Since its inception in the 1930s, farm policy has focused on achieving
economic parity between farm families and other households. Although
programs supporting farmers’ incomes have been used for decades,
the modern-day farm household also earns income off the farm and
through investments.
A comparison of how off-farm income and wealth affect well-being
of both farm and nonfarm households provides an interesting perspective
on the relevance of seeking parity for today’s farmers. New
data from USDA’s Agricultural Resource Management Survey
and the Federal Reserve’s Survey
of Consumer Finances allow
comparison of America’s 2 million farm households with two
separate nonfarm populations that, depending on their economic
focus, have much in common with farm households: 12 million self-employed
nonfarm households (those running a business other than a farm)
and 94 million other nonfarm households (those who worked for someone
else, were retired, or otherwise did not work) in 2001.
Arranging the households in each of the three groups from lowest
to highest income and wealth and comparing the resulting distributions
yields useful insights. In particular, the median of each group—where
half of the households have higher income or net worth (wealth)
and half have lower income or net worth—is a logical starting
point for comparison. Self-employed nonfarm households had the
highest median income ($62,000), followed by farm households ($45,000)
and other nonfarm households ($37,000). The same ordering of incomes
holds throughout the distribution—except at the lowest levels,
where the order changes because farm households are more likely
than nonfarm households to experience negative incomes. In 2001,
negative incomes were reported for 6 percent of farm households.
In contrast, far fewer nonfarm households, including self-employed
households, had negative incomes.
Nonfarm households similarly lag farm households and nonfarm
self-employed households when wealth distributions are compared.
For example, the median net worth of farm households ($339,000)
and of self-employed nonfarm households ($329,000) exceeded that
of other nonfarm households ($73,400). However, the ranking of
farm households and self-employed nonfarm households switched near
the median. Below the median, farm households’ net worth
tended to exceed that of self-employed nonfarm households. Above
the median, farm households tended to have lower net worth than
self-employed nonfarm households.
In effect, farm households are a diverse group. Although there
are similarities to nonfarm households, any comparison is sensitive
to whether income or wealth levels are used, as well as whether
we compare farm households to nonfarm self-employed or the general
population. As a result, the relevance and performance of farm
policies that change the income and wealth distribution may be
rated differently depending on the group, and the indicator, that
is used for comparison purposes.
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