Income an Incomplete Measure of Farm Household
Well-Being
Carol A. Jones
and Ashok
K. Mishra
For more than a decade, average farm household
income has exceeded the U.S. household average by
around 15 percent. However, farm household income
is more variable. At the same time, the wealth of
farm households, like other households with self-employed
heads, tends to be substantially higher than the
wealth of the average U.S. household. Most of the
wealth of farm households is in farm land and equipment
and facilities for production.
In a variable-income/high-wealth
sector such as farming, well-being measures based
on both income and wealth can provide a better indication
of a household’s capacity to maintain its
standard of living than a measure of income taken
in a single year. During downturns in income, farm
households may be able to borrow against, or liquidate,
assets.
To create a joint income-wealth
well-being measure, we divided households into four
groups, separating them into low and high levels
of income, and low and high levels of wealth—with
the median levels of U.S. household income or wealth
as the dividing lines between low and high. Median
income (or wealth) is the level at which 50 percent
of households have greater income (wealth) and 50
percent have less.
In 2005, farm household median
income was about 20 percent higher than the median
for all U.S. households ($53,779 versus $46,326),
while farm household median wealth was five times
greater ($510,018 versus $97,755). And wealth is
more evenly distributed across all farm households
than it is among all U.S. households. For all U.S.
households with self-employed heads, median household
income ($68,701) is 27 percent higher than for farm
households, whereas median wealth ($352,380) is
about a third lower than for farm households.
As a rule, higher income U.S.
households also have higher wealth, and lower income
households have lower wealth. The combination of
low income and wealth can indicate low economic
well-being. But because nearly all farm households
are high wealth, the pattern is substantially different
for farm households relative to all U.S. households.
Lower income farm households are not more likely
to be lower wealth. In 2005, 37 percent of all U.S.
households were in this category, compared with
4 percent of farm households.
|
Download PDF version