaps less concern with this problem today, but the relation of gross variable value assets to net worth on an individual spending unit basis is of interest nevertheless. Fifty-five per cent of all spending units have variable value assets equal to or greater than their net worth. The proportion increases with age up to the year group, of whom 73 per cent have variable value assets equal to or greater than their net worth. The proportion then declines rapidly with age so that among those aged 65 years or over only about one-fourth have variable value assets as large as their net worth (Table 6-11). The proportion who have variable value assets at least as large as net worth increases with the level of income up to a high of 72 per cent for the fourth income quintile and then declines slightly. Components of net worth Table 6-11 shows the incidence in 1962 of debt liability and ownership of the various items that make up net worth. Liquid

141 Survey of Consumer Finances assets and automobiles are the two most frequently held assets, both being held by almost three-fourths of all spending units. Onehalf of all nonfarm units own the home in which they live. Only 4 per cent of all spending units reported that they live on their own farm or that they have an equity in farm livestock or equipment. Fifteen per cent of all spending units own real estate other than the home or farm that they occupy and about the same percentage reported owning corporate stock. Smaller proportions of spending units reported having an interest in an unincorporated or privately held business or holdings of other financial assets. About two-thirds (68 per cent) of all spending units reported debt outstanding (Table 6-12). With one exception, each item is more frequently owned by higher income units than by lower income units (farm assets are reported less often by the top income spending units). The incidence of debt is higher at each higher income quintile up to the fourth quintile, where it appears to reach a plateau. Earlier studies have indicated that the incidence of debt declines at the top income level if the top income range is defined more narrowly than a quintile. The size distributions of the various items are shown in Table Housing is the asset in which the largest proportion of units have a substantial investment. Cohort analysis Cohorts. Most of the people who were years old in 1962 were years old nine years earlier in Similarly, most of the people who were years old in 1962 were years old in 1953, and so forth. We shall call these paired groups cohorts: they are samples of people born during approximately the same ten-year period. Comparisons of the net worth holdings of a cohort in 1953 with the holdings of the same cohort in 1962 will indicate changes that have occurred for the group over the intervening period. (Henceforth cohorts will be identified by their age range in 1962.) The population under analysis is not one of individual people, however, but of spending units, and the cohorts of which we 6peak are made up of spending units headed by persons of the specified ages. During the period some spending units were formed, others disappeared, and still others changed composition as a result of marriage and divorce, illness and death, and changing patterns of responsibility within the units, but no extensive analysis has been undertaken of these changes. The size of the spending unit

142 Net Worth 125 cohort aged increased over the nine years because young people came of age and assumed independent status. The cohort aged also tends to be sughtly larger than it was nine years earlier. The spending unit cohorts headed by persons 45-54, 55-64, 65-74, and 75 or over are each smaller than their respective cohorts nine years earlier, and the amount of decline is greater with each older group. Death is no doubt the most important factor in the decline in cohort size at the older ages, but moving in to live with relatives or into institutions must account for some portion of the decline. Median net worth. Over the period from 1953 to 1962, median net worth almost tripled for the cohort aged (Table 6-14). For the next older cohort (45-54), median net worth more than doubled from 1953 to For these two cohorts, the dollar amounts of thebe increases in median net worth were substantial, about $3900 for the cohort aged and about $5400 for the cohort aged The increase in median net worth was larger for these two cohorts than for any other. 5 The cohort aged increased in median net worth about $1700, but for the next older cohort median net worth did not change significantly. For the oldest group (aged 75 or over), median net worth declined about $1000. Distribution of net worth. Accumulation of assets can result from saving out of income, from appreciation of the value of assets, and from transfers in the form of gifts, inheritances, trusts and life insurance proceeds. The manner in which these accumulations occurred in the cohorts is of great interest but is not yet known. The form in which the assets are held and the differences in the distribution are available, however. For the cohort aged the distributional data for 1962 show a large increase in the proportion with net worth of $10,000 or more, and a substantial minority (26 per cent) still had net worth below $1000. There appears, therefore, to have been an increase in the inequality of net worth distribution for this cohort. The findings for the year cohort are similar. For the year old cohort there was also a substantial increase in the proportion with The dollar volume of asset accumulations cannot properly be inferred from median valueb. It does not necessarily follow, therefore, that most saving wae done by the cohorts aged and A report by Charles A. Lininger on the implications of these survey data for aggregate savings is in preparation.

143 Survey of Consumer Finances high amounts ($10,000 or more) but a pronounced decline in the proportion with low amounts (under $1000). For the oldest cohort (75 or over), there seems to have been a decline in the proportion with high amounts and little change in the proportion with low amounts, although these changes are not statistically significant. In interpreting these data we must remember that declines in cohort membership, which are greater for the older groups, may not be random among the cohort: spending units that disband may not include proportionately as many high net worth units as low net worth units. Spending units that disband because of the death of the spending unit head may be more random, however, than those that join another household as a dependent unit. Surviving widows may also have their assets increased by the death benefit provisions of their husbands' life insurance, although incomes from pensions are frequently decreased by the death of the husband. These are dynamic aspects about which little information is presently available. It is known, however, that from 1953 to 1962 the size of the oldest cohort declined about 50 per cent, while the decrease in size of the next two cohorts was much lower. The composition of net worth. The composition of net worth is shown for only three cohorts in Table 6-15, and excludes the two older groups whose size decreased the most. For the cohorts aged 35-44, 45-54, and 55-64, the older the cohort, the smaller the debt as a proportion of net worth. The level of net worth in dollars increased markedly for the first two of these cohorts and less (but significantly) for the third. It is clear, therefore, that the volume of debt in dollars increased for all three cohorts, although as a proportion of net worth it increased significantly only for the year cohort. The corresponding rise in assets for this cohort was in business and investment assets. The proportionate increase in consumer capital goods was small, although related studies indicate that home ownership probably increased for this cohort during the period. For the year cohort, business and investment assets also rose significantly, and the proportion of net worth in consumer capital goods declined. There was little change in the proportion of debt outstanding. Among the year cohort, both consumer capital goods and debt increased as proportions of net worth. Fixed value assets declined as a proportion of net worth for the youngest of these three cohorts, and rose for the oldest. What interpretations can be placed on these changes? First, the younger cohorts appear more willing and able to take on

144 Net Worth 127 additional debt-mortgage debt as well as installment debt and their housing and automobiles represent the largest share of their net worth. This share is less with the next older cohort, perhaps reflecting the widespread practice of amortization of mortgages. The reduction of mortgage indebtedness would increase net worth and lessen the proportion which housing, and mortgage debt, is of net worth. Since both of these younger cohorts (35-44 and 45-54) showed an increase in business and investment assets, both absolutely and as a proportion of net worth, direct savings in these assets is indicated. A similar increase was not found in the year cohort, indicating little direct saving by this group in these assets.

145 Survey of Consumer Finances Table 6-1 NET WORTH AND GROSS WORTH (Percentage distribution of spending units) Net worth Gross worth 3 Amount Negative; $ b $ $ \ $10,000-24,999 ) $25,000 or more Total Mean $11,900 $14,600 it it Median # $4100 $4700 it it Number of spending units (in millions) Data not available. 'Data for 1950 not available. 'in early 1962, 11 per cent of all spending units had negative net worth, 6 per cent had zero net worth, and 8 per cent had $1-499 net worth.

146 Net Worth 129 Table 6-2 NET WORTH BY AGE GROUPS (Percentage distribution of spending units) Net worth or over Negative $ $ $ $10,000-24, $25,000 or more Total Median $300 $2110 $4480 $8270 $8590 $8400 Per cent of all units Negative $ $ $ $10,000-24, $25,000 or more Total Median $250 $1800 $6000 $9900 $9960 $8000 Per cent of all units

147 Survey of Consumer Finances Table 6-3 NET WORTH BY INCOME QUINTILES (Percentage distribution of spending units) Net worth in 1953 $0- $1000- $5000- $25, income position Total Negative or more Lowest quintile Lowest dec ile Second decile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highes t decile All spending units Net worth in 1962 $0- $1000- $5000- $25, income position Total Negative or more Lowest quintile Lowest decile Second decile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile All spending units

148 Net Worth 131 Table 6-4 DISTRIBUTION OF SPENDING UNITS, NET WORTH, AND INCOME, BY NET WORTH GROUPS AND INCOME QUINTILES (Percentage distribution) Share of Spending Share of total Group units net worth monev income characteristic Net worth Negat ive * * \ 7 $ * ) 11 $ $ , $25,000 or more [ 19 Total too Income quintile Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile Total Less than one-half of one per cent.

149 Survey of Consumer Finances Table 6-5 RELATION OF NET WORTH TO INCOME (Percentage distribution of spending units) Net worth as a percentage of money income before taxes Less than or more Negative net worth or negative income Total

150 Net Worth 133 Table 6-6 RELATION OF NET WORTH TO INCOME, BY AGE GROUPS (Percentage distribution of spending unitb) Age of SU head, early 1953 Total Net worth in early 1953 as a percentage of 1952 money income before taxes Zero or negative net worth or more I or over All spending units Age of SU head, earlv 1962 Total Net worth of 1961 Zero or negative net worth in early 1962 as a percentage money Income before taxes or more or over All spending units a Includes a few cases of zero or negative income.

151 Survey of Consumer Finances Table 6-7 RELATION OF NET WORTH TO INCOME, BY INCOME QUINTILES (Percentage distribution of spending units) Income position Total Net worth in early 1953 as a percentage of 1952 money income before taxes Zero or negative 1- net worth or more Lowest quintile Lowest decile Second decile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile All spending units Income position Total Net worth in early 1962 as a percentage of 1961 monev Income before taxes Zero or negative net worth a or more Lowest quintile Lowest decile Second decile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile All spending units Includes a few cases of zero or negative income

152 Net Worth 135 Table 6-8 COMPOSITION OF NET WORTH BY NET WORTH GROUPS (Assets and debt as percentages of net worth) Variable value assets Business Consumer and Amount of Net Gross capital investment net worth worth Debt worth goods assets Net worth composition in early 1953 Fixed value assets $ $ $ , $25,000 or more All spending units Net worth composition in earlv 1962 $ $ $ , $25,000 or more All spending units a Includes 11 per cent of spending units in 1953 and in 1962 who had negative net worth.

153 Survey of Consumer Finances Table ft-9 COMPOSITION OF NET WORTH BY AGE GROUPS (Assets and debt as percentages of net worth) Age of head in earlv 1953 Net worth Debt Grose worth Variable Consumer capital Roods value assets Business and investment assets Fixed value assets Net worth composition in earlv or over All spending units Net worth composition in earlv or over All spending units

154 Net Worth 137 Table 6-10 COMPOSITION OF NET WORTH BY INCOME QUINTILES (Assets and debt as percentages of net worth) Income Net position worth Debt Gross worth Variable value assets Business Consumer and cap ita1 investment Roods assets Fixed value assets Net worth composition in earlv 1953 Lowest quintile a # # Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile All spending units Net worth composition In earlv 1962 Lowest quintile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile All spending units Data by income quintiles not available for 1953.

155 Survey of Consumer Finances Table 6-11 RELATION OF GROSS VARIABLE VALUE ASSETS TO NET WORTH, BY AGE GROUPS AND INCOME QUINTILES (Percentage distribution of spending units) Gross variable value assets as a percentage of net worth, early 1962 Group 150 characteristic Total Age of SU head or over iconie position Lowest quintile Lowest decile Second decile Second quintile Third quintile Fourth quintile Highest quintile Ninth decile Highest decile spending units a Includes 6 per cent of all spending units who had positive variable value assets and zero or negative net worth.

156 Net Worth 139 Table 6-12 OWNERSHIP OF ASSETS AND DEBT LIABILITY, BY INCOME QUINTILES (Percentage of group owning asset or having debt) Item All Income position spending Lowest Second Third Fourth Highest units quintile quintile quintile quintile quintile Assets Liquid assets Automobile Owne r-oc cup ie d nonfarm home Owner-occupied farm, livestock, farm equipment 4 Other real estate Bua iness interest Corporate stock Other financial assets 4 Debt owed

157 Table 6-13 SI2E OF NET WORTH COMPONENTS (Percentage distribution of spending units) Owneroccupied Farm and Other Other Gross amount, Liquid nonfarm farm real Business Corporate finaneial Total early 1962 assets Automobile house assets estate Interest stock assets debt Zero $ * * $ $ , * $25,000 or more 1 _* * 2 Total Less than one-half of one per cent

158 Table 6-14 NET WORTH BY AGE COHORT GROUPS (Percentage distribution of spending units) Net worth of cohort identified by age of SU head ln 1962 Amount of or over net worth Negative $ $ $ L $10, ;, $25,000 or more Total Median net worth $2110 $6000 $4480 $9900 $8270 $9960 $8590 $8720 $8400 $7380

159 Survey of Consumer Finances Table 6-15 COMPOSITION OF NET WORTH BY AGE COHORT GROUPS (Assets and debt as percentages of net worth) Composition of net worth Net worth of cohort identified by age of SU head in Variable value assets Consumer cap ital goods Business and investment assets Fixed value assets Gross worth Debt Net worth

160 7 VACATION TRIPS The Survey Research Center collected information about the amount of money spent on vacation trips for the first time in Previous studies of vacation travel made by the Center have been concerned with the number of trips taken rather than with the amount spent. In the 1962 Survey of Consumer Finances respondents were asked whether they had taken any vacation trips in 1961 and, if so, whether they had spent $100 or more on vacation trips during the year. This chapter reports data about spending units that took major vacation trips, that is, those who said that they took a vacation trip in 1961 and that they spent $100 or more on vacation travel in that year. Highlights During 1961, 27 per cent of all spending units spent $100 or more on vacation travel. The mean expenditure of these units on vacation trips was about $380. Expenditure on vacation travel is highly correlated with income and with education. Spending units in the highest income groups are much more likely to take vacation trips than those in the middle or lower income groups. Of those units in which the head has a college degree, one-half spent $100 or more on vacation travel in 1961 compared to only one out of eight of the units in which the head has a grammar school education or less. Of those spending units that spent $100 or more on vacation travel in 1961, one out of four took two or more trips. In 1961 one out of ten spending units took a vacation trip to a place 1000 miles or more away from home. Such long trips account for roughly two-thirds of the total expenditure on major vacation travel.

161 Survey of Consumer Finances Relationship to level of income The major determinant of the amount spent on vacation travel by a spending unit is income. At the lower end of the income distribution (under $2000), the proportion of spending units that spent $100 or more on vacation trips in 1961 is only 5 to 7 per cent (Table 7-1). Even in the income range $ only 14 per cent spent that much on vacation trips. In the income range $ , however, about half of the spending units spent $100 or more on vacation trips, and more than 75 per cent of the spending units with incomes of $15,000 or more spent that amount. Annual expenditures of $500 or more on vacation trips are rare up to incomes of approximately $7500 a year. Seven per cent of the spending units with incomes of $ made such expenditures in However, 43 per cent of the spending units with incomes of $15,000 or more spent at least $500 on vacation travel and 29 per cent of the units at that income level spent $1000 or more. The mean amount spent on major vacation travel by all spending units (including those who spent nothing) was about $100 in 1961 (Table 7-2). This estimate implies an aggregate outlay on major vacation trips in 1961 for spending units in the United States of roughly 6 billion dollars. This total is broadly consistent with other estimates (see the methodological appendix to this chapter). For the 27 per cent of all spending units that took vacation trips costing $100 or more in 1961, the mean expenditure was about $380 (Table 7-2). Up to annual incomes of about $10,000 a year, there is remarkably little difference in the mean expenditure of those taking trips; at every income level up to $10,000 the mean expenditure on vacation travel of those who took trips is about $300. In contrast, the proportion of spending units taking major vacation trips rises sharply with income. People in the lower income groups may wait longer between trips but spend substantial amounts when they do travel. Those with incomes of $10,000 and above are more likely to take trips and are also more likely to make larger expenditures when they do take trips than spending units with lower incomes (Table 7-2). As a result, spending units with incomes of $10,000 or more (13 per cent of all units) account for about 44 per cent of the total expenditure on major vacation trips.

162 Vacation Trips 145 Relationship to life cycle stage When expenditures on vacation trips are compared for groups of people at different stages in the family life cycle, those most likely to spend $100 or more are young married couples who do not have children (Table 7-3). Of those at this stage in the family life cycle 44 per cent took major vacation trips in 1961 compared to 27 per cent of the general population. The mean expenditure of young married couples who took trips was not particularly high. Married couples in which the head is 45 years of age or older are somewhat less likely to take trips than younger married couples, but when they do, they spend more money. For older couples with no children who spent $100 or more on vacation trips, the mean expenditure was about $560, roughly twice the mean amount spent by young couples without children. Number of vacation trips One aspect of expenditure on vacation travel which differentiates it from other kinds of consumer expenditures is that there is no obvious limit to the total amount people may spend on vacation trips. From this point of view it is especially interesting to study how many different trips people take. Among the 27 per cent of all spending units that spent $100 or more on vacation trips, 71 per cent report taking only one trip, but 19 per cent took two and 10 per cent took three or more trips (Table 7-4). Even among those who spent $ on vacation travel, about one out of five took two or more trips. Half of those who spend $750 or more took two or more trips. Thus larger annual expenditures frequently result from two or more trips rather than from a single expensive trip. Of those with incomes of $15,000 or more in 1961, 41 per cent took one trip, 17 per cent took two, 6 per cent took three, and 12 per cent reported four or more vacation trips during the year (Table 7-5). For low and middle income groups, multiple trips are, of course, much less frequent. Effects of time and children These results suggest that lack of money is a major impediment to frequent travel. How important are such barriers as lack of free time and the presence of small children? Some information

163 Survey of Consumer Finances about this appears in Table 7-6. Children do seem to be a barrier to travel. Of young married couples whose youngest child was under six, 27 per cent spent $100 or more on vacation travel compared to 35 per cent of the young couples whose children were older and 44 per cent of the young couples without children. This difference may reflect both the difficulties of travel with children and the financial strain under which young couples with children frequently find themselves. If lack of time were a major impediment to travel, one would expect that many retired people would travel frequently. As Table 7-6 shows, the proportion of retired people who travel is much lower than the proportions for spending units in which the head is still in the labor force. Only 15 per cent of retired couples spend $100 or more a year on vacation trips. Relationship to education and place of residence Income is, of course, correlated with education and it is not surprising that there is a strong positive relationship between the education of the head of a spending unit and the number of trips taken by that spending unit (Table 7-6). Of spending units in which the head has a grammar school education or less, only 13 per cent spent $100 or more on vacation trips in 1961, whereas more than half of the spending units in which the head has a college degree spent $100 or more. We might reasonably expect that the place where a respondent lives would influence his readiness to spend money on vacation trips. One might predict that those who live near the center of the largest cities would probably spend part of their incomes on vacation travel in order to enjoy the benefits of trips to less populated areas. On the contrary, we find that people who live in the central cities of the twelve largest metropolitan areas are less likely to take major vacation trips than the general population (Table 7-5). Many of these people have low incomes and automobile ownership is low among those who live in these central cities. Those people who live in suburban areas, especially those living in the suburbs of the central cities, are prosperous and well supplied with automobiles and are most likely to spend substantial amounts on vacations. Outside of metropolitan areas only about one out of five spending units spends $100 or more on vacation travel compared to roughly twice that proportion in the suburbs of the central cities of the twelve largest metropolitan areas.

164 Vacation Trips 147 Maximum distance from home How far do people travel on their vacation trips? The distance is tabulated in Table 7-7. Of all spending units 11 per cent took a vacation trip to a place 1000 miles or more from home. The distance to the farthest point reached is closely related to the income of the spending unit. Of those with annual incomes below $3000, about 4 per cent traveled to a point 1000 miles or more away; of those with incomes of $15,000 or more, 41 per cent traveled to a point at least a 1000 miles away. The differences among income groups are, however, primarily differences in the proportion that spent $100 or more on vacation trips. Of those units in the lower and middle income groups that made such expenditures, a considerable proportion reached a point 1000 miles or more away from home. This result is consistent with the finding that the mean expenditures of those who spent $100 or more on vacation trips were not very different over a wide range of income. As might be expected, there is some relationship between the amount spent on a trip and the distance to the farthest point reached on that trip. For example, 21 per cent of those who spent less than $200 remained within 250 miles of home, whereas the proportions dropped at each higher expenditure level so that only 3 per cent of those who spent $500 or more remained within 250 miles (Table 7-8). The mean expenditure per spending unit on vacation trips in 1961 did not differ significantly by the maximum distance reached for distances up to 1000 miles; the average expenditure was about $250. For spending units that traveled to more distant places, the average expenditure rises substantially. The wide range of distances covered for a given outlay presumably reflects differences in the number of people who went on the trip, the method of transportation chosen, and the type of accommodations used. Large outlays of $500 or more are, however, almost always associated with a trip to a destination at least 1000 miles away. For those traveling to a point miles away from home, the average expense was about $450, whereas the average expenditure for distances of 2000 miles or more was $870. Presumably such long distances involve high expenses for transportation and an extended period of living in hotels, motels, or other transient accommodations.

165 Survey of Consumer Finances METHODOLOGICAL APPENDIX Questions asked The exact sequence of questions on vacation travel in the 1962 Survey of Consumer Finances is shown in the questionnaire reproduced in Chapter 14 of this book (see questions D17-D21). The tabulations in this chapter refer to those spending units that answered "yes" to both the first and second questions (D17 and D18), that is, to those who said that they took at least one vacation trip and that they spent $100or more on vacation trips in This procedure is intended to be a standard method of defining major vacation trips. Comparison with other estimates Other studies by the Survey Research Center have shown that the proportion of the population that takes nonbusiness trips in any one year is substantially higher than the proportion that spends $100 or more on such trips (estimated herein as 27 per cent of spending units for 1961). Automobile trips are, by far, the most frequent type of nonbusiness trips. In the twelve months ending in May 1962, 60 per cent of all adults in the country took at least one automobile trip for nonbusiness reasons to a place 100 miles or more away. 1 (In 1955 this proportion was 53 per cent.) Many of these automobile trips must cost much less than $100. Some "nonbusiness" automobile trips are concerned with people's personal affairs, but there is no question that many people take trips to points 100 miles or more away from home for pleasure or vacation purposes. Estimate of aggregate outlay As previously noted, the mean outlay of $380 per spending unit for spending units that took major vacation trips implies an aggregate outlay of 6 billion dollars. This total excludes all expenditures of those whose total annual outlay for vacation trips was less than $100. Nine per cent of all spending units (or 5 million spending ^Interim Report on the National Travel Market Survey. Ann Arbor, Michigan: Institute for Social Research, 1962, p. 23.

166 Vacation Trips 149 units) reported such outlays. Their expenditures would add several million dollars to the aggregate outlay: at a mean outlay of $50 per unit, for example, the added amount would be about $250 million. The total also excludes short and inexpensive excursions made by those who took major trips, because the way in which the questions were asked very probably resulted in their failing to report expenditures on short trips. It also excludes all pleasure travel by those who report no "vacation trips." Fortune magazine has estimated on the basis of data from the Department of Commerce and other sources that Americans spent $10.5 billion in 1958 on domestic vacations and pleasure travel. 2 Of that amount about $2 billion was for vacation homes and "incidental purchases" leaving $8f billion for train, plane, and bus fares, lodging and meals, and automobile expenses. Fortune's estimates for expenditures on trips is about $9 billion, the exact amount depending on the breakdown of the $2 billion for vacation homes and "incidental purchases." This estimate may be compared to our estimate of $67 billion plus an unknown amount for short trips. The comparison is crude, especially when it is kept in mind that one estimate refers to 1958 and the other to 1961, but there is rough agreement. 3 Charles E. Silberman, "The Money Left Over for the Good Life," Fortune, November 1959, pp. 134 ff.

167 Table 7-1 AMOUNT SPENT ON VACATION TRIPS, BY INCOME GROUPS (Percentage distribution of spending units) <o Amount spent on vacation crips in 1961 All SU's Under $1000 $ spending unit income before taxes $2000 $3000 $4000 $5000 $6000 $ $10, $15,000 or more CO c Zero or under $ $ $ o 3 Co $ $ * * * $ * $ * * * * * * * * * 2 4 $1000 or more 2 * * * * Amount not ascertained * * * * * 1 1 * * 1 * Total Less than one-half of one per cent.

168 Table 7-2 MEAN AMOUNT SPENT ON VACATION TRIPS, BY INCOME GROUPS 1961 spending unit inc ome All spending units Mean expenditure Percentage on vacation trips distribution in 1961 Spending units that spent $100 or more on vacation trips in 1961 Share of Mean expenditure aggregate expenditure Percentage on vacation trips (in per cent) Under $ $ 30 $350 $ $ $ $10,000-14, = a $15,000 or more Total Grand mean $100 $380

169 Life cycle stage of SU head Under age 45 Single Married, no children 3 Married, children Youngest under 6 Youngest 6 or over Table 7-3 MEAN AMOUNT SPENT ON VACATION TRIPS, BY LIFE CYCLE GROUPS All spending unlls Spending units that spent $100 or more on vacation trips in 1961 Mean expenditure Share of Percentage on vacation trips Mean expenditure aggregate expenditure distribution in 1961 Percentage on vacation trips (in per cent) $ $ tn to KM io Cn a o a (n K 45 years or over Married, children Married, no children 8 Single Co 0ther b Total Grand mean $100 $380 No children under 18 in spending unit. > Includes heads of spending units who are not now married or living with 6pouse but who have children. Also includes cases for which relevant data were not ascertained.

170 Vacation Trips 153 Table 7-4 NUMBER OF VACATION TRIPS TAKEN, BY AMOUNT SPENT ON ALL VACATION TRIPS (Percentage distribution of spending units that spent $100 or more on vacation trips) Number of vacat ion Amount spent in 1961 on vacation trips in 1961 Total One Two Three trips Four or more Per cei of sami $ $ $ $ $ $750 or more SU 1 s spending $100 or more on vacation trips

171 Survey of Consumer Finances Table 7-5 NUMBER OF VACATION TRIPS TAKEN, BY INCOME GROUPS AND PLACE OF RESIDENCE (Percentage distribution of spending units) Group characteristic Total Number of vacation trips taken in 1961 Four None 8 One Two Three or more 1961 SU income Under $ $ $ $ $10,000-14, $15,000 or more 100 Place of residence Central cities Of 12 largest SMSA's b 100 Of other SMSA's, 50,000 or over 100 Suburban areas c Of 12 largest SMSA's 100 Of other SMSA's, 50,000 or over 100 Adjacent areas** 100 Outlying areas e 100 All spending units * * * Less than one-half of one per cent. "Spending units that spent less than $100 on vacation trips in b Standard Metropolitan Statistical Area. c Suburban areas include all portions of metropolitan areas exclusive of the central cities. They also include any parts of the county in which the central city is located which are not urban. ^Adjacent areas include all areas (other than those classified as suburban) that lie within 50 miles of the central business district of a central city. e 0utlying areas include all territory which Is not part of a central city, a suburban area, or an adjacent area.

172 Vacation Trips 155 Table 7-6 NUMBER OF VACATION TRIPS TAKEN, BY EDUCATION AND LIFE CYCLE GROUPS (Percentage distribution of spending units) Number of vacation trips taken in 1961 Four Group characteristic Total None 3 One Two Three or more Education of SU head 8 years or less * Some high school High school graduate Some college * 2 College degree Life cycle stage of SU head Under age 45 Single * 1 Married, no children b Married, children Youngest under Youngest 6 or over * 45 years or over Married, children ^ Married, no children Head in labor force Head retired Single Head in labor force Head retired Other All spending units Less than one-half of one per cent. a Spending units that spent less than $100 on vacation trips in b No children under 18 in spending unit. Includes heads of spending units who are not now married or living with spouse but who have children. Also includes cases for which relevant data were not ascertained.

173 Table 7-7 MAXIMUM DISTANCE FROM HOME REACHED ON A VACATION TRIP, BY INCOME GROUPS (Percentage distribution of spending units that spent $100 or more on vacation trips) t\j 1961 spending unit income Under $3000 $ $ Total No trip or less Maximum distance from home reached on a vacation trip in 1961 (in miles) or more Distance N.A. Co TO 3, O o a Co s 3 «j -* a $ $10,000-14, $15,000 ior more All spending units Less than one-half of one per cent. 'Spending units that spent less than $100 on vacation trips in 1961.

174 Table 7-8 MAXIMUM DISTANCE FROM HOME REACHED OH A VACATION TRIP, BY AMOUNT SPENT ON THAT TRIP (Percentage distribution of spending units that spent $100 or more on vacation trips) Amount spent on farthest trip in 1961 Per cent of sample Total 249 or less Maximum distance from home reached on a vacation trip in 1961 (In miles) or more Distance N.A. Under $ * $ $ $500 or more * SU 1 s spending $100 or more on vacation trips Mean expenditure on vacation trips in $380 $230 $230 $250 $450 $870 $350 Share of aggregate expenditure (in per cent) Less than one-half of one per cent.

175 PART TWO CONSUMER ATTITUDES AND INCLINATIONS TO BUY

176 8 FIFTEEN YEARS OF EXPERIENCE IN THE MEASUREMENT OF CONSUMER EXPECTATIONS This chapter reproduces, in a slightly revised form, a paper presented at the annual meeting of the American Statistical Association at Minneapolis, Minnesota, in September The major contributors to this chapter are George Katona, Eva Mueller, Charles Lininger, Richard Kosobud, Jay Schmiedeskamp, and Wallace Wilson, Publications now in preparation will contain data supplementing those presented here. Shortly after the end of World War II, the Survey Research Center began to insert questions about consumer buying plans into nationwide surveys conducted at regular intervals with representative samples of American households. Experimentation with measurements of expectations about income, personal financial progress, business cycle prospects, and prices was also undertaken shortly after the end of the war, but systematic studies of these variables yielding comparable results were not begun until Thus data on buying intentions are now available for fifteen years and data on other expectations and the Center's Index of Consumer Attitudes are available for ten years. The predictive value of expressed attitudes The predictive value of various forms of expressed attitudes (plans, intentions, expectations, hopes, notions about the future) can be tested in a variety of ways. The most direct test consists of

177 Survey of Consumer Finances predicting changes that will occur over a given period of time in the buying intentions of consumers on the basis of a comparison with earlier surveys. Such predictions have been made on numerous occasions since the end of World War II (see 2, 3, 4, 5). 1 It may suffice to recall here two particularly striking instances: the increase in optimism and indications of rising demand for consumer durable goods evident in a survey conducted in the spring of 1954, and the weakening of optimism and indications of falling demand for durable goods evident in the spring of More systematic tests must be based on averages of numerous observations. At the time the Center's measures of consumers' expectations were first evaluated in 1955 (see 1), the number of observations was not sufficient to carry out reliable "time-series tests" in which changes in measures of expectations are compared with subsequent changes in aggregate demand. After a few years, such tests were made and reported (9, 10). A major purpose of this chapter is to present new data relating to 21 surveys conducted from 1952 through In contrast, there is the "individual test" where the performance of specific groups of individuals is compared. For instance, we may wish to compare the behavior of those who at an earlier time expressed plans to buy automobiles with those who did not express such plans. Such tests require at least two consecutive interviews with the same sample. Individual tests also have a long history (see 8), and new findings will be reported here. These forms of testing are based on the theory of psychological economics, which specifies how diverse attitudinal factors serve as intervening variables and influence behavior in interaction with environmental factors and personality factors. Yet, as is true of most empirical tests in the social sciences, theoretical constructs are not measured but rather proxy variables which only approximate them. The tests have numerous shortcomings, therefore. The basic assumption of psychological economics is that discretionary consumer demand is a function of both ability to buy and willingness to buy. a Ability to buy should be measured in terms of l Numbers in parentheses refer to items in the list of references at the end of this chapter. 2 This is not the place to do more than mention the problem arising from the interrelationship between theory and empirical research. The theory, specifying how motives, attitudes, and expectations affect the relationship between environmental changes and changes in behavior, stimulates research not only on the relationship between attitudes and behavior (the topic of this chapter) but also on the origin of changes in attitudes.

178 Measurement of Consumer Expectations 163 income and assets minus debts but is represented in the equations reported here by deflated income and its recent past change. The measures of attitudinal and expectational variables (willingness to buy) are taken irom the surveys. The measures of income and also of the dependent variable, consumer demand, are taken from Department of Commerce data. In this way we conduct a "strong test," using data from a small sample to explain aggregate data rather than explaining the purchases of the consumers in a sample by the intentions and expectations of the same sample. Unfortunately the statistics of the Department of Commerce fail to provide us with a measure of consumers' discretionary demand. We have therefore used the Department of Commerce series of purchases of consumer durable goods as a proxy variable, although this series includes numerous small and nondiscretionary durable goods (e.g., automobile parts) and excludes, of course, such discretionary expenditures as travel, vacation, and recreation. The first dependent variable studied in Table 8-A is durable consumer expenditures during the half-year following the survey (Department of Commerce, seasonally adjusted annual data) deflated and adjusted for changes in the number of families. 3 We find that disposable income in the half-year preceding the survey and the Index of Consumer Attitudes'* both make significant contributions to the explanation of fluctuations in spending on durable goods. Together they explain 76 per cent of the variance in durable goods spending. That buying intentions are less valuable in explaining these time-series equations is indicated by a comparison of equations 2 and 3 (Table 8-A). When income, attitudes, and buying intentions are used jointly to predict durable goods spending (equation 4), we find that the net contribution that buying intentions make to the forecast is not statistically significant. In equations 5 to 7 of Table 8-A a different dependent variable is used: deflated extensions of installment credit for automobiles and other consumer goods during the half-year following the survey. 3 Since the dependent variable expenditure on consumer durable goodsis expressed in current dollars, it had to be adjusted for price and population changes in order to make it comparable with Survey Research Center data on attitudes and intentions to buy which are expressed in percentages of families. At the beginning of each year, the Center also collects data on the amounts of expected expenditures on durables. The use of these data might improve the fit between the two series. ^The composition of the Index has been described in (6) and (7).

179 Survey of Consumer Finances Table 8-A FORECASTING EXPENDITURES FOR CONSUMER (Based on 21 Percentage of variance Forecasts for the half-year following the survey a explained Expenditures on consumer durable goods 1. D = 0.13(Y_!) (0.04) 2. D = 0.18(Y-i) A (0.03) (0.07) 3. D = 0.12(Y-i) B (0.04) (0.04) 4. D = O.ntY-i) A B (0.03) (0.08) (0.03) R 2 = 0.31 R 2 = 0.76 R 2 = R 2 = 0.78 Extensions on installment credit for cars and other durables 5. E = 0.14(Y_ t ) (0.04) 6. E = 0.18(Y-i) A (0.02) (0.06) 7. E = 0.13(Y-i) B (0.03) (0.07) R 2 = 0.45 R 2 = 0.77 R 2 = 0.66 Number of new automobiles sold 8. S = 0.27Y r (0.06) 9. S = 0.19Y r A C (0.07) (0.02) 10. S = 0.26Y r + O.OlBc (0.06) (0.01) 11. S = 0.19Y r A C B C (0.07) (0.02) (0.01) R 2 = 0.47 R 3 = 0.61 R 2 = R 2 = 0.62 All dollar amounts are deflated for price changes and for changes in the number of families. The figures in parentheses are the standard errors of the coefficients.

180 Measurement of Consumer Expectations 165 DURABLE GOODS BY ATTITUDES AND FINANCIAL VARIABLES surveys, ) Legend A = Survey Research Center Index of Consumer Attitudes (6 questions). A c = Survey Research Center Index of Consumer Attitudes modified to include two questions on attitudes toward automobile market. (One standard error of the difference between two measures of A is 1.3; see "Variances for Indexes from Complex Samples," by Leslie Kish. Proceedings of the Social Statistics Section of the American Statistical Association, Minneapolis, 1962.) B = Survey Research Center Index of Buying Intentions. B c = Buying intentions for cars. D E S = Deflated consumer durable goods expenditures during the halfyear following the survey (Department of Commerce, seasonally adjusted annual data). = Deflated quarterly extensions of installment credit for automobiles and other consumer goods during the half-year following the survey (seasonally adjusted data). = Average annual rate of new car sales (number of automobiles) during the half-year following the survey (seasonally adjusted data). Y_i= Deflated disposable personal income during half-year preceding the survey (Department of Commerce). Y r = The ratio of current deflated disposable income to income two quarters earlier.

181 Survey of Consumer Finances This variable is highly correlated with sales of durable goods and it is therefore not surprising that the results are similar to those obtained in equations 1 to 3. Income and attitudes again show a highly significant relationship to the dependent variable. The hypothesis that consumer confidence and optimism affect people's willingness to incur financial obligations is supported by the impressive correlation between the Index and extensions of installment credit. Equations 8 to 11 in Table 8-A represent an attempt to use the attitudinal data to forecast the number of new automobiles sold during the half-year following the survey (adjusted for changes in the number of families). 5 Income level, though related to total spending on durable goods, contributes almost nothing to the explanation of the number of new cars sold in the half-year following the survey. In this case, income change over the half-year preceding the survey has more explanatory power. The Index of Consumer Attitudes again makes a significant contribution to the forecast. These findings justify the conclusion that data on attitudes and expectations, used jointly with data on income, explain a substantial proportion of fluctuations in discretionary consumer expenditures.* Thus the basic propositions of psychological economics are supported. The available measurements appear useful, even though the Index of Consumer Attitudes in its present additive and unweighted form must be considered only a first crude step. The rather poor showing of the buying intentions component in time-series regressions may be misleading. For automobiles in particular, buying intentions require seasonal adjustment. We do "Data on the number of automobiles sold, in contrast to the attitudinal data, include sales to business and government. 8 Similar findings of the Survey Research Center have been criticized on the grounds that the impact of attitudes should not be compared with the impact of income since most economists no longer believe that the level and changes of measured income are the major factors explaining consumer behavior. No doubt regression equations making use of several additional financial variables such as changes in liquid assets, debts, inventories, and prices could be constructed to explain a BOmewhat larger share of demand fluctuations than income variables alone. Some experience along these lines indicates that even in such a system of structural equations, attitudinal variables improve ability to forecast. The predictive value of long-run expectations that might be used as proxy variables for permanent or lifetime income is now being studied. It should be noted in this connection that according to our findings the importance of "measured income" in influencing consumer demand should not be underestimated.

182 Measurement of Consumer Expectations 167 not yet have sufficient data for the various seasons of the automobile year to make such adjustments. On the other hand, the poor showing; of buying intentions in these equations should not be attributed to sampling error resulting from the use of a small sample. If larger samples were used, both the size of the sampling error and the proportion of the variance left unexplained would be reduced, but there would be no appreciable change in the basic relationships revealed by the equations. Fulfillment of buying intentions It has been repeatedly shown in the past that people who expressed intentions tobuy an automobile actually bought one in a subsequent period much more frequently than people who had said they did not expect to buy an automobile. Lininger, Mueller, and Wyss (8) reported that in a panel of respondents interviewed by the Center in , 60 per cent of the intenders realized their intentions to buy automobiles, whereas only 21 per cent of the nonintenders bought automobiles. New data were obtained when the Survey Research Center interviewed a representative sample early in 1960 and reinterviewed the same sample early in 1961 and early in The date for the year 1960 (see Table 8-B) show these proportions as 58 and 20 per cent, respectively, and are therefore very similar to the previous data. The data for the year 1961 (52 and 21 per cent, respectively) show fewer realizations of intentions. 8 To these two measures (proportions of intenders realizing intentions and proportion of nonintenders buying cars),a third must be added; the proportion of buyers who intended to buy. The number of those who express intentions to buy (the denominator in the first measure) is always much smaller than the number of those who do not express an intention (the denominator of the second measure). Therefore, of all those who purchased an automobile during any given year only a minority (33 per cent in 1960 and 23 per cent in 1961) expressed intentions to buy at the beginning of that year. Only respondents who did not move were reinterviewed. Panel losses also detracted from the representativeness of the sample. B It is a somewhat more complex matter to prepare tabulations separately for new and used cars because a sizable proportion of units that had expected to buy a new car bought a used car and vice versa, ln addition, some would-be car buyers had not decided whether they would buy a new or a used car.

183 Survey of Consumer Finances Table 8-B REALIZATION OF INTENTIONS TO BUY Identical spending units a Bi/I (proportion of intenders who bought) B n /NI (proportion of nonintenders who bought) Bj/B (proportion of car buyers who intended to buy) First quarter Second quarter Third quarter Fourth quarter Number of cases in panel a A panel of respondents was interviewed early in 1960, early in 1961, and early in To compute measures in first column, buying intentions for the next 12 months were determined early in 1960 and purchases early in 1961; to compute measures in second column, buying intentions for the next 12 months were determined early in 1961 and purchases early in ^The percentages are averages of 1960 and 1961 data for realization of intentions to buy automobiles. c The question asked in early 1961 (first reinterview) and early 1962 (second reinterview) was: "Are you people making as much money as you were a year ago, or more, or less?"

184 Measurement of Consumer Expectations 169 AUTOMOBILES, BY INCOME GROUPS AND INCOME CHANGE Under $3000 Spending unit income 0 $ $7500 or more Making more Income compared with a year ago b > c Making the same Making less I - Number expressing intentions to buy ("will" or "probably will" buy a car). NI - Number expressing no intentions to buy ("will not buy acar"). (People who said that they "possibly will buy a car" or that they "might buy a car" are omitted from the tabulation). Bi - Number intending and buying cars. B n - Number not intending and buying cars. B - Number buying cars (= Bi + Bn).

185 Survey of Consumer Finances When the same data are computed for certain income groups rather than for all consumers, the performance of buying intentions in predicting subsequent purchases appears in a more favorable light (Table 8-B). People with incomes of $3000 or more realize intentions to buy automobiles much more frequently than those with lower incomes. When automobile purchases during a six-month period rather than a twelve-month period after the expression of intentions are considered, the proportion of cars bought that can be explained by previously expressed buying intentions (Bi/B) is higher (Table 8-B). Obviously, nine or even twelve months after having been asked about their expectations of buying an automobile many people who had honestly said that they did not expect to buy a car find themselves in a different situation. It does not follow, however, that asking for buying intentions for only six months would improve the predictive value of buying intentions. One of the factors relevant both for nonfulfillment of expressed intentions and for unplanned purchases is a change in personal financial condition. Among those who report income increases during the purchase year the fulfillment rate is much higher than among those whose income was unchanged or reduced (Table 8-B). Similarly, the proportion of unplanned purchases is highest among those with income increases. On the other hand, the new data do not confirm the assumption that unplanned purchases are higher than average among those whose total financial situation during the purchase year turned out to be more favorable than expected. The length of the planning period is related to expressed intentions. The proportion of nonintenders who reported that they had bought a new automobile with little or no advance planning was much larger than the proportion of intenders who did so (Table 8-C). There is no doubt that the study of the formation and meaning of buying intentions represents a worth-while undertaking. The usefulness of asking questions about buying intentions is also revealed in certain special circumstances. In the spring and summer of 1962, for example, the most common description of the economic trend was sluggish recovery. At the same time, however, consumer purchases of automobiles reached boom proportions that exceeded all previous levels except those of The Survey Research Center's Index of Consumer Attitudes, foreshadowing this development, registered a sizable advance up to the fall of 1961 and remained substantially stable during the following six months. As early as May 1961, data on intentions to buy automobiles indicated the gains in automobile purchases (see Table 11-15).

186 Measurement of Consumer Expectations 171 Table 8-C PLANNING PERIODS OF PURCHASERS OF NEW AUTOMOBILES, BY INTENTIONS TO BUY (Percentage distribution of new car purchasers) New car purchasers in 1960 Length of planning period a Planned to buy Did not plan to buy No planning, or less than two months Two to six months Seven months or longer Buy car regularly 6 1 Don't know, not ascertained 6 4 Total Early in 1961 it was determined in which month of 1960 respondents bought an automobile. Following this, respondents were asked, "How long before you bought the car had you planned to buy a car at that time?" a These references to recent economic trends may serve to remind us that each business cycle is a unique phenomenon. It follows that time-series tests which use the same predictor variables with the,same parameters to explain several different cycles should be supplemented by additional information about consumer reactions to current economic conditions and nonrepetitive events. 9 In the fall and winter of 1961 questions relating to automobile buying were of special significance. At other times attention had to be focussed on 9 Other shortcomings of time-series tests were discussed in a paper given before the American Statistical Association in 1960 (7). In calculating the regression equations, all observations are taken as equal. Yet cyclical turning points represent crucial times when good predictions are more important and errors in predictions more calamitous than at other times.

187 Survey of Consumer Finances other attitudinal data. If it were possible to determine for a given time which component of the Index of Consumer Attitudes (or which additional questions not included in the Index) deserve special attention, the predictive value of attitudes and expectations would be enhanced. The Survey Research Center therefore regularly studies perceptions of, attitudes toward, and reactions to new developments that have occurred prior to each of its quarterly surveys of attitudes and expectations. Survey methods Among the survey questions asked in addition to those incorporated in the Index, those of particular importance are: 1. Reason questions. Following each attitudinal question we ask, "Why do you think so?" or "Why do you say so?" 2. Questions about information or news heard recently. The answers make it possible to differentiate between periods in which economic news was frequently reported and salient and those in which it was not, and between periods in which favorable or unfavorable news predominated. 3. Newly formulated topical questions. For example, questions were asked in 1957 about interest rates, in 1960 about the presidential election, and in 1962 about what happened in the stock market and the perceived significance of the stock market decline. These and related questions serve to improve the predictive value of the Center's data and reflect a basic feature of the Center's methodology, namely, a combination of repeated survey questions with flexibility in question formulation. The methods used by the Survey Research Center maybe summarized as follows: 1. Use of a different representative sample in each survey, except for occasional reinterview studies. 2. Careful training of interviewers who are capable of inducing respondents to give detailed answers. 3. Hour-long personal interviews with respondents with whom rapport has been established. The interviews for each survey are conducted over a five-week period. Four surveys are conducted each year, in February, May, August, and November.

188 Measurement of Consumer Expectations Fixed-question and free-answer method of interviewing: The respondents answer in their own words and the interviewers write down the answers as nearly verbatim as possible. In studying attitudes, questions that can be answered so simply that only check marks need to be recorded are avoided. Broad questions are asked first and are subsequently narrowed down (see, for example, the questions listed under Table 11-15). 5. Use of an extensive set of questions on attitudes, expectations, and plans. "Why" questions follow the attitudinal questions. Additional information is thereby obtained and the first answer received is better understood (sometimes it is even modified). 6. Completion of analysis within ten days after the end of interviewing and prompt publication of the major results of each survey. Survey findings are a function of the methods used, and different survey organizations using different methods sometimes obtain different results. Nevertheless the influence of methods on findings is not sufficiently understood. Methodological research is urgently needed and it is to be greatly regretted that there have been very few exact studies comparing results obtained under experimentally varied conditions. 10 It is fitting therefore to close with a list of methodological problems which require clarification: 1. The influence of interviewer training and interviewer set on the response. 2. The influence of the wording of questions on the response, including an analysis of the impact of the context and an analysis of the difference between starting with a broader or narrower framework or a longer or shorter period of expectation. "Frequently in the recent past other organizations have taken over questions asked by the Survey Research Center and used them in different contexts or modified the wording slightly without bothering to find out how the changes affect the answers. Methodological studies are also needed when questions tested in personal interviews are used in mail or telephone interviews, Recently the Survey Research Center conducted a methodological study in which personal interviews were compared with telephone reinterviews. Some important differences were found in the responses to the two types of interviewing (see 11).

189 Survey of Consumer Finances 3. Who is the best respondent for different kinds of questions, the head of the family (the husband) or the wife? 4. Over how long a period should the interviews be spread? Arguments for making the interviewing period as short as possible need hardly be mentioned here. There exist, however, arguments in opposition to an interviewing period as short as one week. The influence of the events of the day upon answers received immediately after the news breaks may be different from the influence these same events exert on answers given in the following weeks and months. Some averaging of news and lengthening of interviewing periods may therefore be advantageous. 5. How long into the future does the predictive value of various expectations extend? It is to be hoped that funds will become available to carry out interorganizational studies along these lines.

190 Measurement of Consumer Expectations 175 REFERENCES 1. Consultant Committee. Consumer Survey Statistics. Washington, D.C.: Federal Reserve Board, Katona, George. Psychological Analysis of Economic Behavior. New York: McGraw-Hill Book Company, Katona, George. The Powerful Consumer. New York: McGraw-Hill Book Company, Katona, George, et al Survey of Consumer Finances. Ann Arbor, Michigan: Survey Research Center, Katona, George, Charles Lininger, James Morgan, and Eva Mueller Survey of Consumer Finances. Ann Arbor, Michigan: Survey Research Center, Katona, George, and Eva Mueller. Consumer Expectations, Ann Arbor, Michigan: Survey Research Center, Katona, George, and Eva Mueller. "The Function of Expectational and Motivational Data," Proceedings of the Business and Economic Statistics Section of the American Statistical Association, 1960, Lininger, Charles, Eva Mueller, and Hans Wyss. "Some Uses of Panel Studies in Forecasting the Automobile Market," proceedings of the Business and Economic Statistics Section of the American Statistical Association, 1957, Mueller, Eva. "Effects of Consumer Attitudes on Purchases," American Economic Review, XLVII (December 1957), Mueller, Eva. "Consumer Attitudes: Their Influence and Forecasting Value," in The Quality and Economic Significance of Anticipations Data, a report of the National Bureau of Economic Research, Princeton: Princeton University Press, Schmiedeskamp, Jay W. "Reinterviews by Telephone," Journal of Marketing, XXVI (January 1962),

191 9 THE OUTLOOK FOR CONSUMER DEMAND/ NOVEMBER 1961 AND FEBRUARY 1962 This chapter reproduces major parts of a report issued in December 1961 that summarized the findings of a survey conducted between October 30 and December 3, The survey consisted of two parts: 1) a new cross-section sample of about 1000 respondents, drawn by the traditional method and interviewed through personal visits, and 2) reinterviews over the telephone in order to obtain data on the change in the attitudes of identical people. Over 500 of the 1300 respondents interviewed in May-June 1961 were reinterviewed over the telephone concerning many (but not all) questions. Data obtained in both parts of the survey are presented here. Suitable adjustments have been made for the under representation of nontelephone owners which would have resulted if the findings of the two parts of the survey had simply been added. Several questions were inserted in the 1962 Survey of Consumer Finances to determine changes in consumer attitudes early in The report issued in February 1962 on the basis of survey findings is reproduced at the end of this chapter. Highlights In November 1961 the American people are. in general, aware of business recovery. Their replies to questions about recent developments and current conditions, including questions about the

192 Survey of Consumer Expectations extent of unemployment, indicate a sizable improvement in sentiment as compared to earlier measurements in But the degree of optimism with which consumers view the future has not increased during the period since August A survey conducted in May- June 1961 revealed some improvement in consumer sentiment over January-February 1961; a recheck of attitudes undertaken in August showed a somewhat greater improvement over June. Over-all. consumer expectations have not changed significantly from August to November. The American people are concerned about international developments. Only a small proportion think that a world war might break out in the near future, but uneasiness and anxiety about the international conflict have increased markedly. In reply to questions about business trends, personal financial expectations, and even their own buying plans, many people refer to the Berlin crisis, the Russian nuclear bomb tests, or to uncertainty about Russian plans. The two major news topics international conflict and business upturn are related in the minds of many people. Many consumers believe that the government has stepped up defense outlays because of the Russian threat and that increased defense expenditures have contributed to the business recovery. When a sizable group of people attributes favorable business conditions to international developments that are unfavorable and even threatening, the absence of a pronounced gain in consumer confidence is not surprising. During the past fifteen years the Survey Research Center has repeatedly asked representative samples of consumers how "the way things are going in the world the cold war and our relations with Russia are affecting business conditions here at home." With the exception of a period late in the Korean war ( ), the opinion that the cold war makes for bad times has been far more frequent than the opinion that it makes for good times. Recently the opinion that it makes for good times has gained in frequency; in November 1961 almost as many people speak of favorable as speak of unfavorable domestic economic effects of the cold war. Those who argue that the cold war is making for good times refer to increased government spending and increased employment primarily in terms of the recent past rather than as prospective developments. Those who believe that the cold war has unfavorable effects talk about the uncertainty which prevails. Some respondents assert that because of the current international tensions people feel insecure and hesitate to spend. Some of these people say that they are postponing purchase plans, especially plans to buy a house. The government deficits, of which most middle and upper income people

193 Outlook, November are aware, also make many people feel uneasy. In the opinion of many, these are not times in which one can confidently plan ahead. Answers to questions regarding recent changes in business conditions and in the financial situation of respondents are much more favorable in November than they were earlier in ) Many more people say that business conditions in November 1961 are better compared to those of a year ago than say they are worse. Most upper income people know of the business upturn. 2) Among business news heard recently and recalled during the interview, favorable news exceeds in frequency the unfavorable news. In November 1960 unfavorable news was mentioned more frequently; in May-June 1961 the two kinds of economic news were mentioned with equal frequency. 3) Far fewer people in November than earlier in 1961 report that there is sizable unemployment in their community. (This was found even though national unemployment rates published during the interviewing period did not show a decline!) 4) The ratio of those who say they are better off financially to those who say they are worse off has improved. The Index of Consumer Attitudes The Survey Research Center's Index of Consumer Attitudes (excluding buying intentions) was at 96.4 in November 1961 (fall 1956 = 100). This compares with 94.4 in May-June and 92.4 in January-February of There has been no change in the Index between August and November. The improvement since the beginning of the year is hardly spectacular. It should be noted, however, that during the last six months the attitudes and expectations of upper income consumers (families with incomes of $7500 a year or more) improved to a larger extent than those of middle or low income families. The Index in November 1961 is substantially lower than it was in The difference can be partly explained by the fact that long-range business expectations are less favorable than they were in the 1950's. In the mid-1950's the belief that prosperity is normal for the American economy was widely held. Since the 1958 recession a substantial group of people believe that good times alternate with periods of recession and unemployment. The absence of

194 Survey of Consumer Expectations exuberance in consumer sentiment derives in part from uncertainty about long-run trends. In studying the various types of consumer expectations, we find pronounced gains in the short-term business outlook and in intentions to buy automobiles in November 1961 as compared to six, nine, or twelve months ago. Practically all upper income people believe that there will be good times during the next twelve months. In November 1961 about 16 per cent of all families expected to buy a car during the next twelve months (and about 5 per cent more said they might buy a car); in May-June 1961 the respective percentages were 14 and 5; in January-February, 11 and 5. A study of attitudes toward automobile purchases indicates that automobile demand is one of the strong aspects of the current situation, although the data do not point toward boom conditions. On the other hand, inclinations to purchase one-family houses for owner occupancy appear to have been adversely affected by the international developments. It is well known that consumer demand increased during the few months prior to November The report on our August survey which spoke of a "decisive improvement in consumer confidence" and stated that "intentions to buy new cars show a rise of about 15 per cent over a year ago" appears to have gauged the direction of the trend correctly. The August report concluded with a reference to two areas of uncertainty: concern with unemployment and with international tensions. According to the findings of the November survey, uneasiness caused by the high level of unemployment seems to have lessened. As to international developments, there appear to be reasons for optimism if international tensions should ease in a period of rising incomes. Then, possibly, fewer people would associate international conflict and the business upturn. On the other hand, it must be kept in mind that, according to present indications, the consumer sector is not likely to provide a stimulus for an economic boom. International tensions Early in October 1961 when the questionnaire for the November survey was being prepared, the international crisis loomed large. In studying consumer sentiment the major questions were whether people expected the outbreak of a third world war, or intensification of tensions without war, or relaxation of world conflict, and how their expectations influenced their inclinations to spend and to save. It seemed possible that some people, at least, would expect

195 Outlook, November shortages to develop and react by stocking up on goods and buying in advance of needs. The survey findings indicate that such a reaction is very rare, if it exists at all. Even the small minority who fear an early outbreak of war do not react by rush buying. After the outbreak of the Korean war and subsequent military reversals, such reactions did take place, but not at present. We may begin by citing the most extreme answer received. Shortly after the Soviets exploded the 50-megaton bomb, one respondent said, "People are frightened by the news. People have a tendency, I know we do, not to buy or invest when the world may end soon, but we're trying not to panic and to keep on acting like ordinary." Although the expression "the world may end soon" did not recur in other interviews, there can be no doubt that the Russian testing program greatly impressed and even frightened many people. Respondents interviewed early in November constantly referred to the bombs but, as time went by, the references became less frequent. People spoke of Berlin and the Congo instead of the bombs and showed uneasiness, sometimes even anxiety, rather than fright. Respondents were asked specifically, toward the end of the interview, about their expectations of war. Answers to the question "How likely do you think it is that we are in for another big world war?" are tabulated in Table 9-A. Among high income people the proportion that considers the outbreak of war probable is lower than it is among people with lower incomes. In reply to a further question, only 9 per cent said that war is likely to break out within a year, and another 14 per cent said that it is likely to break out within two years. The possibility of shortages in consumer goods was specifically suggested in the following question: "Some people feel that because of the Berlin crisis there may be shortages in consumer goods; others think that we can have both guns and butter, in other words that we can have all that civilians and that the military needs. What do you think?" The majority, 60 per cent, replied that there will be no shortages or that they are unlikely because our economy is capable of supplying both military and civilian needs. At the other extreme, 18 per cent conceded that some shortages may occur; these people usually mentioned specific goods or industries. Before people were asked about the possibility of a third world war, they were asked their opinion of how the economy was reacting to recent international developments. This question was formulated in the same way during the Korean war and has often been repeated in subsequent surveys. Most of the time in the past the majority of the American people have said that the cold war and our relations

196 Survey of Consumer Expectations Table 9-A EXPECTATIONS OF WAR (Percentage distribution of families) Expectations of war as of November 1961 All families Very likely or probable 32 Chances are even 14 War is unlikely Don't know or couldn't guess Total 100 with Russia make for bad times. Good times are characterized by most people as times of rising standards of living, and, in the past, the majority of people did not believe that international tensions would contribute to such prospects. Only a minority responded in terms of defense outlays making wheels turn and bringing about higher employment. This was true not only during such incidents as the Suez crisis and Lebanon but also during most of the Korean war. Only toward the end of the Korean war was the opinion that the cold war makes for good times more frequent than the opposite opinion. In November 1960 the answers to the question about the economic effects of the cold war did not differ much from those obtained at earlier times. In November 1961, however, the distribution of answers changed. The proportion of those saying "bad times" is still somewhat larger than the proportion saying "good times," but the latter answers are much more frequent than they were a year ago. Among upper income people the opinion "good times" even exceeded the opinion "bad times." Most of the respondents who spoke of unfavorable effects of the international crisis referred to feelings of insecurity or to conditions of uncertainty. A sizable group specifically mentioned that people in general or themselves in particular hesitate to spend under current conditions. Planning ahead is difficult; one might better wait and see what will happen before one embarks on bigger projects. Do we have to conclude that at present people are divided, some having unfavorable and some favorable attitudes? This conclusion would not be justified. To be sure, a sizable group reports that because of the international crisis the government is spending

197 Outlook, November more money and therefore there are more jobs, (Only a few said that the building of fallout shelters makes for more jobs.) Yet most people explained this opinion by referring to recent happenings. In the words of one respondent: "During the last few months defense spending has made for good business." Many people discussed the favorable effects of international tensions on business in the past tense. One may say, then, that there are two widespread opinions about the economic effects of cold war: Some say that international tensions cause bad times and others that they make for temporary good times. These findings are reinforced by studying people's responses to questions about the government deficit. The inquiry began by asking respondents, "Do you happen to know whether the Federal government is now operating with a deficit?" Among all respondents 54 per cent answered in the affirmative (3 per cent said "no" and 43 per cent that they didn't know). The higher the income, the more frequent were the affirmative answers. Among people with annual incomes of $10,000 or more, 82 per cent said that the government operates with a deficit. To the next question about the effects of a deficit on business conditions, the answers were quite similar to those about the effects of international conflict on business. Among those who were sure that there is a deficit (about one-half of all respondents), 17 per cent spoke of favorable effects and 29 per cent of unfavorable effects on business conditions. The favorable effects were again explained in terms of more money spent or more people employed. Among the unfavorable effects, in addition to feelings of insecurity, it was fairly frequently mentioned that taxes will need to be raised or that inflation would ensue. The effects of the deficit appear to represent a problem which very many people find difficult to discuss. Among upper income people, answers such as "don't know" or "can't say" are usually rare and yet to the question about the effects of the current deficit on business conditions, the majority of these people gave such an answer (Table 9-B). Although a sizable group of people speak of favorable effects of a government deficit on business, the deficit remains in the minds of most people an unwelcome development. This is apparent from the fact that only a very small proportion of the American people appears to be in favor of their government going into debt. Two other highly unwelcome alternatives, raising taxes and spending less on domestic programs, are preferred by many more people (Table 9-C).

198 Survey of Consumer Expectations Table 9-B OPINIONS ABOUT THE EFFECTS OF THE FEDERAL DEFICIT ON BUSINESS (Percentage distribution of families with incomes of $7500 or more) Opinion about effects of deficit on business, as of November 1961 Families with incomes of $7500 or more Favorable effects 16 Unfavorable effects 25 Don't know, can't say whether effects are favorable or unfavorable 38 Don't know whether there is a deficit or whether it has any effect 21 Total 100 Most people think it probable that in the future the cold war will cost us more money than it has in the past. Under such circumstances three out of every ten people advocate raising taxes. No doubt a situation which makes such an unwelcome measure necessary does not bring about optimism. Information about business trends and unemployment The extent of awareness of upturn in business conditions is shown in Table The relation of the answer "business is better than a year ago" to the answer "business is worse than a year ago" is about as favorable in November 1961 as it has ever been. The change that has taken place since May-June 1961 is substantial. Upper income people are aware of the business upturn to a much larger extent than lower income people. It has been found in several surveys that the proportion of people able to recall news about favorable or unfavorable changes in 'All of the tables referred to in this chapter (except Tables 9-A, 9-B, 9-C, 9-D, 9-E, and 9-F) follow the text of Chapter 11.

199 Table 9-C Outlook, November OPINIONS ABOUT FINANCING INCREASED COLD WAR EXPENDITURES (Percentage distribution of families as of November 1961) Opinion about how government should finance increased cold war expenditures All families Families with incomes of $7500 or more Raise taxes Spend less on other things Raise taxes and spend less on other things 6 8 Go further into debt 4 5 Other combinations 1 2 Depends, don't know, not ascertained 11 8 Total The question was: "If the cold war with Russia should cost us more money during the next few years, do you think the government should raise taxes, or spend less on other things, or go further into debt?" business conditions is much higher in periods of recession than in good times. About 60 per cent of all respondents recalled some economic news in the spring of 1958 and 52 per cent in the spring of In November 1961 only 40 per cent did so, the same percentage as in the spring of During the few months prior to November 1961 the relation between favorable and unfavorable news reported also shifted and is indicative of people's awareness that business has turned upward. In May-June, when the improvement had great news value, reports about improvement in business were somewhat more frequent than in November. Interestingly, the proportion reporting that business is bad has not declined greatly from May-June to November. Among people with family incomes of $7500 or more, 29 per cent recalled favorable business news and 20 per cent unfavorable news; about one-half of them recalled no economic news at all.

200 Survey of Consumer Expectations Since concern with unemployment has been shown to have greatly affected consumer sentiment in the first half of 1961, the level of information regarding the unemployment currently prevailing requires attention. As can be seen in Table 11-5, 42 per cent of the respondents in November 1961 say that there is no unemployment in their community that they have heard of. In June 1961 only 27 per cent gave this answer. The shift in opinion is even larger than these percentages indicate because in June the proportion of respondents who said that many people rather than a few were unemployed was much larger than it is in November. The proportion of people who think that unemployment in their community has been decreasing exceeds the proportion who think that it is increasing. But the difference between the two proportions does not show an improvement from June to November. Similarly, expectations about unemployment have not shown a significant change for the better in the last six months. Yet many more people, both in June and in November, thought that in the next twelve months unemployment would decrease rather than increase. Economic outlook of consumers Answers to the question about expected business conditions during the next twelve months improved from February 1961 to June, and further from June to November (Table 11-6). The improvement was, however, far from substantial and the answers reflect less optimism than those given in February 1960 or in The explanations given for the expectations are worth studying. A substantial proportion of people (about 20 per cent of all respondents) attribute their opinion about good times during the next year to defense production, to the government taking measures to improve business conditions, or even to the threat of war. The relatively large proportion of people who express uncertainty about business conditions during the next twelve months explain their opinion most frequently by the threat of war or international tensions. The answers to the question about next year's business conditions are correlated with the answers to questions about unemployment as reported in Table Among those who say that many people are unemployed in their community, 43 per cent say that business conditions will be good during the next twelve months. Among those who know of no unemployment in their community, 75 per cent say so.

201 Outlook, November The improvement of people's economic outlook from June to November was more pronounced among upper income people than among lower income people, but even among upper income people optimism has not quite reached the level of late Long-range business expectations have not fluctuated much over the last year or two. The proportion of people who say that during the next five years there will be overwhelmingly good times and the proportion who say that there will be bad times have remained about the same in the last four surveys. During the winter of some reassurance could be derived from the stability of long-range expectations. It needs to be emphasized, however, that long-range expectations in November 1961 are much less favorable than they were in In those years (before the 1958 recession) most Americans were convinced of enduring good times. The problem of cyclical fluctuations and ever-recurring recessions had, in their opinion, been solved. The two recent recessions and the general awareness of the problem of unemployment have basically affected people's thinking. In this respect there are hardly any differences among income groups. Attitudes toward personal finances Throughout 1961 there has been a steady but modest improvement in people's attitudes toward their personal financial situations. These attitudes have now returned to approximately the same level as before the recession. The recent improvement has not, however, been large, because these attitudes did not deteriorate much during the last recession (less than during the recession of ). Consumers' attitudes about their personal financial situation have not regained the high levels of A higher proportion of people in November 1961 than in January-February 1961 say that they are better off now than they were a year earlier, while fewer say that they are worse off. Consistent with this finding, fewer people in November than in January- February 1961 say they are making less money than they were a year earlier. The proportion reporting increased incomes has remained quite steady since May One explanation for the gradual improvement in people's financial attitudes is to be found in answers to a question about financial worries. Fewer people in November than earlier in 1961 admit that they or their friends worry about how they will get along in the next year or so. The improvement can be accounted for by a

202 Survey of Consumer Expectations decrease in the frequency of worries about keeping or finding a job (Table 11-10). Furthermore, over half of all employed workers (other than those self-employed) see good chances of finding another job if they should lose the one they now hold. This is not an insignificant finding, because at the time of interview 15 per cent of wage-earning family heads were either unemployed or believed that there was a chance of their becoming unemployed during the next twelve months. When consumers are asked whether they expect to be in a better or a worse financial situation a year hence, their answers depend in part upon how they view their present situation. Optimism with respect to this question returned to pre-recession levels by early 1961, But there has been no improvement in this respect since that time (Table 11-9). It follows that many people do not expect further income increases or are doubtful about their prospects because of other reasons. The answers to a question about income expected in a few years have remained remarkably constant over the last two years. This is consistent with another finding that in recent years expectations of a lengthy recession or depression have been rare, and yet personal financial attitudes are not buoyant. Attitudes toward prices, market conditions, and debts During the last few months there were no substantial changes in people's notions about inflation. The absence of pronounced inflationary fears is in itself a good sign. In addition, insofar as there were some small changes in people's attitudes toward prices, they tended to be favorable changes. The proportion of people holding the opinion that the prices of household items and clothing have gone up during the past year rose steadily during the early and mid-1950's and reached its highest level in In 1958,1959, and the first half of i960, the proportion was fairly steady, fluctuating between 40 and 43 per cent. By November 1960 it had dropped to 36 per cent and by November 1961 to 34 per cent (Table 11-11). Price expectations for the near future showed a similar development. The proportion of people who believed that prices in general would rise during the next twelve months was higher in 1958 and 1959 than in 1960 and From May-June to November 1961 there has not been much change in how people view short-range prospects.

203 Outlook, November When respondents are asked what prices will do during the next five years, inflationary expectations appear to be as high in November 1961 as they have ever been. Yet, again, during the last few months opinions have not changed very much (Table 11-11). Most people expect inflation of a limited size and many people appear to have no clear reason in mind to which they would attribute their expectation of price increases. When people who say that prices will be higher five years from now are asked, "Why do you think so?", about two out of every five say that "prices have gone up in the past." After their price expectations had been determined, respondents were asked whether whatever they expected (rising prices, falling prices, or unchanged prices) would be to the good or to the bad. In the distribution of answers to this question there was an improvement from November 1960 to June 1961, and practically no change in the next six months (Table 11-12). Upper income people especially appear to be less troubled in November 1961 by shortterm inflationary prospects than they were a year earlier. People's evaluations of inflationary prospects are reflected in their opinions about different kinds of savings. For over ten years the Survey Research Center has asked representative samples about what "the wisest thing" would be for a man to do with money "over and above what he needs for his expenses." Should he "put it in a savings account, buy government savings bonds, invest it in real estate, or buy common stock?" Answers favoring putting the money into variable value investments rose sharply in earlier years, but in the last two years they have become slightly less frequent. Contrariwise, the frequency of mention of bank deposits and bonds as wise investments has increased during the last two years. Several recent surveys made by the Center have shown that hedging against inflation is not a major reason for the increased popularity of purchasing common stock. Many people have friends and colleagues who have fared well with common stock in the past; they expect further capital appreciation and satisfactory yields as well. Changes in people's evaluations of buying conditions for automobiles, houses, and major household appliances 3 are usually determined to a large extent by changes in attitudes toward prices and price expectations. It is not surprising, therefore, that there For a description of "Consumer Attitudes and the Housing Market," 3 see Psychological Research in Consumer Behavior, published by the Foundation for Research on Human Behavior, Ann Arbor, Michigan, January 1962.

204 Survey of Consumer Finances were no Large changes in attitudes toward buying conditions between May-June and November 1961 (Table 11-13). It is known from statistics compiled by the Federal Reserve Board that the aggregate installment debt outstanding declined over most of the year 1961 (debt repayments having exceeded new borrowing) and started to increase again in the fall. Preliminary data collected in the November 1961 survey indicate that the installment debt burden has changed very little from November After having found out how much, if anything, respondents owed, those with installment debt (less than half of all families) were asked whether "it would be a hardship for you to make larger monthly payments than you make now or would it be easy?" In replying to this question the majority of people explained at all times that it would be quite difficult for them to increase their monthly payments since they are paying at present as much as they can afford to pay. This means, obviously, that many people think of new installment purchases only when the old debt has been substantially reduced or repaid. This pattern is particularly true of lower and middle income families. Among upper income families a substantial proportion in November 1961 say that it would be easy for them to increase their monthly payments. Considering all debtors, 27 per cent in November 1961, as against 21 per cent in November 1960, say that it would be easy for them to make increased monthly payments (see Table 11-18). It appears, then, that the absence of an increase in the aggregate installment debt in a period of rising national income has definite implications: Many people are conscious of their improved ability to purchase goods on the installment plan. Attitudes toward automobile purchases Demand for automobiles represents one of the favorable aspects of the current situation. Expressed intentions to buy automobiles increased in frequency from a low point in January- February 1961 to May-June, continued to gain according to measurements in August, and had advanced further by November. The improvement up to August was largest in intentions to buy new cars; between August and November 1961 it extended to both new and used cars. In August 1961 intentions to buy new cars were about 15 per cent higher than they were a year earlier; the gain from November 1960 to November 1961 was small because the November 1960 measurement was unusually high. Answers to the question "Do you people expect to buy a car during the next twelve months or so?"

205 Outlook, November are shown in Table In the opinion of the Survey Research Center this is the crucial indicator because it included tentative plans of marginal buyers in addition to definite plans to be carried out during the next few months. Data on short-run definite plans hardly represent indications of incipient future trends. They usually reflect tendencies that are already known to exist from reports about automobile sales trends in the weeks prior to compiling the survey results, since definite plans rarely change in a fundamental way from one month to the next. To obtain indications of short-term prospects, the Survey Research Center continues its questioning by asking prospective buyers, "About when do you think you will buy this car?" In answer to this question, the reply "before the end of the year" or "quite soon" was obtained with much greater frequency than in November Strength of automobile demand is indicated by the fact that by far the greatest improvement in expressed intentions to buy from June to November 1961 occurred among families with incomes of $10,000 or more. The same is true of the improvement from November 1960 to November Upper income people accounted for a larger proportion of buying plans in November 1961 than in November Would-be buyers of new automobiles are also asked whether they are thinking of buying a regular-sized car, a compact car, or a foreign car. In 1959 and 1960 the proportion of those who thought of buying a regular-sized car declined substantially. It reached its low point in January-February 1961 at 60 per cent (some of the other 40 per cent said that they did not know as yet what kind of car they would buy). By June 1961 the proportion of those who spoke of buying a regular-sized car had risen to 66 per cent and by November 1961 to 70 per cent. Reactions to the new models are studied every fall. In November of 1959, 1960, and 1961 the proportion of people who thought that the new regular-sized models differed from the previous models did not change substantially. More interesting are the answers to the follow-up question which asks those who say that the new models differ from the previous ones, "In what ways do they differ?" In reply, some people refer favorably to the appearance or the performance of the new models or discuss mechanical changes and accessories. Some respondents make unfavorable comparisons. The relation of favorable to unfavorable references shows an improvement in 1961 compared with 1960 or 1959 (Table 9-D). Previous research indicates that buyers of new automobiles are quite price conscious. The impression that new car prices have

206 Survey of Consumer Finances Table 9-D ATTITUDES TOWARD NEW AUTOMOBILE MODELS (Percentage distribution of families) Attitude toward new models November 1959 November 1960 November 1961 Favorable Unfavorable No favorable or unfavorable references Total risen is not conducive to stimulating demand. The answers to the relevant question as obtained during the 1959, 1960, and 1961 are tabulated in Table 9-E. These data are fairly favorable since they show an increased awareness of price stability, but price expectations tabulated in Table 9-F point to a somewhat different trend. The currently expressed intentions to purchase automobiles appear particularly favorable when compared with expressed intentions to buy houses. The data on housing plans from the November 1961 survey are somewhat disappointing (Table 11-16). They are no doubt related to the remarks about postponement of major decisions in the current period of uncertainty. This is confirmed by an increase in the proportion of people who expect to buy or build a house in the year after the next one. Intentions to purchase household appliances show, in general, very small improvements over both June and November Most pronounced are the improvements in expected purchases of television sets.. The prospects of replacement demand in major appliances must be judged as quite favorable. THE OUTLOOK FOR CONSUMER DEMAND, FEBRUARY 1962 Highlights During the last few months confidence and optimism regarding economic trends have increased. The low point in the Survey

207 Table 9-E Outlook, February ATTITUDES TOWARD PRICES OF NEW AUTOMOBILES (Percentage distribution of families) Opinion about level of current new car prices compared to those June June November a year earlier Higher About the same Lower Uncertain Total The question was: "Now speaking of new cars, would you say it costs more or less to buy a new car now than a year ago, or that there is no change-considering new car prices, trade-in allowances, and discounts?" Research Center's measurements of consumer sentiment was reached during the winter of Since February 1961 the Index of Consumer Attitudes has registered a steady improvement, although each increase in the Index (from February to June, from June to November, and from November to February 1962) was small. The sum total of the improvement is impressive, and in February 1962 the Index has reached the top levels achieved between the 1958 and 1961 recessions but not the top levels of It was reported on the basis of the November 1961 survey that concern about international tensions (Russian nuclear bomb tests, Berlin, Congo) was inducing many people to abstain from making major financial commitments. The February 1962 findings indicate that concern about the cold war has lessened during the intervening three months. In discussing recent economic trends as well as economic prospects the American people referred to the international conflict much less frequently than they did in November Yet these uncertainties have not vanished. The same is true about concern with unemployment; it too has lessened but has not disappeared. With many people, inclinations to spend cautiously and

208 Survey of Consumer Finances Table 9-F EXPECTATIONS ABOUT AUTOMOBILE PRICES (Percentage distribution of families) Expectations about automobile prices November 1959 November 1960 November 1961 Will go up Will stay about the same Will go down Don't know, depends Total The question was: "Now about auto prices, what do you think they will do in the next twelve months or so?" to add to savings persist. But people on the whole are confident that good times are ahead for business. In addition, the proportion of people with income gains and the proportion expecting income gains have increased. Indications are that consumer demand for durable goods will be high during the next six to nine months but that it will not reach boom proportions. Demand for housing and appliances appears farthest from boom conditions, demand for automobiles closest. Distribution of income Consumer demand for durable goods is a function both of ability to buy and of willingness to buy. The most important factor determining ability to buy is, of course, current income. As is well known, total personal income increased steadily during the nine months preceding February Data from the 1962 Survey of Consumer Finances indicate that the distribution of personal income by size has remained favorable for large purchases. The year-toyear changes in the distribution of income are usually small and not statistically significant. According to data collected in January and February 1962, the proportion of spending units falling into low or low-middle income groups increased only slightly during the

209 Outlook, February recession of 1961; the proportion of spending units which receive incomes of $7500 or more was larger in 1961 than in These data, as presented in Table 1-1, represent averages for 1961; by the end of the year the proportion of high income people may have been still larger. The Index of Consumer Attitudes Changes in consumer willingness to buy cannot be determined by any one question since diverse changes in the environment may influence the attitudes of different population groups in different ways. Therefore the Survey Research Center asks many questions and constructs a summary measure of changes in consumer attitudes and inclinations to buy. In Table 11-1 this measure is presented in the form of an index for the last few years. One form of the Index contains attitudes and expectations toward personal financial conditions, general business conditions, and market conditions, while a second form also includes expressed intentions to buy. Both indices rose fairly steadily from early 1961 to early Some caution in interpreting these findings is indicated, however, because during the last few months the improvement in consumer sentiment appears to be least pronounced among high income people (families with annual incomes of $7500 or more). These people have in the past become optimistic much earlier than the middle and low income people. Intentions to buy Changes in expressed intentions to buy automobiles, houses, and major household appliances represent valuable data, even though inclinations to buy, particularly on the part of the marginal buyer, cannot be determined by this one measure alone because it represents a rather late intercept in the decision-making process. One difficulty with intentions to buy is that they appear to show seasonal variations, and experience is not extensive enough to permit reliable adjustment for such variations. Therefore in Table an annual series is presented from the Survey of Consumer Finances which is conducted in January and February of each year. Intentions to buy houses for owner occupancy early in 1962 were somewhat less frequent than in any of the preceding three years. The middle-most prospective buyer expected to spend

210 Survey of Consumer Finances approximately $15,000, a somewhat larger amount than in preceding years. Intentions to undertake improvements, additions, and repairs to homes (to an extent of spending more than $50), which were particularly low in January-February 1961, rose in 1962 to 1959 and 1960 levels. Intentions to purchase furniture or large household appliances, which also dropped sharply from early 1960 to early 1961, have not recovered their frequency of two and three years ago. When plans to buy furniture, television sets, or refrigerators are studied separately, the same picture emerges: buying plans are somewhat more frequent than a year ago but less frequent than two years ago. Of particular interest are the data about automobiles, both because of the size of that market and the variability of demand for cars. Expressed intentions to buy new automobiles show a pronounced increase in frequency from early 1961 to early The level of these intentions early in 1962, expressed in percentages of spending units, appears to be the highest since early Intentions to buy used automobiles are also more frequent than they were a year before. The median price that prospective buyers expected to pay for new automobiles shows a small increase from early 1961 to early 1962, the first increase since the introduction of compact cars (Table 11-14). In order to present a picture of the fluctuations of intentions to buy automobiles during the last twelve months, Table presents data from the quarterly surveys of the Survey Research Center. These data are expressed in percentages of family units. In addition, they differ from the annual data insofar as certain prospective buyers those who said that they might buy an automobile are included with half the frequency attributed to more definite planners. During most of the last few years, expressed intentions were relatively high at the time of the introduction of the new models in the fall, and sometimes even during the summer. Therefore the slight decline from November 1961 to January-February 1962 cannot be given great weight. Yet expressed intentions to buy new automobiles were somewhat higher in June 1961 and in August 1961 than in February 1962 (to be sure, the differences are not statistically significant), so that it is conceivable that inclinations to buy new cars have passed their peak. The rise in demand experienced in the fourth quarter of 1961 was foreshadowed by a sharp increase in intentions to buy automobiles from January 1961 to June and November In the studies of the Survey Research Center, questions about

211 Outlook, February intentions to buy automobiles are asked for "the next twelve months or so." In addition, would-be buyers are asked when they expect to buy. In January-February 1962, close to 40 per cent of those who planned to buy a new automobile thought that they would buy it during the first half of the year. Early in 1961 the same answer was given by a similar proportion of the would-be buyers (who were much less numerous in that year). General economic outlook Among the various components of the Survey Research Center's Index of Consumer Attitudes, questions relating to forthcoming business trends show the greatest improvement. That people were aware of improvement in business conditions had been demonstrated in May-June 1961, and in November 1961 answers to a question that asked for a comparison of current business conditions with those a year earlier were rather favorable. A further slight improvement occurred between November 1961 and February 1962 (Table 11-2). The great majority of consumers expect good times during the next twelve months. This indicator, lagging somewhat even as late as November 1961, now is close to peak levels. Most of the improvement between November 1961 and February 1962 resulted from changed expectations of lower and middle income people (Table 11-6). Long-range expectations regarding business trends have not changed much during the last year. They are much less favorable at present than they were in The relatively few people who do not expect good times during the next twelve months explain their opinions almost exclusively by referring to unemployment. This is in contrast to November 1961 when a sizable group mentioned international tensions. The reasons given in January-February 1962 for expecting good times during the next twelve months consist overwhelmingly of references to high employment, improving incomes and profits, and the like. In November 1961, about 21 per cent of the respondents spoke of government action and defense expenditures when asked why they expected good times to come. In February 1962 this proportion fell to 14 per cent. Attitudes toward personal finances The proportion of family units reporting that they are making

212 Survey of Consumer Finances more money in January-February 1962 than they were a year earlier shows a sizable increase over June and November 1961 in each income group. The increase in the proportion of those who say that they are financially better off than they were a year ago is somewhat less pronounced, especially since November (see Tables 11-8 and 11-9). There are people who, in spite of better earnings, do not feel better off. They often refer to temporary good times. Similarly, data about expected income show only a moderate improvement. And yet the current levels of evaluating progress in personal financial situations and of income expectations are close to the best recorded in the past fifteen years. Market conditions The proportion of people expecting prices to rise shows a small increase. This is a finding with unfavorable connotations because in February 1962, as in the past few years, attitudes toward price increases are overwhelmingly unfavorable and attitudes toward price stability are predominantly favorable. Changes in five-year price expectations are presented in Table Some years ago, such inflationary expectations were held primarily by upper income people; today, however, they are rather general and their frequency has tended to rise in all income groups. Thus consumers, even high income consumers, do not seem to share the opinion of those experts who assert that inflation no longer threatens. The questions asked about the future trend of prices refer to "the prices of the things you buy." When asked specifically to evaluate buying conditions for automobiles and household appliances, the frequency of favorable answers has increased during the last few months. In addition, an increasing proportion of people explain their opinions by saying that prices of automobiles and appliances are low or stable.

213 IO THE OUTLOOK FOR CONSUMER DEMAND/ MAY 1962 This chapter reproduces most of a report issued in June 1962 that summarized the findings of a nationwide sample survey conducted between April 23 and May 29, The survey was based on hour-long interviews with a cross-section of about 1300 families selected by probability methods. Highlights Consumer attitudes have shown stability over the past few months. The American people remain soberly optimistic and appear disposed to continue the high level of spending evident early in The outlook appears particularly favorable for the automobile market. In May 1962 the Center's Index of Consumer Attitudes is at the same level as it was in November 1961 but is slightly below the level of January - February This decline is so small that, when sampling variations are taken into account, it is appropriate to view the Index as having stayed on a plateau during the past six months. The over-all stability of the Index is the result of counterbalancing changes in two major areas of consumer sentiment. The satisfaction of consumers with their personal financial situations has improved since November Fewer people indicate that they have economic worries. The proportion of people who expect to be better off in another year is as high in May as it has been at any time in the past ten years. And even long-run personal financial expectations, which usually show great stability, have grown somewhat more optimistic in recent months. At the same time, people's expectations regarding business

214 Survey of Consumer Finances conditions in the coming year, which improved decidedly between November 1961 and January-February 1962, show some change for the worse since the beginning of the year. A very small deterioration has also occurred in attitudes toward long-term economic prospects. Evaluations of the business outlook are considerably more favorable in May 1962 than they were at the bottom of the recession, but now, as in November 1961, they are well below peak levels. The weakening of optimism about business prospects since January is particularly pronounced among people with family incomes of $7500 or more. This is the only income group that views business conditions less confidently than it did in November It is likely that the people in the upper income brackets are more sensitive to stock market news and that developments in the stock market account in part for the change in their attitudes. This may also be the group that is most aware of public discussion about the somewhat unsatisfactory strength, of the recovery. Although stock prices declined throughout the interviewing period, the major break in the market occurred near the close of interviewing. This may explain why only 3 per cent of the respondents spoke spontaneously of the drop in stock prices when discussing economic news they had recently heard. Direct questions on what people know about developments in the stock market and how they react to them were not included in the survey. Nevertheless, it is possible to compare interviews obtained early in the interviewing period with interviews taken late in May when people may have been more concerned about the stock market decline. These comparisons reveal only a slight deterioration in evaluations of business conditions in late May as against late April and early May. Even this limited impact of the market break on consumer confidence is likely to diminish during the coming months unless it is reinforced by further price declines. Answers to questions about the economic news that respondents have heard in the past few months show clearly that consumers are mindful of a number of unfavorable aspects of the business situation other than the decline in the stock market. Forty-five per cent of the people could recall some recent economic news: 28 per cent referred to unfavorable news and only 23 per cent to favorable news. Even excluding the 3 per cent who mentioned the decline in the stock market, references to adverse developments exceed references to favorable developments by a small margin. (The reverse was true in November 1961 when 21 per cent referred to unfavorable news and 26 percent to favorable developments.) In May

215 Outlook, May , just as in the fall and winter of , many people have heard of the high level of unemployment. Concern about international problems is less intense than it was in November 1961, yet uneasiness remains. The proportion of people who believe that the cold war is making for bad times continues to exceed the proportion who argue that defense production raises incomes and employment. More people than in November 1961 say they have heard or read that business is declining; occasionally reference is made to specific industries, particularly steel. The stabilization of steel prices was rarely mentioned, and in these few cases opinions regarding it were divided. People also spoke about labor problems, intense business competition, and the impact of automation on employment opportunities. Attitudes toward market conditions for major consumer goods were very favorable in November Evaluations of the automobile and housing market have improved slightly since then, whereas buying conditions for household goods are viewed in about the same way. Satisfaction with recent price trends for durable goods and houses accounts to a large extent for the judgment that this is "a good time to buy." Viewed as a whole, expressed buying intentions for major consumer goods exhibit no clear trend either up or down. Buying plans for new automobiles have been exceptionally frequent since May-June In January-February they dipped temporarily, but in May 1962 they were back at the high 1961 level. Plans to buy used automobiles are at the same level as a year ago but are somewhat lower than they were in the fall and winter of Plans to buy a house for owner occupancy are less frequent than they were in May 1961 and are less frequent than they have been in most recent spring surveys. The upper income group does not share in this decline, however. Intentions to make major home improvements remain at peak levels. Plans to purchase home appliances are now slightly higher than they were in May 1961 for most major appliances, but in most cases comparisons with earlier years are not favorable. Clearly there is an element of caution in consumer sentiment. Yet it should be emphasized that people evaluate their own financial situations favorably and are satisfied with buying conditions. Hence the sidewise movement of the Index of Consumer Attitudes should not be viewed as a signal of an impending deterioration of consumer confidence. Unless the flow of unfavorable economic and political news increases, the present state of consumer optimism points to a

216 Survey of Consumer Finances sustained high level of spending, particularly if personal incomes continue to rise gradually. It is evident, on the other hand, that the consumer is not in an exuberant frame of mind. There are no indications in the survey that people are disposed to upgrade their standard of living more rapidly in the period ahead than they did in the past few years. Thus the impetus to faster economic growth, sought by government and business, is not likely to come from consumers in the near future unless new stimuli alter their outlook. The Index of Consumer Attitudes From January-February 1962 to May 1962 the Survey Research Center's Index of Consumer Attitudes (Table 11-1), which combines the answers to six key attitudinal questions, declined from 98.7 to 96.8 (fall 1956 = 100). 1 Thus the gain of 2 percentage points which had occurred from November 1961 to January-February 1962 was erased during the next four months. Since the sampling error of the Index (at the 95 per cent confidence level) is close to 2 percentage points, we must conclude that no significant changes were registered by the Index between November 1961 and May An alternative form of the Index (which, in addition to the six attitudinal questions, includes questions about buying plans for houses and automobiles) rose by 3 percentage points from November 1961 to January- February 1962 and fell by the same amount from January-February to May The Index of Consumer Attitudes can also be computed separately for the major income groups. The downward tendency of the Index between January-February and May 1962 is somewhat more pronounced among people with family incomes of $7500 or more than among other income groups, but the difference is small. On the other hand, the buying plans component of the Index dropped less for upper income people than for those in the middle and lower income groups, because between November 1961 and May 1962 plans to buy houses rose in the top income brackets but declined in frequency among the rest of the population. The plateau maintained by the Index of Consumer Attitudes between November 1961 and May 1962 is well below the pe_ak levels *AU of the tables referred to in this chapter (except Tables 10-A and 10-B) follow the text of Chapter 11.

217 Outlook, May attained in but does not compare unfavorably with more recent highs reached by the Index. The finding that consumer confidence does not measure up to levels reached in is almost entirely the result of two component series: (1) expectations regarding business conditions in the coming year, and (2) the longterm economic outlook of consumers. The other major components of the Index are at or near 1956 levels. The reasons why consumers have evaluated economic prospects more cautiously in recent years than they did in the mid-1950's will be discussed below. Two growth factors must be kept in mind when movements of the Index are evaluated over a period of years. First, the number of households increases by about 2 per cent per year; from 1955 to 1962 it rose by 13 per cent. One would expect a substantial increase in consumer spending on that account alone. Secondly, the financial situation of consumers is a major determinant of consumer spending, along with attitudes. Real personal disposable income per household also rose by 13 per cent from early 1955 to early This change, too, makes for a rising trend in spending. Given the influence of household formation and changes in the financial situation of consumers, consumer spending may be boosted by optimistic attitudes or depressed by pessimistic attitudes. The Survey Research Center computes its Index of Consumer Attitudes as a means of summarizing changes in many diverse aspects of consumer sentiment. Any such summary measure cannot be more than a rough approximation. An examination of a variety of attitude measures and of the reasons consumers give for their opinions and expectations is much more revealing than a glance at the Index. Forecasting must be based on a full understanding of past and current developments, and such an understanding is enhanced by going beyond the six or eight questions in the Index and analyzing thoroughly changes in all attitudes measured and the reasons and explanations given by respondents. Attitudes toward personal finances Attitudes toward personal finances are undoubtedly of great importance as determinants of consumer willingness to spend. As Table 11-9 shows, the percentage of people who felt that they were better off than they were twelve months before rose from May to November 1961, whereas the proportion who felt that they were worse off declined. Six months later in May 1962 there was a further slight improvement in people's evaluations of recent changes in

218 Survey of Consumer Finances their financial situations. For American families as a whole these evaluations are as favorable in May 1962 as they have been at any time since In May families with incomes of $7500 or more, as usual, reported being better off more frequently than the lower and middle income groups. However, the upper income group shows no increase in the frequency of favorable responses to the question about recent changes in its financial situation nor are favorable responses at peak levels in that group. Most families explain improvement in their financial situations during the past year by referring to pay increases, better employment opportunities, and longer hours. Favorable attitudes toward personal finances seem to be reinforced by price stability or, more precisely, by the absence of the feeling that rising prices are reducing real income. Most of the time since early 1956, the percentage of families who felt that they were better off has fallen short of the percentage who reported income increases. In May 1962 this gap has virtually disappeared (Tables 11-8 and 11-9). Few people say that because they have accumulated more savings, they are better off than they were a year ago. Yet the proportion of families who indicated that they had saved was somewhat higher than in 1960 and 1961 (34 per cent as against 31 and 32 per cent in 1961 and 1960, respectively). The word "saving" is defined here as consumers see it, which means that mortgage, insurance, and other contractual payments are not considered, and an over-all judgment is made about accumulation of new financial reserves. When people were asked "How do you feel about the amount of money you now have saved up is it far too little, fairly satisfactory, fully adequate, or what?", 33 per cent expressed satisfaction and 33 per cent dissatisfaction. In 1960 the findings were less favorable: 25 per cent expressed satisfaction and 31 per cent dissatisfaction. The rest of the respondents either had no savings or did not give a clear answer to the question. A comparison of the 1960 and 1962 data suggests that the recent accumulation of liquid assets by consumers has contributed to their feeling of financial well-being. Yet, as in past years, many families are far from content with their savings performance and strive to save more. Motivations to save have shown very little change over the past six years, as is indicated by the figures in Table 10-A. The only significant change occurred in the felt need to save for children's education, which appears to be increasing. Answers to the question "Now looking ahead do you think that a year from now you people will be better off financially, or worse off, or just about the same as now?" usually show the highest

219 Table 10-A MAJOR REASON FOR SAVING (Per cent of all families) Outlook, May Reason for saving a Emergencies; rainy days Retirement Children's education; family affairs Buying a house Buying durable goods a Many respondents gave more than one reason for saving. proportion expecting to be better off early in a business recovery, when a fair number of people are below previous income peaks. The favorable distribution of answers to this question in May 1962, following a period of rising incomes, is therefore particularly noteworthy (Table 11-9). Optimism about the future also is evident in Table which shows that the percentage of people who say that they (or people like themselves) have worries about how they will get along financially is the lowest it has been in two years. Worries about job security, employment opportunities, expenses and bills have declined sharply since their recession peak in January- February Long-term financial expectations, which in recent years have responded very little to business fluctuations, did improve somewhat between November 1961 and May About 45 per cent of all families expect to be better off a few years from now; only 20 per cent are uncertain or expect to be worse off; the rest anticipate no change. Confidence in the future also is indicated by people's expectations regarding their standard of living: 46 per cent of all families expect to have a higher standard of living in five to ten years and 43 per cent expect the same standard of living. Very few people express uncertainty or expectations that their standard of living will worsen.

220 Survey of Consumer Finances Expectations regarding business conditions When prospects for the family's financial situation are judged in an optimistic manner, any uncertainties or qualifications that exist in consumers' minds tend to emerge in their discussions of economic conditions generally. In May 1962 such uncertainties were apparently more frequent than they were in January-February Judgments of current business conditions are predominantly favorable in May. Nevertheless, people are somewhat less confident in their short-term expectations in May than they were in January- February (Table 11-6). The change for the worse in people's economic outlook is most pronounced among families with incomes of $7500 or more. Yet it must be emphasized that in all income groups most people continue to believe that "good times" will prevail in the coming year. The term "good times" may cover a considerable range of business conditions. To sharpen the picture, an additional question was asked: "And how about a year from now, would you expect that in the country as a whole business conditions will be better or worse than they are at present, or just about the same?" The replies again indicate some weakening of optimism from January to May Between January and May 1962 long-term business expectations show a small decline in anticipations of "continuous good times" and a corresponding increase in the expectation of occasional mild recessions (Table 11-6). There has been no increase in the proportion of people who anticipate a serious depression. Probably more important than the small recent deterioration is the finding that throughout the past three years confidence in the long-term business outlook has been less widespread than it was in the mid- 1950's. Concern about the recurrence of recessions may account in part for the failure of consumers to lead the economy into a strong and sustained period of prosperity. In order to clarify people's views of business fluctuations, two direct questions were asked: "Do you think that something like the depression of the thirties is likely to happen again during the next five years or so? Why do you say so?" and "How about a recession and unemployment like we had in 1958 and in winter do you think triis might happen again? Why do you think so?" Table 11-7 indicates that less than 15 per cent of the American people believe that a serious depression will occur during the next five years or so. However, expectations of a milder recession are very common. Nearly half of all the respondents believe that another

221 Outlook, May moderate business downturn is in prospect. The distribution of answers to these two questions has remained practically unchanged during the past two years, but in May 1962 people tend to think of the next recession as being more remote than they did in May When those who did expect another recession were asked in May 1962 "About when might it come in your opinion?", only 22 per cent (compared with 31 per cent in May 1960) replied that it would probably happen within the next eighteen months. The majority of people had not thought about timing and could not answer this question. The belief that no major depression will take place is most frequently based on the conviction that government policy can be effective in forestalling depressions. The idea that "we (or business) have learned by experience to avoid depressions" was also expressed with some frequency. People found it much more difficult to explain their expectations of recurring recessions. Two common arguments were: "We've been having recessions from time to time" and "Jobs are not plentiful these days," but many people merely replied to the "why" probe: "I don't know." People*s reactions to recent economic news When expectations regarding business conditions change for the worse during a period of rising income and satisfaction with personal finances, one must assume that some adverse news has been transmitted to consumers by word-of-mouth or by the mass media. This seems to have been the case between November 1961 and May Table 11-3 shows the trend of answers to the question "During the last few months, have you heard of any favorable or unfavorable changes in business conditions? What did you hear?" There is some evidence that American consumers generally take good news for granted and show little awareness of it, except during the early stages of recovery from a business slump. Adverse developments are more likely to be "news" and are discussed and remembered. In November 1961 only 40 per cent of the respondents could recall any economic news, and good news was discussed somewhat more frequently than bad news. Six months later, in May 1962, the percentage of people who could recall some recent economic news was somewhat larger, and bad news was referred to more frequently than good news by a small margin. Many people cannot give a very specific account of the kind of economic news they have heard. In May 1962 many of the people

222 Survey of Consumer Finances who were aware of favorable news merely said that they had heard or read that business is better, that employment was increasing, or that unemployment was decreasing. Those who spoke of unfavorable news often gave equally general responses. Some respondents reported that specific industries or firms were experiencing declining profits or sales or a difficult competitive situation. Often these are industries or firms in which the respondent is employed or which are located where he lives. Such news, which is of some personal interest to the respondent or to people he knows, tends to be salient and spreads largely by word-of-mouth. Unemployment undoubtedly remains a source of concern to many people. Table 11-5 indicates that in May 1962 at least half of the respondents are aware of unemployment in their own community, and about a third report that many or quite a few people are involved. One in four believes that unemployment in his community has been increasing or has remained unchanged during the past few months. While adverse reports about unemployment diminished sharply from May to November 1961, no further decline occurred during the next six months. When people were asked "And now about the coming twelve months do you think that there will be more unemployment than now, about the same, or less?", about half of the respondents answered "the same." The group giving this reply probably included many people who had no clear-cut opinion. Of those who did anticipate a change, the proportion that expected a decline in unemployment was larger than the proportion expecting an increase. Yet the important finding again is that these expectations show no improvement from November 1961 to May Those who were of the opinion that unemployment will rise often referred to unfavorable developments in particular industries or to automation. When asked about the impact of the cold war on business conditions, about a third of the respondents in May 1962 expressed the belief that the cold war makes for "bad times" and a fourth that it makes for "good times." The rest said that it has no effect or that they were unable to judge its economic effects. The distribution of these answers is the same as it was in November The opinion that the cold war makes for bad times reflects to a large extent uneasiness about international tensions. It is not surprising that something that is bad in itself, that is a source of worry and concern, tends to be associated with bad times. Some respondents speak of "artificial" good times; some may feel that other desirable government programs suffer because of the need for defense outlays; still others see the possibility of tax increases, deficits, or inflation.

223 Outlook, May Only 3 per cent of people referred spontaneously to the stock market decline when asked about the economic news they had heard. The rollback of steel prices' occurred just before the survey went into the field and remained under discussion by public figures throughout the interviewing period. Yet very few people related the President's policy or the stabilization of steel prices itself to business prospects. Only about 3 per cent of people mentioned the steel case either when discussing economic news they had heard or when explaining their expectations for business conditions. In some cases they referred to it as a favorable development, in other cases as an unfavorable development. We must conclude that the stabilization of steel prices did not have any significant impact on the economic outlook.of consumers in May The findings regarding people's general economic expectations and economic information may be summarized by saying that the present American mood is sober, perhaps even cautious, because of three persistent concerns: the recurrence of recessions, the relatively high level of unemployment, and the cold war. Given this frame of mind, people are sensitive to bad news. Adverse developments in particular industries or localities, which may be of little importance in the over-all picture, receive attention and are remembered. It must be emphasized,however, that the words "sober" and "cautious" do not mean pessimistic. As the tables which follow Chapter 11 clearly show, the findings of the May 1962 survey do not resemble the data obtained at survey dates when a recession was imminent (in the fall of 1957 or the fall of 1960). Attitudes toward prices and buying conditions In recent months some business analysts have emphasized that inflation has been arrested during the last few years. The May 1962 survey shows that the general public does not share the view that price stabilization has been achieved. However, in contrast to some earlier periods, many people say that good buys are available or that durable goods are reasonably priced. And, as noted earlier, the feeling that rising prices detract from the family's financial welfare is at a low ebb. Attitudes toward prices are illustrated by Table People were first asked about the change in prices over the past year. In May 1962 the answer that prices have risen appears somewhat more frequently than it did in 1961 and is close to the level which prevailed throughout 1959 and It is interesting to note that in

224 Survey of Consumer Finances spite of the fact that the increase in consumer prices from May 1961 to May 1962 was negligible (about 1 per cent), nearly 40 per cent of people continue to say that prices have gone up. Also relevant is the finding that more than half of the respondents (about the same proportion as in May and November 1961) believe that the general price level will rise in the coming year. Many consumers have learned to expect some inflation every year, and neither the absence of major price advances in the recent period nor the President's action in the steel case seems to have altered their customary views. General price expectations appear to be heavily influenced by prices of food and other repetitive outlays. Price expectations for durable goods have been much less inflation-oriented in the past two years than general price expectations. During the past year the expectation that automobile prices will go up has become somewhat more frequent, although it is still low compared with 1956, 1957, and In May 1962, 35 per cent of consumers expected automobile prices to go up compared with the 55 per cent who expected the general price level to advance. Long-term price expectations also show that the majority of people expect inflationary tendencies in the economy to persist. The percentage of people who believe that prices will rise over the next five years or so has gradually increased over the past decade and has continued to inch upward during the last year (Table 11-11). By far the most frequent reply to the "why" probe was "prices have been going up for a long time it seems to be the trend." Only 1 per cent of the people referred to the steel price case as a reason for expecting stable prices. From the fall of 1960 to May 1962 there has been a pronounced upward trend in the opinion that this is "a good time to buy" and a corresponding decline in the opinion that it is a "bad time to buy." Improvement is evident in all three markets studied automobiles, houses, and household appliances. For all three classes of goods, evaluations of buying conditions are at or close to peak levels. As a rule the economically important group of families with incomes of $7500 or more views market conditions more favorably than other consumer groups. This continues to be true in May However, the upper income group does not show the improvement over May 1962 in attitudes toward market conditions that is evident in the lower and middle income brackets. Several considerations account for the increasingly favorable judgments of market conditions. During recessions many people argue that it is a bad time to buy because "people can't afford to spend." Over the past year the frequency of the contrary opinion

225 Outlook, May that people have the money to buy rose sharply. More important, complaints that prices of durable consumer goods are "too high" are relatively infrequent at present. A substantial group of people (about a fourth for each of the three classes of goods) go so far as to say that prices are reasonable or that prices are as low as they will be for some time. In addition many people speak favorably of the ample supply and attractive selection of automobiles, houses, and appliances available to buyers. We may conclude that widespread satisfaction in May 1962 with market conditions for automobiles, houses, and household goods will contribute toward consumer willingness to spend in the months to come. Plans to buy major durable goods and houses Plans to buy in May 1962 were influenced not only by favorable attitudes toward market conditions and personal finances but also by the more uncertain evaluations of business conditions. Expressed buying plans for automobiles point to continued strength in the automobile market, but plans to buy household goods and houses reflect some hesitancy. Reported intentions to buy new automobiles fell slightly in January 1962 but returned in May 1962 to the high level first apparent in May Plans to buy used automobiles are as frequent in May 1962 as they were a year earlier, but are somewhat lower than they were in the fall and winter of (Table 11-15). The strong showing of intentions to buy new automobiles in May 1962 is slightly qualified by the finding that in the important group of consumers whose family incomes are $7500 or more buying plans for new automobiles are somewhat lower than in November 1961 (although they are above the level of May 1961). On the optimistic side, an analysis of intentions to buy automobiles by income and ownership characteristics reveals that the high level of buying intentions during the past year results to a considerable extent from the shift of consumers into higher income groups rather than from unusually high planning rates within the various brackets. In addition the automobile market derives strength from the relatively active demand by the growing group of two-car families (Table 10-B). Both the shift toward higher income brackets and the growth of multiple car ownership are, of course, continuing trends that have favorable implications for the automobile market. Although plans to buy houses were lower in May 1962 than they

226 Survey of Consumer Finances Table 10-B INTENTIONS TO BUY AUTOMOBILES, BY OWNERSHIP GROUPS (Families expressing intentions as a percentage of all families in specified group) Families expressing intentions to buy an automobile a Ownership group May 1961 May 1962 Own no car (22%) b Own one car (58%) Own two or more cars (19%) a Families who reported they would or probably would buy, plus onehalf of those who said they might buy during the next twelve months. b Figures in parentheses indicate proportion of all families m each ownership category in May were in May 1961 and May 1959, Table does not give a wholly pessimistic picture regarding the housing market. Among upper income families, house buying plans are about as frequent as they were in May 1961; they compare unfavorably only with the record number of plans reported in May Intentions to make major home improvements were at peak levels in May They were expressed by one out of every five American families, a figure which underlines the great importance of this aspect of housing demand. Table shows the trend of intentions to buy major household appliances. Plans to buy all major appliances (except cooking ranges) are moderately above the level of May However, comparisons with earlier dates are unfavorable except in the case of clothes dryers. It would be wrong to infer from the rather stagnant demand for major home appliances that consumer demand in general is stagnant. The newer appliances would undoubtedly show a more favorable trend over time. As American families have become well-equipped with the standard home appliances, they have turned to the newer appliances and-to other discretionary expenditures. In May 1962,

227 Outlook, May per cent of families said they planned to take a vacation trip during the following twelve months. In some cases a vacation trip does not entail substantial expenses, for instance when it consists of a visit with relatives. However, vacations are clearly an important and growing component of discretionary consumer spending. Another such component is hobby and recreation expenditures, including hobby equipment {boats, cameras, power tools, sports equipment, etc.). In May 1962, 15 per cent of families thought they would increase their outlays on recreation and hobbies during the next twelve months, 74 per cent anticipated no change, and 10 per cent expected to spend less. This is a somewhat more favorable distribution than in November 1961; however, we do not yet know to what extent these answers are subject to seasonal variations. Possible consumer reactions to the stock market decline Consumer reactions to the stock market decline could be of two kinds: (1) stock owners who suffered losses might curtail their discretionary spending in the coming months, and (2) the stock market slump might have sufficiently unfavorable connotations to generate pessimism about business prospects regardless of whether people own stock or not. The May 1962 survey does not lend itself to a direct analysis of these problems. The largest slide in the market occurred on May 28, the day before the interviews were completed. Since stock ownership is highly concentrated, the proportion of the population who might have experienced substantial losses in the value of their stockholdings prior to May 28, 1962, must have been very small. It cannot be said, however, that these losses are negligible as far as consumer demand is concerned, since families with incomes of $10,000 or more contain a fair proportion of medium and large stockholders. Whether these people will spend less because of what has happened to their stock investments depends in part on the nature of their expectations. In order to throw light on the impact of the stock market decline on confidence and expectations, the attitudes expressed during the interviewing period by respondents in the upper income groups who owned stock were compared with those in the upper income groups who did not own stock. The comparisons show no consistent or significant differences in attitudes between the two groups. A second possible test of the influence of stock market news on people's attitudes is to compare attitudes that were expressed

228 Survey of Consumer Finances early in the interviewing period, in late April and early May, with those expressed in the last ten days of interviewing late in May. Since the market declined throughout the interviewing period and experienced a sharp drop on the day before the end of interviewing, any weakening of confidence should show up in these comparisons. We find only a slight deterioration in attitudes toward business conditions in late May as compared with late April. Finally, we should recall that only 3 per cent of the respondents referred spontaneously to the stock market when asked about economic news they had heard recently. It appears then that as of May the influence of the decline in the stock market on consumer confidence and expectations was small.

229 THE OUTLOOK FOR CONSUMER DEMAND, SEPTEMBER 1962 A nationwide sample interview survey was conducted between August 7 and September 9, The survey is based on hour-long interviews with a cross-section of about 1300 families selected by probability methods. A report issued in September 1962 is reproduced here. Highlights Between May and early September 1962, consumer attitudes and inclinations to buy have not undergone any substantial changes. A small decline has taken place in consumer confidence, continuing a trend which was first noticeable between February and May The latest reading of the Survey Research Center's Index of Consumer Attitudes is 95.0 as against 96.8 in May and 98.7 in February Yet intentions to purchase automobiles remain at a high level, auguring well for the sales of the new models that will soon be introduced. It is possible to interpret these findings in an optimistic manner. If an observer attributed great significance to the sharp decline in stock prices and to the widespread public discussion about the imminence of a recession, he should now feel relieved. Consumer sentiment and consumer demand have not been greatly influenced by the developments that took place during the late spring and summer of Consumers do not believe that a recession is imminent. Nor does the new survey provide any support to those who maintain that two consecutive good automobile years are not possible. But from the point of view of long-range trends, the new findings are far from comforting. Survey Research Center data obtained

230 Survey of Consumer Finances in 1961 and early 1962 correctly indicated that the recovery from the 1961 recession would be sluggish. Yet as early as May 1961, the data pointed toward near-boom conditions in automobile buying. It is now clear that the phase of recovery in consumer sentiment is over. This phase has been replaced by one of slow and gradual deterioration which began long before recovery had reached a fully satisfactory level. A comparison of trends in consumer mood during the last three business cycles indicates that the upturn from 1960 to 1962 was weaker and shorter than the upturns that followed the 1953 and 1958 recessions (see Chart 11-2). Almost one-half of the American consumers have heard of the decline in the stock market and one-fifth describe the developments in highly emotional terms (such as collapse, crash, and the like). The number of families whose wealth has been reduced by the losses in market values is much smaller because only one out of ten families holds stocks worth $2500 or more. Neither these stockholders nor other well-informed people have turned pessimistic. Stockholders overwhelmingly say that the losses they have suffered make no difference to them or are paper losses which do not influence their expenditures. Most Americans do not see a close connection between what happens in the stock market and what happens to the economy. They do not accept the notion that the stock market decline is a signal for an economic recession, and many even believe that stock prices will recover soon. Therefore the impact of the decline in the stock market on consumer confidence has been small. The trends revealed by the latest survey are far from uniform. This is in contrast to some other periods in which all the diverse measures of consumer attitudes, expectations, and intentions to buy pointed upward, or in which they all turned downward (in 1957 and 1960, for example). Let us list here both the favorable and the unfavorable indications. Favorable indications 1) Expectations regarding personal financial situations remain favorable. There was no deterioration in personal financial attitudes at all, and the proportion of upper income people reporting income increases and satisfaction with the trend in their financial affairs shows a sizable increase. 2) Intentions to purchase automobiles remained unchanged at a high level, although definite plans to buy new automobiles declined

231 Outlook, September slightly and plans to buy used automobiles and contingent plans increased somewhat. 3J The proportion of people expecting price increases decreased moderately. Consumers are, on the whole, satisfied with prices and market conditions. 4) The changes in the expectations of upper income people are at least as favorable as those of middle and low income people. Because upper income people read economic news most thoroughly, their resistance to recent pessimistic news is particularly noteworthy. Unfavorable indications 1) The proportion of people expecting good times during the next twelve months declined considerably between February and August When asked about the business conditions that would prevail during the next five years, a sharply increased proportion says that times will be bad. 2) The American people in general do not believe that the unemployment problem will be solved soon. In fact, the proportion of those who think that during the next twelve months the number of unemployed will increase exceeds the proportion of those who think that the number will decrease. 3) Concern with the cold war and the opinion that international tensions make for bad times persist among many consumers. Discretionary consumer demand is a function of both ability to buy and willingness to buy. Survey Research Center data on changes in willingness to buy must be studied jointly with Department of Commerce data on satisfactory trends in consumer incomes. In summary, then, the prospects are for good automobile sales during the fourth quarter of the year and for good Christmas sales in general. The consumer sector will not contribute to a recession during the next six or nine months. But the outlook for the rest of the year 1963 is clouded, and the data do not lend support to those who hope for a more rapid rate of growth of the American economy. The Index of Consumer Attitudes The Survey Research Center's Index of Consumer Attitudes and Inclinations to Buy is computed in two forms. One form reflects

232 Survey of Consumer Finances changes in consumer sentiment and excludes buying intentions. This Index has dropped from 98.7 in January-February to 96.8 in May and 95.0 in August-September The second form of the Index, which includes buying intentions, did not decline from May to September. According to recent calculations of sampling errors presented by Leslie Kish of the Survey Research Center at the September 1962 meeting of the American Statistical Association, one standard error of the difference between two values of the Index is 1.3, In May there was reason to assume that the sentiment of high income people had deteriorated to a larger extent than that of middle and low income people. During the period from May to September, this was not the case; if anything, the confidence of upper income people held up better than that of other consumers (see Table 11-A). The Index represents a crude measure which summarizes a variety of data. Although careful perusal of detailed data remains necessary, recent fluctuations of the Index reflect the over-all trends. When the trends are studied over a longer period (Table 11-1), it must be kept in mind that the Index, like all other attitude measures of the Center, is expressed in percentages of families. It does not reflect the increase in the population. During the last few years the number of households has been increasing by almost 2 per cent a year. In Chart 11-1, the Index of Consumer Attitudes is contrasted with sales of durable goods. Sales of durables have been deflated by increase in population as well as by increase in prices. These necessary steps of correction may not, however, have been extensive enough. The increase in the population has not been taken into consideration in Chart 11-2, in which changes in consumer sentiment following three recession lows are compared. Nevertheless, there can be no doubt about the major conclusion which emerges from a scrutiny of the chart: The improvement in consumer sentiment following the low point in February 1961 was less extensive and lasted for a shorter time than the improvement following February 1958 or that following December Thus evidence for the sluggishness of the recent recovery and the relatively low rate of growth in the discretionary expenditures of consumers is derived not only from data on consumer expenditures, but also from data on changes in consumer sentiment.

233 Table 11-A Outlook, September CONSUMER SENTIMENT AS REFLECTED BY THE INDEX OF CONSUMER ATTITUDES Index of Consumer Attitudes 3 - Jan.-Feb. May Aug.-Sept. Consumer sentiment of: All families Families with incomes of $7500 or more a Excluding buying intentions. Attitudes toward personal finances A quick glance at the various measures of attitudes toward personal finances reveals that there have been no changes at all from May to September In both months substantially the same proportion of all American families reported that they were making more money than they were a year before (Table 11-8); substantially the same proportion said that they were better off than they were a year before (Table 11-9); similar proportions expected to be better off a year hence (Table 11-9); and the proportions expressing worries about employment, income, expenses, and the like, also remained unchanged (Table 11-10). The decline of the stock market and the widespread public discussion of a threatening recession has not changed people's notions about how they themselves stand financially. This finding is strongly reinforced by further data. If the attitudes of any income group are influenced by the stock market or by publicity on economic matters, it is the upper income people. Yet the personal financial attitudes of upper income people improved from May to September, whereas those of lower income people deteriorated, resulting in over-all stability. Upper income people gained in income. In September 1962, among families with annual incomes of $7500 or more, the proportion reporting that they are making more than they were a year earlier has reached an all-time high (Table 11-8). The gain from May to September in the proportion of upper income people who say they are better off (Table 11-9) is similar in magnitude to

234 Survey of Consumer Finances the gain in the proportion of this group that reported increases in income. Only when expectations are studied do we find that.upper income people show no increase. There have been periods in the past when changes in incomes have not determined changes in personal financial attitudes. These were times when people were greatly concerned with rising prices. Inflation is a lesser concern at the present time, and the satisfaction with personal financial conditions represents one of the strong points of the current situation. Expectations regarding business conditions The changes in people's opinions about what has happened to business and how business conditions are expected to change contrast sharply with the changes in attitudes toward personal finances. Those who heard of worsening of economic conditions or of the threat of a recession in the near future represent a minority of the American people. But changes in the attitudes and expectations of a minority can affect the over-all distribution of consumer sentiment substantially. All data compiled from questions about attitudes toward business conditions or cyclical fluctuations show a deterioration from May to September, continuing a trend which began early in For many years the Survey Research Center has attached importance to answers to a question about the kind of economic news heard by people. During recession periods and even several months before recessions began, the proportion of people recalling unfavorable news has greatly exceeded the proportion recalling favorable news. Contrariwise, upswings are characterized by more people reporting favorable than unfavorable news. The sluggishness of the recovery from the recession is reflected in the finding that at no time during the last year or two did the proportion of people who had heard news about favorable changes in business conditions greatly exceed the proportion who had heard about unfavorable changes. In September 1962 the proportion of people that had heard unfavorable news about business conditions or unemployment greatly exceeds the proportion that had heard favorable economic news (Table 11-3). Among families with annual incomes of $7500 or more, the proportion hearing any news, particularly unfavorable news, is higher than among other income groups. When asked to compare present business conditions with those that prevailed a year ago, optimistic answers declined andpessimis-

235 Table 11 -B Outlook, September DIFFERENCE BETWEEN PROPORTION SAYING BUSINESS CONDITIONS ARE BETTER AND PROPORTION SAYING THEY ARE WORSE THAN A YEAR EARLIER Interviewing period Per cent Spring 1958, low point of recession -61 Top of recovery, Early 1961, low point of recession -43 Top of recovery, February May August-September tic answers increased in frequency (Table 11-2). The series of figures in Table 11-B illustrates the deterioration of opinions but also indicates that in September 1962, in the opinion of the American people, a recession stage has not been reached. People's expectations about the business conditions that would prevail during the next twelve months show a similar deterioration from January to May and from May to September 1962 (Table 11-6). The decline from January to September 1962 is greater for high income people than for middle and low income people. Opinions about the business outlook during the next five years reflect a substantial change in attitudes. The proportion of optimists who say that over the next five years we can look forward to continuous good times or predominantly good times has declined very little according to the last four quarterly surveys. In past years most of the other respondents said either that they were uncertain about future developments or that they expected some unemployment. Only a small minority in past years thought that bad times with widespread unemployment would predominate during the next five years, but in August 1962 such pessimistic answers were given with much greater frequency than in previous surveys (by 27 per cent of all respondents, see Table 11-6). The increase in such answers is again particularly noteworthy among upper income people.

236 Survey of Consumer Finances A series of questions asked about unemployment yields a similar picture. People's reports about the amount of unemployment currently prevailing and about recent changes in unemployment were practically the same in August 1962 as in May 1962 and in November 1961 (at which time they showed a great improvement over May 1961; see Table 11-5). When people were asked whether in their opinion unemployment would increase or decrease in the coming twelve months, their replies were rather optimistic in Even in May 1962 somewhat more people thought that the rate of unemployment would decline than thought that it would increase. In August 1962, the answer "there will be more unemployment during the next twelve months" was given by more people than the answer "there will be less employment" (Table 11-5). People are uneasy about the economic outlook not only because of the widely assumed inability to reduce unemployment but also because of the cold war. The proportion of people who say that the cold war is making for bad times has increased in the course of Many people say that the cold war makes them feel insecure or makes it difficult for them to plan for the future. The best way to summarize people's notions about the shortrange economic outlook is to tabulate jointly answers to questions about people's attitudes toward business conditions a year earlier and the conditions they expect a year hence. Table 11-C shows that only a small minority (13 per cent of all respondents) believe that business conditions have improved during the last year and will improve further during the coming year. A still smaller minority (5 per cent) think that business conditions have deteriorated in the past year and will grow even worse in the coming year. The proportion of those who think that business conditions have deteriorated (23 per cent) is sizable and far exceeds the proportion of those who think that business conditions will deteriorate (8 per cent). People's outlook may be summarized by saying that, according to the modal opinion, things will remain as they are in late summer This is far from satisfactory because in September 1962 conditions are not viewed as good. But a recession in the near future is, in the opinion of most people, not in the cards. Direct questions asking people about the likelihood of a recession or depression confirm this impression (Table 11-7). Only a small minority (14 percent) say that "something like_ the depression of the thirties is likely to happen again during the next five years or so." Many more, namely 60 per cent of all respondents (the same proportion as in May 1962), say that a recession "like we had in 1958 and in winter " is likely to happen again. But when asked "About

237 Business conditions expected a year hence Table 11-C Outlook, September ATTITUDES TOWARD BUSINESS CONDITIONS A YEAR EARLIER AND A YEAR HENCE (Percentage distribution of families) Business conditions in August-September 1962 compared to a year earlier Better About the same Worse Uncertain Total Better About the same Worse * 8 Depends _2 _3 _3 1 9 Total Less than one-half of one per cent. when might the recession come?", only 12 per cent of all people (and 14 per cent of high income people) say that the recession will start this year or early next year. Even the proportion who think that the recession might start in the fall of 1963 is small. People are concerned with the threat of recession but do not believe that it is imminent. Demand for automobiles Expressed intentions to purchase automobiles remain at a high level. Because these data are subject to seasonal fluctuations, small changes in percentages from one quarter to the next should not be scrutinized closely. The data collected by the Survey Research Center showed substantial gains as early as May 1961 and thus signaled in advance the great success of the 1962 puto models. The fluctuations during the last year or two, shown in Table 11-15, permit one definite conclusion: according to people's plans in

238 Survey of Consumer Finances August-September 1962, a decline in the rate of sales of automobiles is not in sight. A more detailed study of the data indicates some decline in definite plans to purchase new automobiles. The proportion of people who say that they are not sure whether they will purchase a new or a used automobile has increased. The plans of people who hesitate between a new and a used automobile are obviously not as definite as the plans of people who are resolved to buy a new car. We also find that compared to a year ago prospective buyers are somewhat more frequent in the upper middle income groups, but less frequent among high income people. Therefore, there are grounds to evaluate the August-September data on expressed intentions to buy cars with some caution. In addition, of course, intentions and other expectations should be used jointly in assessing market prospects. Underlying strength of the automobile market is revealed by people's replies to a number of other survey questions. As can be seen in Table 11-13, the proportion of people who say that the next year will be a good time to buy automobiles has not changed from May to September. Compared with earlier years, the proportion is favorable. Satisfaction with the assortment of cars offered and especially with compact cars no longer seems to influence many people to look favorably at the market situation; compact cars and a wide variety of offerings are now taken for granted. (If anything, the new data reveal a slight tendency away from compacts toward preference for regular-sized cars.) Satisfaction with prices represents a major factor which strengthens people's willingness to buy. In the opinion of the majority of informed people, automobile prices have not changed much in the recent past and are not expected to change much in the near future. Expressed desires to become a two-car family and, generally, buying plans of two-car families constitute a sizable part of automobile demand. Prices and market conditions It has been reported in the preceding chapters that consumers on the whole did not share the opinion expressed by some experts that inflation is over, in the August-September survey some indications of lesser concern with inflation were obtained. As can be seen trom Table 11-11, replies obtained to three questions about prices uniformly show a smaller proportion of people than in May expressing inflationary sentiment. Fewer people say that prices have gone up recently, fewer say that prices will rise during the next twelve

239 Outlook, September months, and fewer say that prices will rise during the next five years. The differences from May to September are small, but they are consistent in all income groups. Whatever respondents say about recent past and expected price trends, they are asked whether in their opinion these trends are to the good or to the bad (Table 11-12). Consistently during the last few years and again in September 1962 about 12 per cent of those who think that prices are going up argue that this is to the good. On the other hand, approximately 70 per cent express the opinion that rising prices are bad for themselves and for the economy. Contrariwise, mast people who believe that prices have been stable and will remain stable think that this is to the good. The somewhat reduced concern about inflation is therefore to be viewed as a favorable factor in consumer sentiment. Consumers' answers to questions as to whether times are good or bad to purchase houses, automobiles, and other durable goods were rather favorable in May and remained unchanged in September (Table 11-13). Compared to earlier years a definite improvement is noticeable in these opinions and it is to be attributed to satisfaction with price trends. The frequency of opinion about unchanged prices of durables has increased and expressions of dissatisfaction with prices have become less frequent. Expressed intentions to buy houses and appliances likewise do not show substantial changes from May to September The proportion of families who plan to buy a house for owner occupancy during the next twelve months has increased slightly, especially among upper income people (Table 11-16). On the other hand, intentions to make major additions and repairs to homes have declined somewhat. A small improvement is evident in intentions to purchase television sets and refrigerators, and a small deterioration in intentions to buy washing machines, cooking ranges, and clothes dryers. Reactions to the stock market decline In one of the questions which the Survey Research Center has used for more than ten years, respondents are asked what in their opinion the wisest thing would be to do with money over and above that needed for expenses: put it in a savings account, buy government savings bonds, invest in real estate, or buy common stock. In reply to this question, in August 1962 fewer people expressed a preference for stocks than at any time during the past five years (Table 11-19). For instance, among respondents with incomes of

240 Survey of Consumer Finances over $3000 or more, 11 per cent "voted" for stocks as against 19 per cent in November 1961; among respondents with incomes of $7500 or more, 16 per cent against 26 per cent. The change in preferences might be related to the lessening of concern with inflation. This notion is supported by a small increase in preferences expressed for savings accounts but is contradicted by an increase in preferences for investing in real estate. There were some indications in the past that in times of bullish stock markets preferences for investment in stocks increase in frequency, while in times of bearish stock markets they decrease. Probably in the investment preferences expressed in August 1962 we find an effect of what has happened in the stock market during the past few months. A fairly substantial proportion of the American people have heard that stock prices have declined. Table 11-4 shows that 46 per cent of all people and 68 per cent of people with annual incomes of $10,000 or more knew of the decline in stock prices that has taken place during the past few months. A much smaller proportion described recent events in such emotional terms as collapse or crash or proved to be well-informed by saying that the market decline was very substantial. Less than 20 per cent of all respondents and one-third of the people with incomes of $10,000 or more fall in this category. The level of information of stockholders, without regard to their income, resembles that of high income people. About 20 per cent of all families own common stock at present and roughly one-half of these stockholders estimate that their holdings are worth $2500 or more. Among the smaller stockholders 29 per cent and among the larger stockholders 40 per cent describe the developments that occurred in the stock market late in May and during the following weeks as a collapse or a substantial decline. Respondents who had heard of a decline in stock prices were also asked about the reasons for the market decline. (The question was "Why do you think this happened?") About three out of five gave answers to this question, and among the answers the most frequent were: (1) stock prices declined because of government action (or the steel price crisis), (2) they declined because they had been too high, or (3) they declined because of speculation or manipulation. The next question read "Nobody can know for sure, but what do you think stock prices will do during the next few months?" Onehalf of all respondents, but only one-fifth of high income people, replied that they did not know. Among the rest there is a sizable

241 Table 11-D Outlook, September PERCEPTION OF EFFECT OF STOCK MARKET DECLINE ON PERSONAL FINANCES (Percentage distribution of stockholders) Degree of effect of stock market decline on personal finances A great effect Some effect Effect too small to matter No effect, since only paper losses No effect at all Don't know, not ascertained Total All stockholders Stockholders Stockholders with incomes with stocks of $10,000 worth $5000 or more or more group who said that stock prices would go up (and 20 percent of high income people thought that stock prices would return to their previous high levels), and a much larger gioup who thought that in the near future stock prices on the whole would remain about where they are in September The interesting finding is that only 4 per cent of all respondents and 6 per cent of high income people thought that stock prices would go down further. The most relevant question addressed to stockholders read as follows: "Has the recent decline in the stock market made a difference to you financially, or not much difference, or what?" The replies are tabulated in Table 11-D. It is conceivable that if this question had been asked during the weeks when stocks declined sharply, the answers obtained would have been somewhat different. The crucial fact remains, however, that looking back at the market performance from the vantage point

242 Survey of Consumer Finances of August-September 1962, the great majority of stockholders feel that the decline had no effect on their personal finances. There are of course people who feel differently, and a few of them were encountered even in the small sample study reported here. Some respondents told of having been wiped out, and more (less than 2 per cent of the stockholders, however) reported that as a result of their losses they were forced to spend less. The reference to stock developments representing nothing but paper losses for many stockholders is borne out by replies to another survey question. Only 12 per cent of all stockholders, and 15 per cent of stockholders with incomes $10,000 or more, report that they have sold any stock during the last few months. When the economic attitudes of stockholders are compared with those of people in similar financial situations who do not own stock, or when the economic attitudes of people informed about recent stock market developments are compared with those who are not informed, only small differences are found. The difference is the largest in expressions about the general economic outlook during the next five years. There are some stockholders who have turned pessimistic, as there are some who say that they are worse off now than they were a year ago. But the great majority of stockholders and of other people informed about the stock market think of business conditions just as other people do. They believe that what has happened in the stock market is not closely related to what happens to the economy.

243 Chart 111 Trend of Con turner Attitude* and Durable Goodi Sale* n T i i r T i l l I i i [ l l I I l I l i r~l [ 1 i l l i r Durable Goods Sales -hio D c Q rr (D o o 0_ 1ft l/l Q 90 Yd Index oi Consumer Attitudes 3 a. 80 Source*: Curable goods sales baaed oc U. S. Department at Commerce quarterly data, aeaaonally adjulted, and deflated for lncreaaea ID prlcen as well aa Ln DUBber Of fmalllea; fourth quarter, 1956 = 100. Index or Consumer Attitudes (excluding buying Intention*) is confuted from Survey Research Center data; average of fall,

244 Survey of Consumer Finances Table 11-1 INDEX OF CONSUMER ATTITUDES AND INCLINATIONS TO BUY (Fall 1956 = 100) Questions on buy ing inten t ions Included Excluded Date of study (8 auestions) 3 (6 questions) 1952 November-December January-February September-October January-February June September-October May-June October April-May August November-December May-June November-December January-February May-June October May-June \ Oc tober-novembe r 90.2 b 91. l 1960 January-February April-May August 93.3 C 95.5 C Oc tober-november January-February May-June August C C November January-February May August-September Based on responses to two questions about buying plans and six questions on attitudes and expectations. The composition of the Index is discussed in Chapter 9 of the 1960 Survey of Consumer Finances. ^Survey conducted during a steel strike. Estimated on the basis of attitude change of telephone owners. For a graphic presentation of data for January-February 1954 through August-September 1962, see Chart 11-1 in this book. b

245 Charts and Tables for Chapters 9, 10, and Table 11-2 CONSUMERS' EVALUATIONS OF PRESENT BUSINESS CONDITIONS AS COMPARED WITH THOSE A YEAR EARLIER (Percencage distribution of families) Business conditions now compared to a year ago May- June 1961 Nov All families Jan. - Feb May 1962 Aug.- Sept Better About the eame Worse Not ascertained, don 1 1 know, depends Total Business conditions now compared to a year aeo Upper income familiefi May- Jan. - June Nov. Feb ($7500 or more) May 1962 Aug. - Sept Better About the same Worse Not ascertained, don't know, depends 4 3 I 4 2 Total For data for January-February I960 through January-February 1961, see Table 8-2, 1961 Survey of Consumer Finances. The question was: "Would you say that at present business conditions are better or worse than they were a year ago?"

246 Survey of Consumer Finances Table 11-3 INFORMATION ON RECENT CHANGE IN BUSINESS CONDITIONS (Percentage distribution of families) Type of news heard about business conditions 1 May- June 1961 Nov May 1962 Aug.- Sept Favorable Kind of favorable news specified Business is better Employment has risen Increased demand Government action Personal reference 12 7 L 2 3 Unfavorable Kind of unfavorable news specified Business is bad Unemployment Lack of demand Inflation Personal reference Did not hear any news Less than one-half of one per cent. Adds to more than 100 per cent because some people both favorable and unfavorable news. reported hearing For data for May 1960 and October-November 1960, see Table 8-3, 1961 Survey of Consumer Finances. The questions were: "Have you heard of any favorable or unfavorable changes in business conditions during the last few months? What did you hear?"

247 Charts and -Tables for Chapters 9, 10, and Table 11-4 INFORMATION ABOUT RECENT STOCK MARKET DEVELOPMENTS (Percentage distribution of families) Information about recerit developments in the stock market Stocks have gone down a lot; dropped sharply; collapsed A ug _ 1962 family income Sept. Under $3000 $5000 $7500 $10, $ or more Stocks have gone down Stocks went down and then went back up Stocks have fluctuated Other information Don't know what stocks have done Not ascertained * * * * i \ Total Less than one-half of one per cent. The question was: "Do you happen to know what the stock market has done during the last few months?" (If yes) "Tell me about i t. "

248 Table 11-5 INFORMATION AND EXPECTATIONS ABOUT UNEMPLOYMENT, BY INCOME GROUPS (Percentage distribution of families) Informat ion about unemployment May- June 1961 All families 1962 family income Aug.- Nov. May Sept. Under $3000- $5000- $ $ $10,000 or more Has heard of unemployment Number of people affected Many Quite a few Only a few Not ascertained Changes in amount Increas ing No change Decreas ing Can't say Knows of no unemployment Uncertain 3 * * * 1 * * 1 Not ascertained * Total

249 Table 11-5 (continued) Changes in unemployment expected during next year May- June 1961 All Nov families Aug.- May Sept family income Under $3000- $5000- $7500- $10,000 $ or more More About the same Less Don't know; depends 12 Not ascertained Total *Lesa than one-half of one per cent. For data for October-November 1960, see Table 8-4, 1961 Survey of Consumer Finances. The questions were: "Is there any unemployment here in the [community name] area that you have heard of?" (If yes) "Does i t involve many people or just a few?" "Would you say unemployment here has been increasing or decreasing in the past few months, or was there no change?" "And how about the coming twelve months--do you think that there will be more unemployment than now, about the same, or less?"

250 Table 11-6 to CO BUSINESS CONDITIONS EXPECTED DURING THE NEXT TWELVE MONTHS, A YEAR HENCE, AND FOR THE NEXT FIVE YEARS (Percentage distribution of families) All families Upper income families ($7500 or more) May- Jan. - Aug. - May- Jan. - Aug.- Business conditions June Nov. Feb. May Sept. June Nov. Feb. May Sept. expected During next months twelve Good times Good in some ways, bad in others Uncerta in Bad times Not ascertained O o Total A year from now as compared to present Better About the same Worse a 8 Not ascertained, don't know Total

251 Table 11-6 (continued) All families Upper income f emil ies (S7500 or more) May- Jan. - Aug. - May- Jan. - Aug.- Business conditions June Nov. Feb. May Sept. June Nov. Feb. May Sept. expected For next five years Good times Good times, qua 1 if ied Some unemployment Uncertain Bad t lines, qua 1 i ied Bad times Not ascertained 8 8 it it 7 7 Total Cases for whom expectations were not ascertained are included with uncertain. For data for January-February 1960 through January-February 1961, see Table 8-5, 1961 Survey of Consumer Finances. For data for 1956 through 1959, see Tables 12-9, 12-10, and 12-11, 1960 Survey of Consumer Finances. The questions were: "Now turning to business conditions in the country as a whole, do you think that during the next twelve months we'll have good times financially, or bad times, or what?" "And how about a year from now, do you expect that in the country as a whole, business conditions will be better or worse than they are at present, or Just about the same?" "Looking ahead, which would you say is more likely that in the country as a whole we'll have continuous good times during the next five years or so, or thac we will have periods of widespread unemployment or depression, or what?"

252 Survey of Consumer Finances Table 11-7 OPINIONS ABOUT LIKELIHOOD OF DEPRESSION AND RECESSION DURING THE NEXT FIVE YEARS (Percentage distribution of families) Opinions about likelihood of: May May Aug. -Sep t Depression in the next five years Likely Not likely Uncertain Not ascertained Total Recurrence of recession in the next five years Like Ly Not likely Uncerta in Not ascertained Total The questions were: "Do you think that something like the depression of the thirties is likely to happen again during the next five years or so 1 " "How about a recession and unemployment like we had in 1958 and in winter ; do you think this might happen again?"

253 Table 11-8 RECENT INCOME CHANGE (Percentage distribution of families) Direction of income change May- June 1961 Nov All families Jan. - Feb. May Aug. Sept 1962 Upper income families ($7500 or more) May- Jan.- Aug.- June Nov. Feb. May Sept Increase No change Decrease Not ascertained Total Less than one-half of one per cent. For data for January-February I960 through January-February 1961, see Table 8-6, 1961 Survey of Consumer Finances. For data for 1956 through 1959, see Table 12-2, 1960 Survey of Consumer Finances. The question was: "Are you people making SB much money now as you were a year ago, or more or less?"

254 Table 11-9 CONSUMERS' EVALUATIONS OF THEIR FINANCIAL PROGRESS AND PROSPECTS (Percentage distribution of families) All families Upper income families ($7500 or more) May- Jan.- Aug.- May- Jan.- Aug.- Evaluation of June Nov. Feb. May Sept. June Nov. Feb. May Sept. financial situation Now as compared with a year earlier Better off Same Uncertain * Worse off Not ascertained * * * * * * * * * Total A year from now as compared to present Better off No change Uncertain Worse off Not ascertained * * 1 * 1 1 Total Less than one-half of one per cent. For data for January-February I960 through January-February 1961, see Table 8-7, 1961 Survey of Consumer Finances. For data for 1956 through 1959, see Tables 12-3 and 12-4, 1960 Survey of Consumer Finances. The questions were: "We are interested in how people are getting along financially these days. Would you say that you and your family are better off or worse off financially than you were a year ago?" "Now looking ahead--do you think that a year from now you people will be better off financially, or worse off, or just about the same as now?"

255 Charts and Tables for Chapters 9, 10, and Table FREQUENCY OF FINANCIAL WORRIES (Percentage distribution of families) of Frequency financial worries Jan.- Feb May- June 1961 Nov May 1962 Aug. Sept 1962 Has worries Concerning: employment (keeping or finding a job, job securi ty) income lank of adequate savings prices; cost of living expenses, bills (no reference to prices) debts health hous ing international war threat situation, business, stock market Has no worries Don't know, not ascertained Total * * * * * Less than one-half of one per cent. For data for January-February 1960 through October-November 1960, see Table 8-8, 1961 Survey of Consumer Finances. For data for 1956 through 1959, see Table 12-5, 1960 Survey of Consumer Finances. The questions were: "Do you think people around here have any worries about how they'll get along in the next year or so? I'm speaking of people like yourself and your friends." (If yes) "What kinds of things do you or they worry about?"

256 Table OPINIONS ABOUT PRICE CHANGES (Percentage distribution of families) to id. CO All families Upper inc ome families ($7500 or more) May- Jan. - Aug.- May- Jan.- Aug. - Opinion about June Nov. Feb. May Sept. June Nov. Feb. May Sept. price changes L During the past twelve months Went up # # Stayed the same Went down Uncerta in, not ascertained O o Total Expected during the next twelve months Will rise No change expected; or some rise and some fall Uncerta in, depends Will fall Expectations not ascertained Total

257 Table (continued) All families Upper income families ($7500 or more) May- Jan. - Aug.- May- Jan.- Aug. - Opinion about June Nov. Feb. May Sept. June Nov. Feb. May Sept. price changes Expected during the next five years Higher Same Lower Uncer t a in, dep ends on: War, defense, international s ituation Other things Expectations not ascerta ined Total Data not available. For data for January-February 1959 through January-February 1961 on price expectations during the year ahead and price level five years hence, see Table 8-9, 1961 Survey of Consumer Finances. For data for 1956 through 1959 on price levels expected five years hence, see Table 12-7, 1960 Survey of Consumer Finances. The questions were: "We'd like to know what's happened to prices of household items and clothing here in [community name] during the past year. Have they stayed about the same, gone up, or gone down?" "Now speaking of prices in general, I mean the prices of the things you buy--do you think they will go up in the next year or so, or go down, or stay where they are now?" "Looking further ahead--do you expect that, say, five years from now, prices of the things you buy will be higher than they are at present, lower, or just about the same?" "On what does i t depend in your opinion?"

258 Survey of Consumer Finances Table REACTIONS TO PROSPECTIVE PRICE DEVELOPMENTS, WITHIN PRICE EXPECTATIONS CPercentage distribution of families) Reaction May- Jan.- Aug.- to prospective June Nov. Feb. May Sept. price developments To the good Makes no difference Pro-con To the bad Don 1 t know; depends Don't know direction of prices Not ascertained Total Price expectations for the vear ahead Prices will Prices will Prices will eo UD be steadv eo down Reaction May- Aug. - May- Aug.- May- Aug.- to prospective June Sept. Junc Sept. June Sept. price developments To the good Makes no difference * * Pro-con To the bad Don't know; depends Not ascertained Total Leas than one-half of one per cent. For data for May 1960 through January-February 1961, see Table 8-10, 1961 Survey of Consumer Finances. For data for 1957 through 1959, see Table 12-8, 1960 Survey of Consumer Finances. The questions were: "Now speaking of prices in general, I mean the prices of the things you buy--do you think they will go up in the next year or so, or go down, or stay where they are now?" "Would you say that these [rising prices; falling prices; unchanged prices] would be to the good, or to the bad, or what?"

259 Table BUYING INTENTIONS AT THE BEGINNING OF CALENDAR YEARS Intentions to buy during next 12 months Spending units expressing intentions to buy* fas per cent of all SU's) Jan.-Feb Jan.-Feb. Jan.-Feb Median planned expenditure Jan.-Feb Jan.-Feb Jan.-Feb Houses'' # $14,210 $14,999 Home improvements and maintenance, c $480 $410 d $416 New automobiles e $2775 $2780 $2855 Used automobiles $1110 $1160 $802 Furniture and household appliances $345 $335 $325 Data not available. a Spending units that reported they would, probably would, or possibly would buy in survey year. "Based on data for nonfarm spending units only. c Includes planned expenditures of $50 or more. ^Revised figure. e Cases not ascertained whether new or used were apportioned equally between these categories. For data for selected years beginning In 1950 through 1959, see Table 11-1, 1960 Survey of Consumer Finances.

260 Table OPINIONS ABOUT BUYING CONDITIONS FOR AUTOMOBILES, HOUSES, AND HOUSEHOLD APPLIANCES (Percentage distribution of families) All families Upper inc ome families ($7500 or more) May- Jan.- Aug.- May- Jan. - Aug.- Opinion about June Nov. Feb. May Sept. June Nov. Feb. May Sept. buying conditions Automobiles to ch I? I R Good time to buy Uncertain; depends Bad time to buy Total Houses Good time to buy Uncertain; depends Bad time to buy Total

261 Table (continued) Opinion about buying conditions May- June 1961 Nov All families Jan. Feb. May Aug.- Sept Upper income families ($7500 or more) May- Jan.- Aug.- June Nov. Feb. May Sept Household appliances Good time to buy Uncertain; depends Bad time to buy Total For data for May I960 through January-February 1961, see Table 8-11, 1961 Survey of Consumer Finances. For data for 1955, 1957, and 1959, see Table 2-19, 1960 Survey of Consumer Finances. The questions were: "Speaking of the automobile market--do you think the next twelve months or so will be a good time or a bad time to buy a car?" "Generally speaking, do you think now is a good time or a bad time to buy a house?" "Now about things people buy for their house--i mean furniture, house furnishings, refrigerator, stove, TV, and things like that. Do you think now is a good or a bad time to buy such large household itema?"

262 Survey of Consumer Finances Table INTENTIONS TO BUY AUTOMOBILES IN THE NEXT TWELVE MONTHS (Families expressing intentions to buy as percentage of all families) Date of interview Per cent of all families Kind of automobile planning to buy automobiles Undecided whether in next 12 months 8 New Used new or used 1960 May January-February ].6 May-June November January-February 17.1 May 17.4 August-September Families who reported that during the next twelve months they would or probably would buy, plus one-half of those who said they might buy. The questions were: "Do you people expect to buy a car during the next twelve months or so? Does anyone else in the family expect to buy a car during the next twelve months?" (If yes) "Will i t be a new or used car?"

263 Charts and Tables for Chapters 9, 10, and Table SPECIAL EXPENDITURES PEOPLE WOULD LIKE TO MAKE IN THE NEXT TWELVE MONTHS (Per cent of all families) May- June Would like to spend on: 1961 Aug.- Nov. May Sept Durable goods House furnishings Trips, vacation House or cottage for own use 8 Luxuries, hobbies 4 Other; "many things" 2 Investments, savings 3 Not ascertained * No special expenditures desired * Less than one-half of one per cent. For data for May-June 1959 through October-November 1960, see Table 8-19, 1961 Survey of Consumer Finances. The question was: "Now about your wishes, are there any special expendlturea you would really like to make in the next twelve months? Anything you would like to spend money on--for example, a refrigerator; TV; cooking range; washing machine; repairs, improvements or additions to the house; or a car?"

264 Table INTENTIONS TO BUY HOUSING AND HOUSEHOLD APPLIANCES IN THE NEXT TWELVE MONTHS Buying plans House for owner (Families expressing intentions or desires as a percentage of all families) occupancy Will, or probably will, buy Might buy May- June All Nov families May Aug.- Sept May- June Upper income families ($7500 or more) Nov May Aug.- Sept to to <Ln O o 0) Home improvements, and repairs additions, Good or fair chance Slight or no chance Refrigerator Good or fair chance Slight or no chance 3 A Washing machine Good or fair chance Slight or no chance Cooking range Good or fair chance Slight or no chance

265 Table (continued) Upper income families All families ($7500 or more) May- Aug. - May- Aug.- June Nov. May Sept. June Nov. May Sept. Buying plans Television set Good or fair chance Slight or no chance Clothes dryer Good or fair chance Slight or no chance People who said they would like to buy the appliance, or to spend money on housing modifications, but who also said there was only a slight chance or no chance of their doing so. a ^Revised figures. For data for May 1960 and October-November 1960, see Table 8-17, 1961 Survey of Consumer Finances. For data for 1956 through 1959, see 1960 Survey of Consumer Finances, Table (expected expenditures for household appliances and housing modifications) and Table (intentions to buy houses). The questions were: "Do you people expect to buy or build a house for your own use during the next twelve months?" "Now about your wishes, are there any special expenditures you would really like to make in the next twelve months?" "Anything else you would like to spend money on--for example, a refrigerator; TV; cooking range; washing machine; repairs, improvement, or additions to the house; or a car?" "What are the chances that you will buy (spend money on) in the next twelve months? Would you say you're quite certain, there's a fair chance, a slight chance, or no chance at all?"

266 Survey of Consumer Finances Table OPINIONS ABOUT POSSIBILITY OF INCREASING MONTHLY INSTALLMENT PAYMENTS, BY INCOME GROUPS (Percentage distribution of families making monthly installment payments) Making larger monthly payments would be: Oct Nov All families 1961 family income 3 Nov May 1962 Under $3000 $ $ $7500 or more Easy Pro-con, don't know 1 2 I * Hard Not ascertained * 4 Total Less than one-half of one per cent. a 1961 family income as ascertained in May For data by income groups for October-November 1960, see Table 8-20, 1961 Survey of Consumer Finances. For data for October-November 1959, see Table 10-2, 1960 Survey of Consumer Finances. The question was: "Suppose you'd like to make more large purchases, would i t be a hardship for you to take care of larger monthly payments than you make now, or would It be easy?"

267 Charts and Tables for Chapters 9, 10, and Investment preference Table OPINIONS ABOUT WISEST PLACE TO INVEST MONEY (Percentage distribution of families) May-June Nov, Aug. -Sept Middle and upper income families ($3000 or more) Fixed value Bank deposits Bonds Both Variable value Stock Real estate Both Other combinations None of these * 1 1 Don't know ; not ascertained Total Upper income families only ($7500 or more) Fixed value Bank deposits Bonds Both Variable value Stock Real estate Both Other combinations None of these * 1 1 Don't know; not ascertained Total Less than one-half of one per cent. For data for 1955 through 1959, see Table 8-21, 1961 Survey of Consumer Finances- The question was: "Suppose a nan has some money over and above what he needs for his expenses. What do you think would be the wisest things for him to do with it--put it in a savings account, buy government savings bonds with i t, invest it in real estate, or buy common stock?"

268 16 I 14 Chart 11-2 Relative Gain* of Consumer Attitude* during Laat Three Economic Upturn* Feb to Oct * 112 O 0 0) 108 4) 106 in / / / / / Doc. D«1953 lo Oct Feb to Aug Months after Low Point Survey Research Center's Index of Consumer Attitudes (excluding buying Intentions). At each survey date the Index value le divided by its value at the start of the recovery and multiplied by 100.

269 12 ATTITUDES TOWARD TAX REDUCTION DURING the summer of 1962 President Kennedy proposed that income taxes be reduced. The problem was widely discussed in Congress, in the press, and over radio and television during the interviewing period for the August-September 1962 survey. Most of the publicity centered around the notion that in view of the threat of a recession, a tax cut should be enacted immediately. On August 13, 1962, President Kennedy in a television address took the position that a tax reduction was not needed in the fall of He announced that in January 1963 he would propose to Congress an across-the-board, top-to-bottom cut in both corporate and personal income taxes that would place billions of dollars in the hands of consumers. The Survey Research Center had studied the problem of attitudes toward a tax reduction in 1961 and during the recession of In the September and November 1962 surveys, several questions were devoted to the problem. Altogether in September and November 1962, approximately two-thirds of the respondents thought that the President's proposal was a good idea or expressed approval of the proposal. One out of five respondents disapproved of the proposal or thought it was a bad idea. The higher the income, the more frequent the opposition. Among people with family incomes of $10,000 or more, 26 per cent disapproved of the proposal, but among people with family incomes below $3000 only 14 per cent disapproved (Table 12-1). A similar question was asked in surveys conducted in the spring and fall of At that time, to be sure, the proposal could not be attributed to the President of the United States. The main difference between asking the question in 1961 and in 1962 consisted, no doubt, in the widespread publicity the idea of reducing taxes was receiving in In 1961 there was hardly any such publicity, al-

270 Survey of Consumer Finances though in order to elicit opinions on the issue the questions expressly referred to "discussion." As can be seen from Table 12-1 the attitudes of the American people toward tax reduction were considerably more favorable in 1962 than in This was true of all income groups, the change being most pronounced among high income people. Comprehension of issues The major function of survey research is to disclose the reasons behind people's opinions rather than simply to tabulate the extent of their approval or disapproval of a pending proposal. The first step toward understanding the considerations that shape people thinking is to find out something about their comprehension of the issues involved. It appears that in 1962 less than half of the respondents mentioned the connection between the proposal to reduce income taxes and economic developments (Table 12-2). The other respondents (who saw no connection) can be divided into three groups: (1) those who mentioned only selfish reasons for approving the proposal (for instance, "I like the proposal; I'd like to pay less taxes"), (2) those who simply said that taxes are too high, and finally.(3) those who could not explain why they were or were not in favor of the proposal. Two-thirds of the people with incomes below $3000 were in one of these groups. Proceeding upward on the income scale the combined frequency of these three groups declined, but they still included about 40 per cent of the people with family incomes of $10,000 or more. Respondents who linked the tax reduction proposal with economic matters can be divided into two groups: (1) those who favored the proposal, and (2) those who were against it. The second group was somewhat larger than the first, especially among upper income people. Reasons for opinions The reason most frequently given for favoring the proposal was that a tax cut is needed to raise purchasing power. Only 4 per cent said that the proposal is needed to overcome a recession or to reduce unemployment. Opposition to the tax cut proposal stems from two arguments. The first one concerns the need for funds for government expendi-

271 Attitudes Toward Tax Reduction 257 tures, 1 while the second, which is less frequent, concerns deficits. Some people called attention to the prevailing high defense expenditures; they believe that these or some other expenditure programs are so important that it is not possible to reduce taxes. Nine per cent of all the people and a somewhat larger percentage among the higher income groups expressed opposition to deficits. They were against the tax cut proposal because in their opinion the budget should be balanced or because deficits must be avoided. Opposition to the proposal based on a threat to the value of the dollar (gold outflow, balance of payments difficulties) is practically nonexistent. Some of the answers given in opposition to tax cuts are worth quoting verbatim. The answer "this is a bad idea; it jeopardizes national safety" exemplifies the extreme point of view according to which the government is unable to meet its vital obligations unless it takes in enough money in taxes. The notion that "we can't afford the tax cut" is expressed frequently: "Since we need money to fight the cold war, we can't afford the tax cut." "Due to Cuba, Berlin, the whole world crisis, we need more money than ever before. Taxes can't be cut. The money has to come from somewhere." It appears then that the connection between tax reduction and an increase in purchasing power is far from being fully understood. During World War II our surveys indicated that in the opinion of many people the government could not buy tanks and planes if the people did not buy war bonds. Many people still have similar erroneous notions. Therefore, if a tax cut is enacted, the government has the additional task of informing and educating the public about the reasons for the action and its probable effects. Proposed uses of money saved by a tax cut What would people do with the money saved through a reduction of income taxes? It is rather difficult to study this problem by the survey method. The interviewer must ask the respondent to express an opinion about what he would do at some future time under For a discussion of this issue, see the paper by Eva Mueller entitled "Public Attitudes Toward Fiscal Programs," to be published shortly in the Quarterly Journal of Economics.

272 Survey of Consumer Finances certain conditions which may never materialize and to which he may not have given any thought. Under such circumstances, one major finding of recent surveys by the Survey Research Center is not surprising: Different answers are obtained according to how the question is formulated. In the course of the last two years the problem has been presented to different representative samples in three ways. Method 1: What would most people do with a tax refund? In the spring as well as in the fall of 1961 the following question was asked: "Suppose the government returned some of the income taxes people have paid (let us say, an amount equal to one week's wages or salary); what do you think most people would do with such an unexpected tax refund?" In reply, close to 60 per cent of the respondents said that most people would spend the money, 17 per cent said that the money would be used to repay debts, and only 8 per cent said that people would save or invest the money. Method 2: What would respondents do with extra money? In May 1962 the following question was asked: "Suppose you had some extra money say an amount equal to one week's wages or salary (income) what would you do with this money?" In reply, 34 per cent said that they would spend the money on consumer goods, 14 per cent that they would use it to repay debts, and 44 per cent that they would save it or invest it. Method 3: What would respondents do with money from a tax reduction? Questions in September and November 1962 asked respondents how they would use money available from a tax reduction amounting to about 3 per cent of their annual income. The answers received did not differ greatly from the answers obtained by Method 2 (Table 12-3). The difference in the use of money attributed to others and to oneself may be explained in view of previous findings that many people consider saving a good and virtuous activity, while they are defensive about spending too much. It should also be noted that good intentions to save are not always carried out. When, for instance, expectations about saving money were studied, it was found that many more people predicted they would save next year than actually did. But there probably is another factor involved as well. Many people, and especially upper income people, do not have one single need that looms much larger than any other need. It is not easy for

273 Attitudes Toward Tax Reduction 259 these people to answer "I would spend the money on...." because the priority of different expenditures is not definitely established. In survey research in general, "don't know" replies are received much more frequently from low income people than from high income people, the latter being more familiar with the questions and having greater ability to verbalize. In this instance, however, people with family incomes of $10,000 or more gave the answer "don't know" most frequently (10 per cent did so). Before it is spent, money often accumulates in a bank account. Therefore the answer "I'd put the tax savings in the bank" is given frequently. The difficult problems which arise in classifying people's answers and especially their use of the terms "saving" and "spending" may be illustrated by a few quotations from interviews: "We would put it in the bank. The money will go toward retirement." "Spend it for the children's education; college is still far away, but it is never too early to prepare for it." "Save it toward a vacation next year." "Save it for a down payment on a house." "Save it to buy a painting." "I need new teeth; I'll save the tax money for this." "Leave it at the bank to use it for travel to see my children." "Bank it first, then spend it when I've thought it over." "Bank it until I've decided what I might want." It is possible to classify some of the answers received as "the money will be invested, or saved permanently" and others as "the money will be saved temporarily, pending a decision about expenditures" (Table 12-3). Many answers could not, however, be so classified. Yet we cannot assume that people who would put the money in the bank would not withdraw it and spend it soon afterward. Both a temporary increase in the size of bank accounts and a reduction in debt add to ability and inclinations to spend. In addition, as can be seen from Table 12-3, a sizable proportion of people in all income groups state that they would use the tax money for buying cars and other durable goods, for making additions and repairs to their homes, or for travel and leisure-time expenditures. What people actually do with money saved through lower taxes

274 , Survey of Consumer Finances will depend on the same considerations that govern the rate of discretionary expenditures and amounts saved out of income. When people are optimistic and confident, they spend a larger share of funds available from supernumerary income on things they would like to have or like to do. When they are pessimistic and consider the future uncertain, they spend a smaller share. The crucial question concerns then the psychological impact of a tax cut. In the fall of 1962 many people worried about the unemployment situation and felt that nothing was being done or nothing could be done to reduce unemployment. The widespread notion of inaction on the part of the government may be counteracted by a reduction of taxes.

275 Table 12-1 OPINIONS ON THE ADVISABILITY OF A TAX REDUCTION (Percentage distribution of families) Family income Opinion about All $10,000 advisability of a families Under $3000 $ $ $ or more i K tax reduction A good idea Pro-con, depends A bad idea No possibility of tax cut c Don't know, not ascertained Total too data are the average frequencies of replies obtained in the Bpring and the fall surveys in that a year. l962 data are average frequencies of replies obtained in two surveys in that year (August-September and D November). Thls answer was not coded in c In 1961 the questions were: "There has been discussion about reducing taxes at the present time. Do you think this is a good idea or a bad idea?" In 1962 the questions were: "Our government is considering a proposal to reduce income taxes next year; what do you think of this proposal? Why do you think so?"

276 Table 12-2 REASONS FOR ATTITUDES TOWARD TAX REDUCTION (Percentage distribution of families) Reasons given in 1962 for attitudes toward tax reduction 3 All families Under $ family income $ $ $10,000 or more Only personal selfish reasons Only "taxes are too high" No reasons mentioned Economic reasons mentioned Total Attitude of those who mentioned economic reasons' 1 Favorable to tax cut Unfavorable to tax cut a The percentages given are the average frequencies of replies obtained in two surveys in 1962 (August- September and November). 'Some respondents expressed both favorable and unfavorable attitudes toward a tax cut. The questions were: "Our government is considering a proposal to reduce income taxes next year; what do you think of this proposal?" "Why do you think so?"

277 Table 12-3 INDICATED USE OF FUNDS FROM A HYPOTHETICAL INCOME TAX REDUCTION (Percentage distribution of families) All families, 1962 family income Money from tax cut will be: November 1962 $ $ S or more Spent Proposed expenditure mentioned 8 Durables Additions and repairs to homes Trips, hobbies, lux tries Used to repay debt Saved temporarily Saved, not clear whether temporarily Invested, saved permanently Don't know Say they do not pay taxes 3 1 * * Total Leas.than one-half of one per cent. 'Respondents who answered that money will be spent "on necessities," "on many things," et cetera, are not included in detail. The questions (asked in November 1962) were: "Suppose that income taxes are cut and therefore in 1963 you would have more of your income left after taxes were deducted, let us aay an amount equal to [an amount of approximately 3 per cent of 1962 family income before taxes was mentioned]. Whac would you do with the extra money?" (If spend) "On what would you spend it?"

278 PART THREE METHODOLOGICAL APPENDIX

279 13 SURVEY METHODS A DISCUSSION of survey methods appears in Chapter 14 of the 1960 Survey of Consumer Finances. Methods of sampling, interviewing, and analysis are there described. Number of interviews Of the spending units designated for interview in the 1962 Survey of Consumer Finances, 77 per cent were successfully interviewed. Altogether 2117 interviews were taken in 66 areas. They were selected as a probability sample of all spending units in private dwelling in the coterminous United States. Transients and people living on military reservations and in hospitals, prisons, and other institutions were excluded. The 1962 survey included 1478 reinterviews with spending units that had been interviewed in I960, in 1961, or in both years. These reinterviews were supplemented by 539 other interviews. An analysis of the reinterviews will be published separately. The number of interviews taken in the Periodic Surveys were as follows: interviews in November 1961 (956 new interviews and 518 telephone reinterviews), 1299 interviews in May 1962, and 1317 interviews in August-September In May and in August - September, new samples were drawn of families not previously interviewed. Table A-l shows the distribution and total number of spending units and family units for the annual surveys conducted in January and February of each year. Tables A-2 and A-3 show the number of spending units and the number of family units in the major subdivisions of the total population used in this report. These counts may be used to enter Tables A-4 and A-5 which contain general sampling

280 Survey of Consumer Finances errors of survey results. Sampling errors for the major attitudinal variables appear below. Sampling errors for financial variables are being prepared for subsequent publication. In order to measure change in attitudes it is necessary to use identical methods of sampling, question formulation, and analysis in repeated surveys. Each survey also contains numerous new questions in addition to the "trend questions" because each new period brings forth new problems. Selection of respondents The procedure in the Periodic Surveys in families where the head is married is to select the husband and wife alternately as respondents; where the head is unmarried he (or she) is automatically the respondent. In the few instances where several unrelated families reside in the same dwelling unit, a separate interview is obtained from each family. The procedure in the annual financial survey is to interview the head and to substitute the wife or other responsible adult only when the head cannot be interviewed during the interviewing period. Sampling errors of attitudinal variables Because of chance variations in the sample, minor differences between current and past findings may not be significant. However, since the data obtained in successive surveys are based on representative samples drawn by probability methods, the sampling SAMPLING ERRORS OF THE MAJOR ATTITUDINAL VARIABLES, BASED ON 1350 CASES If the percentage is near (or 80) 10 (or 90) 5 (or 95) then the standard error of that percentage is: and the standard error of a difference (change) in that percentage is:

281 Survey Methods 269 errors can be calculated. Elaborate computations of the size of sampling errors were made by the Sampling Section of the Survey Research Center for the major attitudinal and expectational measures used. These computations present a difficult challenge, and new formulas had to be developed. 1 The table on the opposite page shows average sampling errors for various attitudinal variables measured on the basis of approximately 1350 cases. If answers had been obtained from the entire population, the chances-are fair (2 out of 3) that the data would lie within one standard error; the chances are good (19 out of 20) that they would lie within two standard errors. It follows that, if 50 per cent of the respondents express an attitude, the chances are fair (2 out of 3) that the true percentage is between and 51-65, and the chances are good (19 out of 20) that the true percentage is between 46.7 and If in two consecutive surveys a change from, say, 50 to 60 per cent is obtained, the chances are fair (2 out of 3) that the change actually lies between 8 and 12 per cent and the chances are good (19 out of 20) that it lies between 6 and 14 per cent. When parts of the sample are considered for example, families with incomes of $7500 or more (about 25 per cent of the sample in 1962) the sampling errors are higher. As a rough approximation, they may be twice as high for upper income families as they are for the entire sample. Scores and relatives of scores From the individual attitudinal measures, scores are constructed by adding to a standard of 100 the percentage of optimistic replies minus the percentage of pessimistic replies. (For instance, if 50 per cent say that they are better off than a year ago and 15 per cent that they are worse off, the score is 135.) An index is constructed from relatives of scores, that is, the score of the current survey divided by the score of the base period (fall 1956). The unweighted average of six relatives (listed in Table A-6) represents the Index of Consumer Sentiment. *See Leslie Kish, "Variances for Indexes from Complex Samples," Proceedings of the Social Statistics Section. Minneapolis: American Statistical Association, 1962.

282 Survey of Consumer Finances Table A-l DISTRIBUTION AND TOTAL NUMBER OF SPENDING UNITS AND OF FAMILY UNITS (Annual surveys conducted in January-February each year) Number of interviews Primaries Related secondaries Unrelated secondaries Total Weighted proportion (in per cent) Primaries Related secondaries Unrelated secondaries Tentative expansion (in millions) Primaries (occupied dwelling units) Related secondaries Unrelated secondaries 2_,0 1.8 _U2 1.1 I -1 Spending units Family units b A spending unit is defined as all related persons living together who pool their incomes. Husband and wife and children under 18 living at home are always considered to be members of the same spending unit. A family unit is defined as all persons living in the same dwelling unit who are related co each other by blood, marriage, or adoption. A single person who is unrelated to the other occupants of the dwelling or who lives alone is a family unit by himself. For 1950 and , see Table 14-1, 1960 Survey of Consumer Finances.

283 Survey Methods 271 Table A-2 NUMBER OF NONFARM FAMILY UNITS IN SPECIFIED GROUPS OF THE 1962 SURVEY OF CONSUMER FINANCES Homeown ing Home nonfarm All owning families Numbe: 1961 nonfarm nonfarm with Reported of family income families families mortgage house value faraili. All interviews Owner interviews 1122 Under $ Less than $ $ $ $ $ $ $ $ $10,000-12, $ $12,500-14, $ $15,000-19, $ $20,000-24, $10,000-14, $25,000 or more 112 $15,000 or more Occupation of family head Monthly rent payments Professional Renter Managers interviews 667 Self-employed Clerical and sales $ Skilled $ Semiskilled $ Unskilled and $ service $ Miscellaneous $ Retired $150 or more 25 N.A. or inappropriate 24 Age of family head Mortgage debt Interviews Less than $ $ $ and over $ $10,000-12, $12,500-14, $15,000 or more 59

284 Survey of Consumer Finances Table A-3 NUMBER OF SPENDING UNITS IN SPECIFIED GROUPS Number of Number of Group spending Group spending characteristic unite characteristic units All ca6es Income Under $ $ $ $ $ $ $ $ $10,000-14, $15,000 or more 77 Age of SU head or over 323 Education of SU head 8 years or less 633 Some high school 412 High school 501 Some college 262 College degree 295 Education not ascertained 14 Size of place Central citiee of 12 largest SMSA's 276 Other cities, 50,000 and over 459 Urban places 10,000-49, Rural areas In an SMSA 203 Not in an SMSA 432 Occupation Professional and technical 267 Managers and officials 126 Self-employed 131 Clerical and sales 253 Craftsmen and foremen 260 Semiskilled 298 Unskilled 240 Farmers 99 Miscellaneous 109 Retired 334 Life cycle group Under age 45 Single 211 Married 704 No children under 18 at home 98 Children or over Married Children 269 No children under 18 at home Head in labor force 247 Head retired 136 Single Head in labor force 158 Head retired 165 Other (includes N.A.) 129 Region Northeast 497 North Central 580 South 656 West 384

285 Survey Methods 273 OF THE 1962 SURVEY OF CONSUMER FINANCES Group characteristic Number of spending units Group characteristic Number of spending units Place of residence Central cities Of 12 largest SMSA's 276 Of other SMSA's 396 Suburban areas Of 12 largest SMSA's 349 Of other SMSA's 249 Adjacent areas 400 Outlying areas 447 Housing status and duration Owners Purchased before Purchased Renters Moved in before Moved in, Related secondary units 150 Others 126 Income change to income larger income about the same income smaller 445 Income change not ascertained 19 Expected income change to income smaller income about the same income larger 809 Expectation not ascertained 56 Net worth Negative 214 Zero 115 $ $ $ $ $ $10,000-24, $25,000-49, $50,000 or more 133 Liquid assets (checking and savings accounts and government bonds) Zero 533 $ $ $ $ $ $ $ $10,000 or more 100 Amount of large medical expense Zero 1262 $ $ $ $1000 or more 62

286 Survey of Consumer Finances Table A-4 APPROXIMATE SAMPLING ERRORS OF SURVEY FINDINGS Reported Sampling error (In per cent), by site of sample or group percentage 2000 a or or or or Approximate size of entire sample in Note: The chances are 95 in 100 that the value being estimated lies within a range equal to the reported percentage plus or minus the number of percentage points shown above.

287 Survey Methods 275 Table A-5 SAMPLING ERRORS OF DIFFERENCES Size of Differences required for significance (in per cent) sample Size of sample or group or group For percentages from about 35 per cent to 65 per cent For percentages around 20 per cent and 80 per cent For percentages around 10 pe r cent and 90 per cent For percentages around 5 per cent and 95 per cent Differences required for significance (95 per cent probability) in comparisons of percentages derived from successive Surveys of Consumer Finances and from two different subgroups of the same survey. Note: The sampling error of difference does not measure the actual error that is involved tn specific survey measurements. It shows that (except for nonsampling errors, errors in reporting, In interpretation, etc.) differences larger than those found in the table will arise by chance in only 5 cases in 100. In calculating the sampling errors it was not taken into account that the majority of cases in the January- February 1962 survey were reinterviews with previous respondents. Therefore, when used in comparing findings, this table presents, in most instances, an extremely conservative estimate.

288 Survey of Consumer Finances Table A-6 STANDARD ERRORS OF SCORES AND RELATIVES OF THE INDEX OF CONSUMER ATTITUDES AND ITS COMPONENTS Size of the standard error of Scores Relatives' Change Change of of Item item Item Item Index of Consumer Attitudes (excluding buying Intentions) Components of the 6-point index 1. Evaluation of financial situation as compared with a year earlier 2. Expected change in f inane ia1 s itua tion 3. Business conditions expected over the next 12 months 4. Business conditions expected for the next five years 5. Good or bad time to buy large household goods 6. Evaluation of price changes expected for the next year Buying intent ions: 7. Intention to buy automobile during the next 12 months Intentions to buy a house during the next 12 months it # it it Data not available. 'Relatives are calculated by dividing the current acore by the base period score of the corresponding item; base period is fall, 1956.

289 v 14 QUESTIONNAIRES THE questionnaires used in the 1962 Survey oi Consumer Finances are reproduced here. Two questionnaires, designated A and B, were used because the sample design included reinterviews. The A questionnaire was used with units that had previously been interviewed. It contained questions on saving over the past two years. The B questionnaire was used with units not previously interviewed. It was identical with the A questionnaire except that the questions on saving over the past two years were omitted and questions on moving (Q. B23-B40) were included. The complete A questionnaire and pages 6 and 7 from the B questionnaire (Q. B23-B40) are reproduced in this chapter. The following questions (involving estimates of saving) were omitted from the B questionnaire: Questions G16; G39-G40; H5; H11-H14; H19-H22; H24 a2-a4, b2-b4, c2-c4, d3-d5, e2-e4; H25c. The questionnaires used in the Periodic Surveys are not reproduced here for reasons of space. They are available from the Economic Behavior Program, Survey Research Center.

290 Survey of Consumer Finances The University of Michigan Survey Research Center Project 707 January-February Interviewer*! Wame_ 2. lour lot. Ho SURVEY 0? COHSUHER FINANCES A 2a. Data Sample Book Ho._ Place Codes Do not write In above (paces <C0PT LISTING BOX INFORMATION FROM "W08K" LISTING BOX OH THE 1962 INFORMATION SHEET: LIST ALL PERSONS 18 YIARS 07 ACE AND OVER WHO RESIDE AT THIS DWELLING DMIT.) Relationship to Head b. Famllyj Unit Number d. Age Doel be (she) uaually receive $15 or more per wk. from any source! f. (IP YES) g. (IP YES) Does he(sbe^ contribute leas than one-half of bis Income?* h. Does be(sae) keep hla finances aeparacef Spending Unit Numbed 1. Indl- cate S by Check) (O J- Did be (she) live here id T 66T T o3 Head of DU (INTERVIEW HEAD OT DU (SU #1). HUE OUT BLUE COVER SHEET, AMD TAKE SEPARATE INTERVIEW WITH HEAD OF EACH SECONDARY SPENDING UNIT AT THIS DWELLING UNIT.) 3. Do you (SU covered by this Interview) bavt any children under 18 living heret I No I 3a. How many?_ 3b. How old are they? *(XF HE (SHE) IS "YES" IN COLS, s, f, and g, BE (SHE) IS A SEPARATE SPENDING UNIT. IP "NO" TO ANY ONE OF THEM, HE (SHE) IS NOT A SEPARATE SPENDING UNIT. THE MAIN SPENDING UNIT SHOULD BE NUMBERED "1". PLEASE NUMBER ALL SPENDING UNITS.)

291 Questionnaires 279 Schedule A: GENtBAL ATTITUDES Al. We are Interested in how people are getting along financially these daya. Would you say that you and your family are better off or worse off financially than you were a year ajtot I Better now I I Same 1 [ Worse now ] Uncertain ) ALs. Why is that?. A2. Are you people making aa much money now aa you were a year ago, or more or lea at I Mora now About the sane" ] I Leaa now] A2a. How Is that? A3. Looking back over the paat twelve montha. did things work out pretty much aa you expected financially, or did anything unexpected happen? (IP UNEXPECTED) A3a. What waa tbatt A4. As far ss your family income la concerned, would you say that 1961 was an average year, an unusually bad year, or what? A4a. Why do you aay lot A5. Now looking ahead--do you think that a year from now you people will be better off financially, or worse off, or Just about the same as now? 1 Better 1 I Same I [ Worse [ I Uncertain ) A6. Speaking of prices ln general, I mean the prices of the things you buy do you think they will go up in the next year or go down, or atay where they are now? A7. Would you say that these (...rising prices; falling prices; unchanged prices...) would be to the good, or to the bad, or what?

292 Survey of Consumer Finances AS. Looking further ahead--do you expect that, aay, about five yeara from now prices of the things you buy will be higher than they are at present, lower, or Just about the sane? (IF DON'T KNOW OR DEPENDS) A8a. On what does it depend in your opinion? A9. Now, turning to business conditions ln the country as a whole--do you think thst during the next twelve months we'll have good times financially, or bad times, or what? I Good times I I Good, with qualifications I Pro-con"! Bad, with qualifications I I Bad time's"! I Uncertain"! A9a. Why do you think that? A10. Would you say that at present, business conditions are better or worse than they were a year ago? I Better now About the same j I Horse now All. And hov about a year from now, do you expect that ln the country as a whole business conditions will be better or worse than they are at present, or Just about the same? Better a year from now I I About the same I Worae a year froa now ] A12. Looking ahead, which would you say is more likely--that ln the country as a whole we'll have continuous good tlmea during the next five years or so. or that we will have periods of widespread unemployment or depression, or what? (IF DON'T KNOW OR DEPENDS) A12a. On what does it depend ln your opinion? A13. Thinking back to when you ware growing up, did your parents discuss with you how the family was getting along financially? A14. How old were you before you knew how much the family income was?

293 Questionnaires 281 Schedule B: HOUSING Bl. About when did you move into thla home (apartment)? Before 1930~1 I I I ( 1956 I I 1957 I I 1956 I 1959 I I I I I ) B2. How many rooma are there in this house (apartment), not counting bathrooms? B3. Do you (SU) own this home or psy rent or what? I Owns or is buying I (SKIP TO "IP OWNS") Pays rent (SKIP TO B5) I Neither owns nor rents B4. How Is that? (SKIP TO PAGE 5, o. B17) B5. About how much rent do you pay a month? S (SKIP TO PACE B17) (IP BOUGHT BEFORE 1960) (IP BOUGHT IN I OR 1962) B6. Could you tell ma what the present value of this house (farm) ia? I mean about what would It bring if you sold It today? $ B7. Did you sell or trade a house when you bought thla one? I Yes, sold or traded I No. neither 1 (SKIP TO PAGE 5. Q. B12) BS. Was It a newly-built house or one that had been lived in b e f o r e T 1 Mewly-bulltl [ Lived in before B9. How much did the bouse and lot (farm) coat (total price)? $ B10. Did you sell or trade a house when you bought this one? Yes, sold or traded") I No. neither I I (SKIP TO P. 5, Q. B12) Bll. How much did you receive in cash from the sale of the other house, after paying off the mortgage and closing coats? S (CONTINUE WITH PAGE 5, Q. B12)

294 Survey of Consumer Finances (ALL B12. Do you have a mortgage on the property! I Mo I (SKIP TO B17) OWNERS) 313. Do you alio have a aecond mortgage? 1 Yea 1 Ho aecond First Mortgage Second Mortgage B14. Approximately bow much la your present mortgage? B15. How much ere your payments every month? B16. How mich of this amount is payment on the principal? (ASK EVERYONE) B17. Let's see, you said you moved here In (REFER TO PAGE 4, Q. Bl) I Before (SKIP TO Q. B20) (PEOPLE WHO MOVED HERE BEFORE 1956) B18. How many people were there living together in your family ln 1955? B19. Have you added any rooms or subdivided since 1955? I Mo ) (SKIP TO PAGE 8, Q. B41) Bl9a. What has changed? (SKIP TO PAGE B. Q. Ml) (PEOPLE WHO MOVED HERE IH ) B20. Thinking bsck to where you lived ln 1955, would you say that your present housing ia better or worse for you than your housing then (ln 1955)7 B20a. How is that? \ Better now 1 Same I Worse now B21. How many rooms vera there in that houae or apartment in 1955, not counting bathrooms? B22. How many people were there living together in your family ln 1955? (SKIP TO PACE 8, Q. Ml) (0. B23-M0, PAGES 6-7, OMITTED PROM THIS QUESTIONNAIRE)

295 Ques tionnaires 28 3 (ASK EVERYONE) B41. Generally speaking, do you chink now it ft good or a bad tine to buy a house? I Good I \ Pro-con \ [ Bad \ \ Uncertain"! B41a. Why do you aay ao? B42. DO you expect to buy or build a housa for your own year-a round use during the next 12 months? (IP YES OR DEPENDS)! B43. About bow much do you think it will coat for the bouse and lot? ^ (IP WILL NOT BUY OR BUILD) B44. During the next five years do you chink you might be In the market for a house? B44a. Hov is that?

296 Survey of Consumer Finances (ASK EVERYONE) B45. Did you have any expenses for work done on your houae or property in 1961 thing* like upkeep, additions, or improvements or painting and decorating? (FARMERS EXCLUDE FARM BUILDINGS) Mo (SKIP TO B54) (IF YES) 1 B46. What was done? B46a. Anything else? (ENTER B47. What month was that in? month month month B48. How auch did it cost? $! B49. Do you still have anything left to pay? 1 Yes 11 No 1 1 Yes 11 No I'Yes II No 1 (1? YES TO B49) B50. Is whst you owe fnr It Included in the mortgage on your house? 1 Yea 1 1 No 1 1 Yes 11 No 1 Yes 11 No 1 (TP NO TO B50) B51. How much are your payments? B52. How many payments do you have left to make? B53. How much do you have left to pay? 5 $ 9 per per per 1 a! 5 B54. Do you expect to make any large expenditures for work on the house or property during the next 12 months things like upkeep, additions or improvements or painting and decorating? (FARMERS EXCLUDE FARM BUILDINGS) No (SKIP TO TOP OF PAGE 10) (IP YES)] BSS. What do you plan to do? B56. About how much do you think you will spend for all you plan to do in the next 12 months? ^

297 Questionnaires 285 Schedule C: CARS Hov we would like Co calk about cara--cara that you and (MENTION OTHERS IN SU) own. Cl. Do you (or your wife) own a cart I Yea I I Ho I C2. Doea anyone elae (ln the SU) living here own a car? I Yea I I Ho I (II NECESSARY) C2a. Who owna a car! (IP TBS TO C3. How nany cara do you (R and other* in SU) own? Cl or C2) One I Two Three 1 Pour 1 I Five or more I (ASK ABOUT ALL CARS OWNED BY MEMBERS OF THIS SU) CA. CS. Did you buy your car new or uaed? What make? and year model la it? C6. le It a aedan, station wagon, convertible or what? First Car Second Car New Uaed Hew I fused C6a. Ia it a compact, or regular-slse? C7. What year did you buy it? (IF BOUGHT IN ) CS. Whi nth did you buy it? C9. When you bought thla car, did you trade-in or sell a car? T-I [T I Ho I (IF TRADE-IN OR SALE) CIO. Cll. What make and year model was It? Waa it a sedan, station wagon, convertible or what? C12. What year did you buy the car you traded-tn (aold)? C13. During 1961 did.you sell, give away or scrap a car that we haven't talked about? I Sold 1 Gave away"] I Scrapped 1 I HO I (SKIP TO TOP OF F.lll (IF SOLD. GAVE AWAY. OR SCRAPPED) C14. What waa its make.. and year model?... CIS. Waa it a aedan, atation wagon, convertible or what? C16. What year did you buy it? (SKIP TO P.11, INSTRUCTION AT TOP OF PAGE)

298 Survey of Consumer Finances (IF HO CAR OWNED SKIP TO Q. C31) (IF ANY CAR OWNED FOR EACH CAR: BOUGHT IN 1961 OR 1962 ASK Q. C17) -BOUGHT IN 1960 OR BEFORE ASK Q. C27) (HAND COPY OF CAR CARD TO R AND PILL OUT BELOW) About the car you purchased in 1961 (1962): COST: C17. What was the Total Price, not counting financing chargea7 CIS. Bow much did vou net from Trade-in or Sale of your old car? C19. How much did you pay in Cash? C20. How much did vou Borrcw or Finance, not counting financing charges? First car Second car S $ S $! $ $ $ (IF NO BORROWING OR FINANCING. SKIP TO Q. C27) FINANCING: C21. How much were your payments, and how often were they made? C22. How many payments did you agree to make altogether? C23. How many payment* have you made? C24. How many payments are left to make? C25. How much was (is) the final payment? C26. How much do you have left to pay now. including, financing charges? 5 9 per per 5 $ 5 5 (IF BOUGHT IN 1960 OR BEFORE. OR IF BOUGHT IN 1961 OR 1962 WITHOUT BORROWING) C27. Uo you owe any money on your car now? (IF YES) C28. How much are your payments? C29. How many paymenta do you have left co make? C30. How much do you have left to pay now, including financing charges 7 First csr Second car Yes I No Yes No $ P er _ (ASK EVERY QUE) C31. Speaking now of the automobile market--do you think the next twelve months or ao will be a good time or a bad time to buy a car? Cood I Pro-con"1 Bad Uncertain C31a. Why do you say ao?

299 Questionnaires 287 C32. Do you people expect to buy a car during the next twelve montha or so? (IP YES OR DEPENDS] C33. Will it be a brand new car or a used car? I Sew 1 Dsed I Uncertain! C34. About when do you think you will buy thla car? C35. How much do you think you will pay for it! $ Schedule D: OTHER DURABLES Dl. Hov about larger Items for the homo--dld you buy anything of thla aort during furniture, a refrigerator, stove, washing machine, television set, air conditioner, household appliances, and so on? 1 Ho 1 (SKIP TO P. 13, Q. D12) 1 Yes 1 r D2. What did you buy? D2a. Anything else? (ENTER - --» D3. What month did you buy it? D4. How much did it coat, not counting financing charges? 5 month 3 month 3 VJOtltll D5. Was there a trade-in or did you sell your old one or what? IT-IIISII No (III-1 IISIINOI 1 T-llTslI No (IF TRADE-IN OR SALE) D6. How much did you get for It? 3 s 3 D7. Did you buy it on credit or pay 1 Credit 1 Credit 1 I Credit cash or what? I Caah I Cash I Caah DS. Do you s t i l l have anything left to pay? to pay? 1 Yes 1 nio~l 1 Yes 11 No 1 Yes 11 Ho 1 (IF YES) D9. How much are the payments? D10. How many more payments do you have left to make? $ $ S per per per Dll. How much do you have left to pay? $ 3 $

300 Survey of Consumer Finances D12. About the things people buy for their house--i mean furniture, house furnishings, refrigerator, stove, television, and things like that. In general, do you think now is a good or a bad time to buy such large household items? I Good I I Pro-con I Bad ) I Uncertain Dl2a. Why do you aay ao? D13. Do you expect to buy any large items auch as furniture, a refrigerator, stove, washing machine, television set, air conditioner, household eppllancea and ao oo--during the next 12 months? I Ho I (SKIP TO Q. D17) [ Yes (IF YES OR DEPENDS) Dl4. What do you expect to buy? (ENTER D14a. Anything else? D15. Would you say you definitely will buy a (MENTION ITEM ) during the next 12 months, or Chat you probably will, or are you undecided? D16. About how much do you chink you will spend for it? 1 Definitely I Definitely 1 Definitely 1 1 Probably 1 I Probably 1 1 Probably 1 1 Undecided 1 Undecided 1 Undecided 1 s $ D17. Did you people take any vacation trips in 1961? I No I (SKIP TO PACE 14, TOP OF PAGE) j Yes Dlfl. Did yau spend $100 or more on vacation trips during the year? I So' t--(skip TO PACK 14, TOP OF PACE) j [ Yea D19. How many vacation trips did you take during the year? First Second Third Trip Trip Trip D20. About how far is the most I I I distant place that you reached on your trip? (Miles) 1 D2I. About how much did you spend altogether, including trans-. portatlon and extra expenses? * * *

301 Questionnaires 289 D22. Did you and your family have any large medical expenaea ln 1961 for doctors, nuraea, hospitals, and thing* like that. Including expenaea covered by medical insurance! I Mo (SKIP TO Q. D30) D24. D25. D26. Were these expenses for: a. doctor bills? I Mo Yes b. nurses? 1 Ho 1 Yes c. hospitals? Mo I Yes I d. drugs or other medical expenses?... I Mo 1 Yes L -(SPECIFY) Thinking of your family's total medical bills for the entire year 1961, hov much were they altogether, not counting bills paid by medical or hoapltal Insurance? I under $200l I $ I S jl ~ or over To take care of these expenaea, did you take anything out of your savings? I Ho I Yes ) a. Do you still owe psrt of it? I Ho [ 1 Yes 1 b. Did you borrow money? I Ho I Yea c. Did you pay any out of current income?. I Ho Yes d. Did you raise any money any other way?. Mo I Yes h-(ask Q. D25e) e. What waa that? Do you have insurance coverage for medical or hospitsl expenses, such aa Blue Cross, Blue Shield, or others like that? j HQ~ --(SKIF TO Q D30) D27. Did your medical insurance pay for any expenses during 1961 to you directly or to a doctor or hospital? Qj 3 ( S K I P T 0 q > D 3 0 ) (ASK EVERYONE) D2S. About hov much did your insurance pay during 1961? I Under S200l $ \ I I $ ~ I ~ I or over"] Don't know] (IP SAME BRACKET IS CHECKED IH D24 AMD D28) D29. Which waa larger, your family medical bills or the amount paid by insurance, or were they about the same? Family bills larger Paid by insurance larger About the aame Don't know D30. (Including what you just told me), do you now owe any money to a doctor, dentist, or hospital for medical services? ( Yes [No] (SKIP TO P. 15, TOP OF PAGE) Doctor Dentist Hospital D31. How much? 5 9 9

302 Survey of Consumer Finances Schedule E: OTHER PERSONAL DEBT We've aaked about some of the things for which you night have borrowed money, but many people owe for other thlnge too. El. Do you people owe any money now on anything else you have bought on the installment plan, with revolving accounts, or for anything else on which you make payments? ) Hq [--(SKIP TO Q. E6) I E2. What did you buy, or, what are you making payments on? (ENTER - - E3. How much are the payments? 1 $ s 9 >er per per per E4. How aany payments do you have left to stake? E5. How much do you have left to pay?! s 3 $ B6. Ia there anything we've missed? For Instance, do you owe any other money to a bank, a loan or finance company, credit union, or employee loan fund? I Ho I (SKIP TO Q. Ell) j 1 Yea 1 1 E7. What was It for? (ENTER ES. How much are the 1 t S 9 payments? wr per per per E9. How many payments do you have left to make? E10. How much do you have left to pay? i Ell. Were any of the debts we talked about for buslneaa or farm purpoaea? I I E12. Which ones? - -

303 Questionnaires 291 Schedule C: OCCUPATION. EMPLOYMENT AMD INCOME Next, we would not working. like Co find out about your work and the times, if any, when you were Gl. Let's start with the present are you (HEAD) working now, unemployed or laid-off. retired, or what? (WORKING NOW) 1 (UNEMPLOYED OR LAID-OFF) \ ( S K L P T 0 Q. C 2 ) (RETIRED) J (KEEPING HOUSE-FEMALE HEAD SKIP TO Q. G6) (OTHER: EXPLAIN),. (IF Gla. Did you ever work for pay at a full-time regular Job? 2 =S> No ~1 I Yea I (SKIP TO Q. G7) (SKIP TO Q. G2) (IF WORKING HOW. UNEMPLOYED. LAID-OFF. RETIRED, OR OTHER), G2. What is (was) your (HEAD) occupation? What sort of work do(dld) you do? C3. What kind of business ia (wss) that ln?_ G4. Do (did) you (HEAD) work for yourself or someone else, or what?_ <1F SELF* CS. Do(did) you (HEAD) regularly employ people other than yourself? ReTI 1 Bo C6. In 1961, how many weeks did you (HEAD) work full time including paid vacations and paid sick leave? i (weeka) (IF NONE. SKIP TO Q. G7) (IP 1-49, SUBTRACT THE NUMBER OF WEEKS WORKED FULL TIME FROM "52" AND ASK Q. G7) (IF SKIP TO PAGE 17) (IF 3 OR MORE WEEKS HEAD DID NOT WORK PULL TIME) C7. Now about theae weeks during 1961 when you (HEAD) didn't work full time, were you (HEAD) working part time, looking for work, i l l or disabled, on unpaid vacation, or what? Reason Number of Weeks

304 Survey of Consumer Finances (IF FARMER REFER TO Q. C2. PACE 16) C8. C9. CIO. What were your total receipts froa farming ID 1961, Including aoll bank payments end commodity credit loans? What were your total operating expenses, not counting living expenses or income taxes? That left you a net Income from farming of i. that right? m (A-B),.IA) 1"> Cll. Did your expenaea include any Investments in things that will laat for a while, like tractor, trucks, equipment or buildings? Ho -CxiD- Gils. How much went for things like that? G12. What la the market value of your livestock, equipment and unsold crops? G13. Do you owe any money on these things? I Ho I C14. How much do you owe? G1S- Q T] Then your net investment ln livestock, equipment and unsold crops 1* (E-F). la that right? G16. Over the laat two yeara, has your net investment ln livestock, equipment, end unsold crops lncreaaed, declined, or stayed the same? Increased over past 2 years Declined over past 2 years (IF CHANCED) CI6i How much would you estimate it has changed? $_ (ASK EVERYONE) C17. Did you (R and SU) own a business sny time in 1961, or did you have a financial interest in sny buslnea* enterprise? Ho (SKIP TO PAGE 20, TOP OF PACE) -TYeD CIS. What sort of bualneas is it? G19. Are you the sole owner, or Is It a partnership, or what? G20. Ia It e corporation or an unincorporated business or do you have an interest In both kinds? Corporation (SKIP TO P. 19, Q. C35) Unincorporated business Both kinds Don't know (CO TO PAGE 18, q. GZ1)

305 Questionnaires 293 (ASK THIS PACE FOB ALL UNINCORPORATED BUSINESS R ASP SU'S SHARE) G21. Did your business make s profit or a loss ln 1961? G22, Did you (or your wife) tske anything out of the but salary, living expenses, or profit ln Ho Yes C23. How much did you take out in 1961T In addition, did you leave any profit in the businesst i C26. Yes G25. How much did you leave in, I mean profits before deducting lncooe taxest Then if we sdd that in, your share of the total income from the business ln 1961 before deducting income taxes waa (A+B), is that about right? } _(B) AO G27. How much was your loss in 1961? G28. Did you (or your wife) take anything out of the business as salary or living expenses in r s o n Yes C29. How much did you take out in 1961? 1961T G30. If you had left that money In the business, how much profit or loss would the business have shown? _(*> _( p ) (CONTINUE AT TOP OF PACE 19)

306 Survey of Consumer Finances (UNINCORPORATED BUSINESS CONTINUED FROM PACE 18) G31. Does Che business owe any money for business improvements, new equipment, new buildinga, and things like that? r-r. 1 r I Yea I Mo C32. Did you pay off any money in 1961 that you owed on things like that? C33. Yea Some people think of money used co pay off business debts as part of the expenses of their business and some chink of it as profit used to increase the value of their business. Did you counc this money you paid off ln 1961 as a bualnesa expense or ss part of profit? 1 Profit t--(3kip TO Q. G15) Business expense G34. How much did you reduce your business debt during 1961? (CONTINUE WITH C35) (ASK ALL BUSINESS OWNERS--"YES" TO Q. G17, PAGE 17) G35. How much is your share of tbe business(es) worth? (gross) S_ G36. Do you owe any money in connection with your share of the buslneas-i mean the $ (Q, G3S AMOUNT) you just told me about? jno ) (SKIP TO Q. G39) Yes C37. How much do you owe? G38. That leave* a net value for your share of che buiineas of (I-J) Is that right? No r~(correct G35-G38 RESPONSES) 1J) _I K ) G39. Over Che past two years would you any the net value of your share of the business has increased or declined? Increased over past 2 years Same (SKIP TO TOP OF P. 20) Declined over past 2 years (IF CHANCED) G&0. How much would you estimate ic has changed? $ ID

307 Ques tionnaires 29 5 In this survey all over the country we sre trying to get an accurate picture of people's financial situation. One thing we need to know is the Income of all the people we interview. (ASK EVERYONE) G41. How much did you (HEAD) receive from wages and salaries in 1961, that la, before deductions for taxea or anythingt ) G42. In addition to this, did you have any income from bonuses, overtime, and connnlsslonst Vyfo I I Tea 1--G43. How much waa that? G44. Did you receive any (other) income from: S_ (IP YES TO ANY ITEM) professional practice S_ (flow much was your income froa (SOURCE) after [allowing for expenses? (ENTER AMOUNT AT RIGHT) (IP NO, ENTER "0") a trade S_ farming or market gardening roomers and boarders $ any other aelf-employment S_ rent $_ G45. How about: g) interest S h) dividends S_ 1) trust fund or royalties J) veteran's pension, veteran's school allotment, serviceman's family allotment k) unemployment compensation?_ 1) Social Security 5, m) other retirement pay, pensions, annuities n) alimony, regular contributions from family (NOTE TO INTERVIEWER: o) public welfare, other LEAVE HO BLANK SPACES, government aid $. ENTER ZERO IF HONE.) $_ $_ TOTAL $ (CARRY FORWARD TO TOP OF NEXT PACE)

308 Survey of Consumer Finances Nov about the Incone of other member* of the family (SU) (TOTAL FROM PREVIOUS PAGE) S_ (INCOME OF HIPS) C46. Did your wife have any incoae during the year? I Ho I (SKIP TO G51) -OsD- G47. Was It from wages, salary, * business or whatt G48. How much did she receive 7 G49. How many weeks did she work full time? G50. Row many weeks did she work part time? S_ (weeks) (weeks) -S_ t INCOME OF OTHER MEMBERS OF SU) G51. Did (MENTION OTHER MEMBERS OP SU) have any income? Ho f--(skip TO INSTRUCTIONS PRECEDING G55) C52. C53. Yea Who? (ENTER Wss it from wages, salary, a business or what? C54. How much was it? (IF BUSINESS INCOME FROM G26 or G30, PAGE 18. ENTER IT HERE) (BUSINESS) (IF FARM INCOME FROM G10, PAGE 17, ENTER IT HERE) (FARM) 5_ GSS. Adding everything up, I get (SU TOTAL) $_ for the total of youraelf (and your wife and children) for the year. Is that about right? G56. Waa your income in 1961 larger or smaller than the year before...i mean for youraelf and (MENTION OTHER MEMBERS OF SU)? (IF NOT SAME) 1961 larger than 1960 I Sane both years (SKIP TO Q. G58) 1961 amaller than 1960 C57. Thinking back, what would you say your income was for the year before last (1960), for you and others in the family (SU)? g G58. Do you expect your total family income in 1962 will be larger, smaller, or about the seme aa 1961? Larger Same Smaller in 1962 (SKIP TO P. 22) ln 1962 (IF NOT SAME) GS9. About how much would you expect your 1962 Income to be...for you and others in the family (SU)1 ^

309 Questionnaires 297 Schedule H: OTHER ASSETS AND SAVTKGS HI. Do you (R and SU) carry life insurance! Ho Tea HI*, How much did you (entire SU) put into life insurance payments (premiums) ln 1961? ^ HZ. Do you (R and SU) owe any money on a policy loan from a life Insurance company? H3. H4. DEI Yea H2a. How much do you owe? $ Did you (R and SU) take out any new policiea during 1961? Do you (R and SU) own any common or preferred stock ln a corporation, including companies you have worked for, or own stock through an investment club, or own shares of a mutual fund? ( THE APPROPRIATE BOXES) O (OWN CORPORATE STOCK DIRECTLY INCLUDING COMPANIES WORKED FOR) (OWN STOCK THROUGH AN INVESTMENT CLUB) ) (GO TO (OWN SHARES OF A MUTUAL FUND(S)) <3. H6) (OWN NO STOCKS OR SHARES) HS. Two years ago did you own any stocks or shares ln a corporation or mutual fund? QjjQ ( S K l p JO P. 23, Q. HIS) Yes HSa. Altogether what was the total value ln stocks or shares that you (entire SU) held two years ago? < (IF OWNS STOCK OR MUTUAL FUND SHARES) H6. (SKIP TO PAGE 23. Q. HIS) Ia it stock that is sold to the general public, or stock in a privately held corporation? 1 Sold to general public 1 Privately held I I Both I I D.K. I H7. H8. How much are these stocks worth? Do you owe any money in connection with )_ Publicly Traded Privately Held your, toek? r _ 1 (8cg ^ pxce ^ hii) H9. How much do you owe? $ H10. That leaves your net Investment ln stock $ Ia that right? Yes j (GO TO P. 23, Q. Hll) Ho J (CORRECT H7-H10)

310 Survey of Consumer Finances (IF. OWNS STOCK OIL MUTUAL FUND SHARES CONTINUED) Hll. Stock prices change and people also put money into stocks and take money out. Did you put new money Into stock or take money out "on balance" over the last two years? Put money In I [ Took money out* I Same I H12. How much* Hia. Altogether would you aay that the net value of the stocks and shares that you hold today is greater or less than the net value of your holdings two r I Greater today I I Lesa today I fssel 8 8 '1/ H1&. How much would you estimate that the value has changed? 5_ (ABK EVERYONE) fll5. Do you or other* In your family (SU) have any regular government savings bonds, war bonds or defense hoods? rr: \ Yes Hl5a. How much do you (SU) have altogether? (FACE VALUE) H16. Do you or other* in your family (SU) have any savings accounts in banks, savings or building and loan associations, or credit unions? HICa. How much do you (SU) have altogether in: Banks? I None I Savings (Building) snd Loan Associations?... I Mone I Credit Unions? I Hone 1 H17. Do you or othere in your family (SU) have any checking accounts at banks? E E Yes Hl?a. How much do you (SU) have in your checking account(s) now?!_ HIS. Adding up your checking accounts, savings accounts, and savings bonds, I gat 1962 TOTAL 9_ : Is that right? r- ^ I No (CORRECT HL5-H17a)

311 Ques tionnaires 299 (BRING OUT SEALED ENVELOPE) We're interested in finding out about change* in your savings during the laat two years. I have in this envelope the information you gave us two years ago since it is hard to remember. Could we look it over now and See if the change* from 1960 seem reasonable to you? ] Yes 1 Mo (ANSWER Q. H23 AND SKIP TO PACE 25, Q. H24) (ASK FOR EACH ITEM THE FAMILY (30) OWNED EITHER YEAR) (BONDS) H19. In bonds now you have 3 (FROM H15-Hl5a); Two years ago you had $ (FROM SEALED ENVELOPE); If I subtract there is S (MORE/LESS) now. Does that seem right to you! [ Yes I I Ho (--(RRvnsi H15, H15a, OR HIS) (SAVINGS ACCOUNTS) HZO. In savings accounts now you have $ (FROM H16, H16a); Two year* ago you had? (FROM SEALED ENVELOPE) If I subtract there is 9 (MORE/LESS) now. Does that sean right to you? Tea 1 Mo 1 (REVISE H16, H16a, OR H20) (CHECKING ACCOUNTS) H21. In checking accounts now you have 9 (PROM H17, H17a); Two years ago you had $ (FROM SEALED ENVELOPE) If I subtract there is $ (M0RB/LE5S) now. Does that seem right to you? I Yes I OH] H21a. How much has your checking account changed from two years ago? 5 (MORE NOW/LESS NOW) (INTERVIEWER) : H22. Were any changes or revision* msde in response to H19-H21? I No I i ["Yes" H22a. How did these changes come about? H23. What records did R use ln answering Queattons H15-H21B? I None

312 Survey of Consumer Finances 124. Nov about other kinds of investment do you people have any... a. other U.S. government bonds (marketable or current Interest besting)! I 1 YES 1) Hov much! 4 2) BOH much different ia thii onount from 2 years ago! j [~1nq 3) Did you own any 2 years ago? 4) How mucb? 9 b. state or local bonds! HYES 1) Sow much! 9 2) Nov much different is this amount from 2 yeara ago! ^ 3) Did you own any 2 years ago? 4) How mucb? 9 c. corporate bonds! I I YES 1) Hov much! S 2) Hov much different la thla amount from 2 years ago! g 3) Did you own sny 2 years ago? 4) How much! $ d. other real eatata (besides thla homa)t riyefl 1) What do you own! 2) Hov much is It(are they) worth! 3) How much different is thla amount from 2 yeara agot ^ Dm 4) Did you own any 2 years ago? r^treti [nti 3) How much? 9 e. mortgages or land contracts owed to you! riybs 1) How mucb are they worth! 9 2) How much different la this aaount from 2 years ago? j n t r o 3) Did you own any 2 yeara ago! j-tfesi n?o*i 4) How much! 9 (II AHI "YES", ASK Q. H25 DN PACE 26)

313 Questionnaires 301 (If I ANY "YES" TO E2* a-e) H25. How about loans associated with any of theae Investments; do you now owe any money associated with theae items? rrjr i ries H25a. Which onea? H2Sb. How much do you owe now?. S t $ '"i H25c. How much did you owe two years ago on this type of loan? H26. Have you Inherited any money or property ln the last year? I 1 Yea I H27, What was It worth? $ (If HAS AMT SAVINGS OR 1HTESTMBHT3) H28. Thinking back over what has happened to your savings, investments, and reserve funds in the last two years, do you feel satisfied or dissatisfied? H29. What do you have ln mind?.

314 Survey of Consumer Finances Schedule J: IHFORHftTION ABOUT SPEEDING UNIT INTERVIEWED Jl. Are there any people who do not ltve with you and who are dependent on you for more than half of their living? JZ. Are you (HEAD) married, single, or what? (IF MARRIED AND LIVING TOGETHER) 1 Married 1 1 Single 1 1 Widowed Divorced"] [^Separated J3. How long have you been married? (CHECK NEAREST YEAR) I 1 or less"! ]~2~ ftl ~4~] over 20 J4. How many grades of school did you (HEAD) finish? S or less"! I 9-11 I [ 12 or mori J5. Have you had other schooling? No 1 \ Yes J6. What other schooling have you had?_ (college, secretarial, business, etc.) (IF AMY COLLEGE) J7. Do you have a college degree? Yes No [ (INTERVIEWSR--BY OBSERVATION ONLY:) J8. SEX OF HEAD OF SPENDING UNIT: Man Woman J9. J10. JU- JU. J13. J14. SEX OF RESPONDENT: Man [ Woman RACE: White I I Negro I 1 Other: (SPECIFY) I LENGTH OF INTERVIEW: NUMBER OF CALLS: WHO WAS PRESENT DURING THE INTERVIEW? TYPE OF STRUCTURE IN WHICH RESPONDENT LIVES: Detached single family house Apartment In a partly commercial structure Other: (SPECIFY) I Apartment house, (5 or more units) Detached 2-4 family house, or row house J15. NEIGHBORHOOD: Look at three structures on each side of respondent's DU but not more than 100 yards or so in both directions, and check aa many of Che following boxes as describe what you find: Vacant land only Mixed commercial and residential structure Detached single family house Detsched 2-4 family house, or row house Wholly conanercial or I I Other: industrial structure] ^SPECIFY) Apartment house (5 or more units)

315 Questionnaires 303 (PEOPLE WHO MOVED HERB IH ) 123. Thinking back to where you lived ia 1955, would you aay that your present housing ia better or worse for you than your housing then (in 1955)T B23a, How is that? Better now \ Ssne I Worse now"] %2U. Hew many roams were there In that bouse or apartment counting bathrooms? in 1955, not B25. Bow many people were there living together ln your family ln 1955? B26. When you moved from where you were living in L955, did you move directly to this bouse (apartment), or did you live somewhere else in between? I Directly to herel Somewhere else i n between I (SKIP TO B2S) (IP DIRECTLY 10 HERE) B27. Were any rooms added or was the place subdivided between 1955 and when you moved out? r^y. (aka ^ ^ B27a. What bad changed?_ H Yes h (SKIP TO B31) (IP SOMEWHERE B28. ELBE IH BETWEEN.) Thinking now of the place you were living In Just before you moved here--would you say that your present housing is better or worse for you than your previous place? I Better now I B28a. How la that? Same Worse now B29. Bow many rooms were there ln that house or apartment? B30. How many people were there living together in your family then? (CO ON WITH B31) B31. Just before you moved to this home, were you living In another home here ln (county) or aomewhere elae? Another home here --(SKIP TO Q. B32) B31a. Where were you living then?_ B31b, What county wae that? Somewhere else _(City or Town, State) _ County) B32. About how many miles did you move from your former home to here? (miles) (CONTINUED)

316 Survey of Consumer Finances ^PEOPLEWHO MDVBD_1EK_IH_1960 :1962 : TB33. HOW did you happen to move! l(ip WORK HOT MEHTIOHBD) B3A. Did you change your employer or piece of work when you moved? B34a. I Bmployerl I Piece of work I Both tslgp I 10 B35) Ho I ^ Did you heve the new Job «U arranged before you movedt (IT SCHOOL OK GOVEKKMEHT HOT MENTIONED) B35. Were there any tblaga about the local schools or local government services that Influenced you in moving to this neighborhood? 8 o m e c h l w Ho things 1 ' (SKIP TO B36) B35arWhatweretheyI B36. Did you have all the same people living together in your family after you moved or were there some changes? changes I [ Same 1 1 (SKIP TO B37) B36a. How did your family situation change with moving? B37, Did you move from a place that you owned, rented, or what? I Owned I I Rented I Neither owned nor rented"! (SKIP TO B39) (SKIP TO B40) (U OWNED) B3S. About how much waa your houae worth? 3 (SKIP TO PACE g. Q. B41) (IP RENTED) B39. About how mucb rent did you pay? 3_ (SKIP TO PACE S. 0. B41) (IP NEITHER OWNED NOR RENTED) B40. How waa that! (GO TO PACE 8, TOP OP PAGE)

317 15 BIBLIOGRAPHY CHAPTER 17 of the 1960 Survey of Consumer Finances lists publications of the Economic Behavior Program of the Survey Research Center and publications by scholars not connected with the Center that were based to a substantial extent on Survey Research Center data. A supplemental list was included in the appendix of the 1961 Survey of Consumer Finances (pages ). The following list contains books and articles issued in 1962 and additions to the earlier bibliographies. Barlow, Robin, James Morgan, and Graver Wirick. "A Study of Validity in Reporting Medical Care in Michigan," Proceedings of the Social Statistics Section of the American Statistical Association, 1960, Bouldingy ELiae. "Orientation toward Achievement or Security in Relation to Consumer Behavior," Human Relations, XII (November 1960), Brazer, Harvey, and Martin David. "Social and Economic Determinants of the Demand for Education," in Economics of Higher Education, Selma Mushkin (ed.), Washington, D.C: U.S. Government Printing Office, Brownlee, Oswald, and Alfred Conard. "Effects upon the Distribution of Income of a Tight Money Policy," American Economic Review, LI(May 1961), Cohen, Jacob, and James Morgan. "The Effect of Cash Buying and Credit Buying on Consumer Liquid Savings," Journal of Finance, XVII (March 1962), "Consumer Psychology Comes of Age," Michigan Alumnus, XVI (January 1960), David, Elizabeth. "Public Preferences and the Tax Structure: An Examination of Factors Related to State and Local Tax Preferences." Unpublished Ph.D. dissertation, University of Michigan, David, Martin. Family Composition and Consumption. Amsterdam, The Netherlands: North-Holland Publishing Company, 1962.

318 Survey of Consumer Finances David, Martin. "The Validity of Income Reported by a Sample of Families Who Received Welfare Assistance during 1959,' 'Journal of the American Statistical Society, LVH (September 1962), , and James Morgan. "A New Interpretation of Statistics on Income Distribution," Proceedings of the Business and Economic Statistics Section of the American Statistical Association, 1961, Fisher, Janet. "An Analysis of Consumer Goods Expenditures in 1957," Review of Economics and Statistics, XLIV (February 1962), Foundation for Research on Consumer Behavior. Psychological Research on Consumer Behavior. Ann Arbor, Michigan, Goldberger, Arthur, and Maw Lin Lee. "Toward a Microanalytic Model of the Household Sector," American Economic Review, Papers and Proceedings, LIl(May 1962), Henle, Peter. "A New Look at the Status of Today's Union Member," The American Federationist, February 1961, Huang, David. "The Effect of Stock on Demand for Automobiles," Econometrica, XXX (April 1962), "The Demand for Automobiles in 1956 and 1957: A Cross Section Analysis." Unpublished Ph.D. dissertation, University of Washington, Katona, George. "Attitudes toward Installment Credit," The Industrial Banker, June 1962, pp. 12 ff. Oklahoma City, Oklahoma: National Consumer Credit Conference. (Also translated and published in Sweden.). "The Consumer's View of Consumer Credit," Consumer Finance News, XLVn (October 1962). Washington, D.C: National Consumer Finance Association.. "Consumers Wasters or Investors?" Challenge, X (December 1961), "Have Consumers Stopped Wanting?" Printer's Ink, February 17, 1961, "Motivational Research and the Consumer," Proceedings of XIV International Congress of Applied Psychology, Vol. V, Copenhagen, Denmark: Munksgaard, 1962., "The Relationship Between Psychology and Economics," in Psychology: A Study of a Science, Sigmund Koch (ed.), Vol. VI, New York: McGraw-Hill, in press.. "Review of The Achieving Society, by David McClelland," American Economic Review, LII {June 1962), "Statement before the Joint Economic Committee, Eighty-seventh Congress, Second Session, August, 1962." in State of the Economy and Policies for Full Employment, Washington. D.C: U.S. Government Printing Office, 1962.

319 Bibliography 307, Charles Lininger, James Morgan, and Eva Mueller Survey of Consumer Finances. Ann Arbor, Michigan: Survey Research Center, Kosobud, Richard. "Reconciliation Problems among the Social Accounts," Proceedings of the Social Statistics Section of the American Statistical Association, 1961, "A Problem Caused by Assignment of Missing Data in Sample Surveys," Econometrica, April 1963., and Kanta Murwah. "Estimates of the Influence of Credit Term Changes of Government Underwritten Mortgages on the Volume of Residential Construction." A paper presented at the Econometric Society meeting, September Kreinin, Mordechai. "Analysis of Contractual Payments," Review of Economics and Statistics, XLIV (February 1962), Lampman, Robert. "Changes in the Share of Wealth Held by Top Wealth-Holders, ," Review of Economics and Statistics, XLI (November 1959), "The American Tax System and Equalization of Income," Proceedings of the Forty-Ninth Annual Conference on Taxation, National Tax Association, 1956, Lansing, John B., and William Ladd. Interim Report on the National Travel Market Survey. Ann Arbor, Michigan: Survey Research Center, Lee, Maw Lin. "An Analysis of Installment Borrowing by Durable Goods Buyers," Econometrica, XXX (April 1962), 377. Lee, Tong Hun. "Demand for Housing: A Cross-Section Analysis," Econometrica, XXX (April 1962), 376. Lininger, Charles. "The Economic Position of the Aged, Retirement Plans and Attitudes toward Responsibility for the Needy Aged: Some Recent Survey Data." Background paper, University of Michigan Conference on Aging, June "The Effect of Weekly Unemployment Benefit Amounts on the Duration of Unemployment Benefits." Unpublished Ph.D. dissertation, University of Chicago, "Some Aspects of the Economic Situation of the Aged: Recent Survey Findings," Chapter 5 in Aging in the Economy, H. L. Orbach and C. Tibbits, (eds.). Ann Arbor, Michigan: University of Michigan Press, Maynes, E. Scott. "Review of 1960 Survey of Consumer Finances," Journal of Political Economy, LXX (August 1962), Merz, Paul. "The Income Tax Treatment of Owner Occupied Housing." Unpublished Ph.D. dissertation, University of Minnesota, 1961.

320 Survey of Consumer Finances Morgan, James. "The Anatomy of Income Distribution," Review of Economics and Statistics, XLIV (August 1962), "The Surveys of Consumer Finances, U. S. A.," in Family Living Studies A Symposium, Geneva, Switzerland: International Labor Office, 1961., Martin David, Wilbur Cohen, and Harvey Brazer. Income and Welfare in the United States. New York: McGraw-Hill, 1962., and Martin David. "The Aged: Their Ability to Meet Medical Expenses," Financing Health Care of the Aged, Appendix A, Part I, A Study of the Dimensions of the Problem. Chicago: Blue Cross Association and American Hospital Association, 1962., and Martin David. "Race, Economic Attitudes, and Behavior." A paper presented at the meetings of the Social Statistics Section of the American Statistical Association, September, 1962., and Martin David. "The Aged and Their Economic Position Some Highlights of a Survey Taken Early in 1960," Retirement Income of the Aging, Appendix IV. Hearings before the Special Committee on Aging, U.S. Senate. Washington, D.C: U.S. Government Printing Office, 1961., Martin David, and Harvey Brazer. "Factors Affecting Family Income: Results of a Conditional Probability Analysis,"Proceedings of the Social Statistics Section of the American Statistical Association, 1961, Muehl, Doris. A Manual for Coders Content Analysis at thesurvey Research Center. Ann Arbor, Michigan: Survey Research Center, Mueller, Eva, and James Morgan. "Location Decisions of Manufacturers," American Economic Review, Papers and Proceedings, LII (May 1962), Mueller, Eva, and Jay Schmiedeskamp. Persistent Unemployment, Kalamazoo, Michigan: W. E. Upjohn Institute for Employment Research, Mueller, Eva, Arnold Wilken, and Margaret Wood. Location Decisions and Industrial Mobility in Michigan Ann Arbor, Michigan: Survey Research Center, Mueller, Eva, and Gerald Gurin. Participation in Outdoor Recreation; Factors Affecting Demand among American Adults. Report to the Outdoor Recreation Resources Review Commission. Washington, D.C: U.S. Government Printing Office, Orcutt, Guy. "Microanalytic Models of the United States Economy: Need and Development," American Economic Review, Papers and Proceedings, LII (May 1962),

321 SURVEY* RESEARCH CENTER PUBLICATIONS 1960 Survey of Consumer Finances $7.50 (paperbound), 310 pp Survey of Consumer Finances. G. Katona, C. A. Lininger, J. N. Morgan, and E. Mueller $4.00 (paperbound), $5.00 (cloth), 150 pp Survey of Consumer Finances. G. Katona, C. A. Lininger, R. F. Kosobud $4.00 (paperbound), $6.00 (cloth). Paperbound copies of these three volumes can be purchased as a set for $ Order Survey Research Publications by author and title from the Librarian, Survey Research Center, University of Michigan, Ann Arbor, Michigan. Report on the National Travel Market Survey. 3. B. Lansing, W. Ladd, and N. Barth. $7.50 (paperbound), available June Location Decisions and Industrial Mobility in Michigan t E. Mueller, A. Wilken, and M. Wood $2.50 (paperbound), $3.00 (cloth), 115 pp. The Travel Market. E. Mueller, J. B. Lansing, T. Lorimer $2.50 (paperbound), 111 pp. Educational Achievement Its Causes and Effects. M. H. David, H. E. Brazer, J. N. Morgan, and W. J. Cohen $2.00 (paperbound), 158 pp. How People Pay for College. J. B. Lansing, T. Lorimer, and C. Moriguchi $3.00, 160 pp.

322 Survey of Consumer Finances Lump Sum Redemption Settlements and Rehabilitation: A Study of Workmen's Compensation in Michigan. J. N. Morgan, M. Snider, and M. G. Sobol Gratis, 151 pp. The Travel Market, J. B. Lansing and E. Lilienstein $5.00, 180 pp. Life Insurance Ownership among American Families, J. L. Miner (Paperbound) 100 pp. Consumer Expectations, G. Katona and E. Mueller $3.50, 143 pp. Consumer Attitudes and Demand, G. Katona and E. Mueller $1.50 (paperbound), 119 pp. Industrial Mobility in Michigan $1.50 (paperbound), 77 pp. OTHER BOOKS BY MEMBERS OF THE ECONOMY BEHAVIOR PROGRAM Income and Welfare in the United States. J. N. Morgan, M. H. David, W. J. Cohen, and H. E. Brazer. McGraw-Hill, An Investigation of Response Error. J. B. Lansing, G. P. Ginsburg, and K. Braaten. Bureau of Economic and Business Research, University of Illinois, The Powerful Consumer. G. Katona. McGraw-Hill, I960. Business Looks at Banks: A Study of Business Behavior. G. Katona, S. Steinkamp, and A. Lauterbach. University of Michigan Press, Consumer Economics. J. N. Morgan. Prentice-Hall, Inc., Contributions of Survey Methods to Economics. G. Katona, L. R. Klein, J. B. LanBing, and J. N. Morgan. Columbia University Press, Psychological Analysis of Economic Behavior. G. Katona. McGraw- Hill, 195lT

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