revised equivalence scale

FO R E S T IM A T IN G

E Q U IV A L E N T IN C O M E S

O R B U D G E T C O S T S

B Y FA M ILY T Y P E

Bulletin No. 1570-2

U.S. DEPARTMENT OF LABOR

BUREAU OF LABOR STATISTICS

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revised equivalence scale

FOR ESTIMATING 

EQUIVALENT INCOMES 

OR BUDGET COSTS 

BY FAMILY TYPE

Bulletin No. 1 5 7 0 -2

U.S. DEPARTMENT OF LABOR

Willard Wirtz, Secretary

BUREAU OF LABOR STATISTICS

Ben Burdetsky, Acting Commissioner

November 1968

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Preface

Family equivalence scales are measures to determine the relative income required by 

families differing in composition to maintain equivalent levels of consumption. Ideally, 

such information would be obtained by developing estimates of budget costs for 

specified standards of living for various types of families. In lieu of such a battery of 

family budgets, which would be costly and time-consuming to construct, family equivalence scales have been developed for use with estimated budget costs for a specific 

type of family to approximate comparable costs for other family types.

Policy decisions and legislation designed to maintain or improve standards of 

living have multiplied the uses of such equivalence scales. Minimum wages, social 

security and other social insurance programs, as well as guidelines for public assistance, 

may be determined on the basis of prescribed levels of adequacy for family living. 

Programs for college scholarships, for public housing, and for distribution of food 

through the Food Stamp Plan are among those that attempt to distribute benefits 

equitably by stipulating family income as a criterion of eligibility.

The intensified attack on poverty after passage of the Economic Opportunity Act 

of 1964 promptly spotlighted a basic problem facing the Office of Economic Opportunity-defining and identifying the poor. A given income could not indicate 

comparable well-being for all types of families. Income adequate for an elderly 

couple fell short of meeting equivalent needs of families with several children.

The Bureau’s Survey of Consumer Expenditures, 1960-61, provided data for 

calculating new scale values for urban families of different sizes, cross-classified by 

family composition and age of head. In a sense, the scales introduced in this bulletin may be regarded as a progress report on the continuing program of research 

being conducted by the Bureau of Labor Statistics (BLS) to measure and evaluate 

levels of material well-being of American families. A great deal is yet to be known 

about the consumption behavior of families at different phases of the life cycle. The 

Bureau’s efforts, as well as research outside the Bureau referred to in appendix D, 

recognize the need for continued study and review of the assumptions and methods 

used in deriving equivalence scales.

This bulletin was prepared by Carolyn A. Jackson under the supervision of 

Helen H. Lamale, Chief of the Division of Living Conditions Studies and Kathryn R. 

Murphy, Chief of the Branch of Consumer Expenditure Studies. It is one of a series 

of bulletins prepared under the general direction of Arnold E. Chase, Assistant Commissioner, to report results of the standard budget research program.

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Contents

Page

Concepts and assumptions.................................................................................... 1

Formula derivation .............................................................................................. 1

Food expenditures-income elasticity ................................................................ 2

Steps in deriving scale based on food

expenditures-income......................................................................................... 3

Effect of family composition and age of head ................................................ 5

Comparison with other scales............................................................................... 7

Application of the scale .................................................................................... 9

Costs of goods and services .......................................................................... 9

Total budget c o s ts ........................................... 11

Tables:

1. Revised equivalence scale for urban families of different size, age,

and composition.................................................................................... 4

2. Equivalent income scales from selected studies ................................. 8

3. Estimated annual cost of goods and services for family

consumption at a moderate standard for families of differing

size, type, and age............................................................................... 10

4. Estimated annual cost of a budget providing a moderate living

standard for families of differing size, type, and age .................... 12

Appendixes:

A. Revised scale of equivalent income before ta x e s................................. 13

Table A-l Revised scale of equivalent income for urban families

of different size, age, and composition ........................................... 14

B. Experimentation with food consumption and total consumption

in scale................................................................................................... 15

C. Technical references............................................................................... 17

D. Research on scales outside the Bureau of Labor Statistics................. 21

Chart:

Revised equivalence scale for selected types of urban families composed 

of husband, wife, and children .................................................................. 6

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REVISED EQUIVALENCE SCALE: FOR ESTIM ATING EQUIVALENT INCOM ES OR

BUDGET COSTS BY FAMILY TYPE

Concepts and Assumptions

The basic problem in deriving an equivalence scale is 

to obtain an objective means of identifying equivalent 

levels of consumption for families of varying composition. Research and experimentation with family consumption data accumulated for more than 100 years 

have resulted in various criteria of general welfare. 

These include the relative adequacy of diets, the proportion of income spent for various categories of goods, 

or the proportion of income saved. 1

Historically, a food-income relationship has been the 

most commonly accepted criterion for appraising levels 

of living in the United States and in other countries. In 

1857, Ernst Engel observed, “The proportion of the 

outgo used for food, other things being equal, is the best 

measure of the material standard of living of a population.”* 2

Scales based on a combination of food and nonfood 

items have been developed, but they have presented 

more technical difficulties than those based on food 

alone. The problems arise partly because housing and 

certain other nonfood expenditures are family rather 

than individual in character. Prais and Houthakker 

referred to the difficulties of using nonfood items in 

scales in terms of the “existence of economies of scale.” 

This concept “gives expression to the possibility that, 

with given levels of income per person, a larger household may be able to attain a higher standard of living 

than a smaller household.” 3 *

In 1948, the BLS presented two scales for measuring 

equivalent income of families of different sizes with its 

initial calculation of the City Worker’s Family Budget.4 

These BLS scales or relatives of “family well-being” 

were based on adequacy of diets and amounts of savings. 

They related only to family size, and did not differentiate by age of head or age of oldest child.

iFor a summary of early consumption scales and source references, see technical reference 26, appendix C. See also

technical references 9, 16, and 27. In addition, appendix D

contains notes on procedures used outside the Bureau of Labor

Statistics in deriving measures of equivalence.

2As translated in Carle C. Zimmerman, Consumption and

Standards o f Living, technical reference 27, p. 99, appendix C.

3See appendix D and technical reference 16, pp. 145-146,

appendix C.

^Technical reference 23, pp. 28-30 and 49-51, appendix C.

The BLS Survey of Consumer Expenditures in 1950 

provided the detailed cross-classification of family expenditures necessary for a scale differentiating six 

family-size classes by family composition and age of 

head.5 In that scale, the measure used to determine 

equivalent income was the proportion of income after 

taxes spent on food. It is based on the assumption that 

families spending an equal proportion of income on 

food have attained an equivalent level of total consumption. The same assumption underlies the revised scale 

presented here.

Formulation of the equations used for the two latest 

BLS equivalence scales was preceded by extensive 

research showing that essentially the same form of relationship between food expenditures and income was 

observed in eight major consumer expenditure surveys 

conducted by the BLS between 1888 and 1950.6 

Before adopting the 1950 method for the present revision, similar research on the income elasticity of food 

expenditures was conducted with data from the Survey 

of Consumer Expenditures, 1960-61.

The principal advantage of the current BLS method 

of approximating equivalent levels of consumption is 

its objectivity. It can be calculated directly from 

measures of actual market behavior of different groups 

of families. Also, from an operational standpoint, the 

method is easy to use. It shares limitations of equivalence scales derived by other methods: The assumptions 

on which they are based are arbitrary and do not take 

into account all of the factors affecting levels of consumption for families differing in size and stage in the 

life cycle.

Formula Derivation

The relatives or indexes of equivalent income for 

families differing in size, type, and age of head who 

attained equal levels of consumption were derived from

tech n ical reference 22, appendix C.

^Technical reference 3, pp. 149-156, and technical reference

18, pp. 359-393, appendix C.

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the functional relationship of food expenditure and 

income,7 and expressed by formula:

(1) yi= Ki Cxi)°

Where,

y.= the average expenditure for food by family type i

X|= the average money income after taxes of family 

type i

Ki= the measure of level of the income-food expenditure relationship for family type i

e= income elasticity of food expenditures, assumed 

to be approximately

tfl The ratio of food expenditures to income for the i 

type family,

*i K.

— _ —E. (derived by dividing equation (1) by Xj),

Xj (x/ 2

when K. ( x ^ 2

K 4 ( x 4 ) 1/2

(2) or x{ K.

K.

2

Before deciding to use this method for revising the 

scale, the validity of the assumption that the income 

elasticity of food expenditures was 0.5 was tested with 

data from the Survey of Consumer Expenditures, 

1960-61. Special tabulations also were obtained to 

experiment with an alternative scale based on the 

1960-61 relationship of food consumption and total 

consumption. This alternative scale is discussed in 

appendix B.

Food Expenditures-lncome Elasticity

was computed for all urban families and single consumers. It was derived from a regression of the logarithm of average annual food expenditures8 on the 

logarithm of the average annual money income after 

taxes for nine income classes, excluding the class “under 

$ 1,000.” The relationship was linear, and the regression 

coefficient (or the income elasticity of food expenditure) 

was 0.53. This figure compares favorably with the elasticity of 0.54 found by previous studies,9 and substantiates the 0.5, or Vi, in the formula used to derive the 

scale. The value was rounded in the formula to avoid an 

implication of overprecision and to simplify computations.

Elasticities also were computed for the family types8 

shown below:

Deviation in 

standard 

units*

Husband-wife only

y/ = 1.1098 + .5 2 2 7 x '................... 014

Husband-wife, oldest child 

under 6 years

y ' = 1.0838 + .5 3 2 8 x '................... 045

Husband-wife, oldest child 

6-17 years

y / = 1.2714+ .5092X7 ....................020

Husband-wife, oldest child 

18 years and older

y '= 1.2310 + .5 1 8 7 x '....................022

One parent-own children 

only

y ' = .8914 + .5 9 4 8 x '....................018

Single consumer (one person)

y '= .5461 + .6 4 9 0 x '....................099

1.62

.73

.45

.83

5.12

1.50

* Assuming universe “e” = 0.5, deviation equals e. . eu

y ' = log of food expenditures -----------

x' = log of money income after taxes £ j~ ei

The income elasticity of food expenditures, or e in 

formula (1)

yr W

7This is the formula used in deriving the scale based on the

1950 data (see technical reference 22, pp. 1198-1199). For a

detailed discussion of the consumption function, see technical

references 3 and 18, appendix C.

8Average food expenditures for each income class were

adjusted for family size by using an equation which expresses

the relationship between the reported family size and the average

family size. This empirically derived relationship for standardizing family size was developed by Dorothy S. Brady and

Helen A. Barber; see technical reference 2, appendix C.

9Research of Brady and Snyder cited in technical references 3

and 18 showed that income elasticities of food expenditures calculated from over 300 cross-section family expenditure studies

in individual cities at different dates yielded an average value of

0.54.

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The standard error of the elasticity (a- e^ was 

highest for one-person families. The income distribution for this family type showed very few persons in 

the top two classes ($10,000 to $14,999 and $15,000 

and over).10 * Averages based on the food expenditures 

reported by this small number were not considered representative of either the level of food expenditures or 

the distribution of total food costs between home prepared food and meals in restaurants, etc. for all individuals with incomes of $10,000 or more. Exclusion of 

the top two income classes from the regression reduced 

the food elasticity for one-person families to 0.51 and 

the standard error to 0.033.

The one parent-children family was the only type for 

which the elasticity (.59) differed significantly (at the 

1-percent level) from the Vi or 0.5 assumed in the formula. The relation was linear, and no unusual cases 

explaining the high regression coefficient could be 

isolated. H

The algebraic adjustment to the scale to account for 

the elasticity of income for food being different from 

that of the base family was computed.12 The effect on 

the scale results, however, was minor, and for all practical purposes a scale for one-parent families derived in 

the same manner as for all other types is adequate.

Steps in D e r iv in g S c a le B a s e d on

Food Expenditures-lncome

To obtain data in the form required for the scale of 

equivalence represented by equation (2) above, special 

tabulations from the Survey of Consumer Expenditures,

^Survey o f Consumer Expenditures and Income, 1960-61:

Cross-Classification by Family Characteristics, Urban United

States, 1960-61, Supplement 2 to BLS Report 237-38, p. 3.

1 !The one-parent families were the smallest group for which a

food/income regression was computed. It may he less homogeneous than the other family types since by definition it

includes a parent with only grown children, as well as a parent

with young children.

12The principal difference in the case where a family-type has

an income elasticity for food different from that of the base

family is that the equivalent income ratio is no longer a constant but varies with the income of the base family. For

example, in the case where the i-th family type has an elasticity

of 3/5 the ratio becomes:

x

x

4

and it would be necessary to recompute the scale value each

year a different budget (i.e., x^) is estimated.

1960-61, were made for urban families. Data were tabulated for each of the four major geographic regions 

(Northeast, North Central, South, and West) and were 

combined with population weights to represent the 

entire urban United States. These tabulations provided 

average income after taxes and average food expenditures per family for a three-way classification of 

families13 by: (1) family size, (2) family type, and

(3) age of family head. (See table 1.)

The following steps were required to derive the equation of equivalent income x /k \ 2

1. K., or y. (when y = average food expenditure,

( x ^ 2 x = money income after taxes

for ith class) was computed for each size-age-type class.

2. Ratios of K. to K4 for the base class-husband 35 

to 44 years, wife, and 2 children, the older 6 to i5 

years—were calculated and squared.

3. The squared K ratios for all urban U.S. families 

were plotted by family type-size for different ages of 

head and smoothed graphically. Where necessary, lines 

representing the U.S. were smoothed by averaging 

regional differences by inspection.

4. A second graphic smoothing was made after 

plotting the ratios obtained in step 3 by age of headfamily type for each size group.

5. The smoothed values for seven age-of-head classes 

were combined by population weights into four classes, 

as follows:

Under 35 years (Under 25 and 25 to 34)

35 to 54 years (35 to 44 and 45 to 54)

55 to 64 years

65 years and over (65 to 74 and 75 and 

over)

The scale values are shown in table !.

13This is the principal difference between the procedures used

with 1960-61 and 1950 data. In 1950, three-way classifications

were not available. Therefore, an iterative process was used to

obtain the three-way classifications from averages for food

expenditures and income for each size-age class and each sizetype class. In combining the size-age and size-type classes, the

(x )1/2

was assumed to be proportional to Kj on the basis of evidence

from the earlier large sample surveys of 1935-36.

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T a b le !« R e v is e d E q u iv a le n c e S c a le 1 F o r U rban 

F a m ilie s o f D iffe re n t S ize , A g e , and C o m p o s itio n

|_4-person fa m ily -h u s b a n d , age 35 to 54, w ife , 2 c h ild re n , o ld e r 6 to 15 = 1 0 0 ]

A ge o f head

S ize and ty p e o f fa m ily 2 U nder

35 35-54 55 -64

65 or 

o ve r

One p e r s o n ..................................................................................................... 35 36 32 28

T w o p e rs o n s : a v e ra g e 3 .......................................................................... 47 59 59 52

H usband and w i f e .................................................................................... 49 60 59 51

One p a re n t and c h i l d .............................................................................. 40 57 60 58

T h re e p e rs o n s : a v e ra g e 3 ....................................................................... 62 81 86 77

H u sb a n d , w ife , c h ild u n d e r 6 ............................................................. 62 69 — -

H u sb a n d , w ife , c h ild 6 -15 ................................................................ 62 82 88 81

H u sb a n d , w ife , c h ild 1 6 - 1 7 ................................................................ -

4 9 1 88 -

H u sb a n d , w ife , c h ild 18 or o v e r ...................................................... - 82 85 77

One p a re n t, 2 c h ild r e n .......................................................................... 67 76 82 75

F o u r p e rs o n s : a v e ra g e 3 ....................................................................... 74 99 109 91

H u sb a n d , w ife , 2 c h ild re n , (o ld e r under 6 ) ............................... 72 80 ~ -

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 6 - 1 5 ) ...................................... 77 100 105 95

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 1 6 - 1 7 ) .................................. — 113 125 —

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 18 or o v e r ) ........................ - 96 no 89

One p a re n t, 3 c h ild r e n .......................................................................... 88 96 — —

F iv e p e rs o n s : a v e r a g e 3 ....................................................................... 94 118 124 —

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t under 6 ) ........................... 87 97 — —

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t 6 - 1 5 ) .................................. 96 116 120 -

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t 16-17) ............................... 128 138 -

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t 18 or o v e r) ..................... ~ 119 124

One p a re n t, 4 c h ild re n ....................................................................... 108 117 — —

S ix p e rso n s or m ore: a v e ra g e 3 ......................................................... 111 138 143 ~

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t un der 6) . . . . 101 — — —

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 6-1 5 ) . . . . . . no 132 140 —

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 1 6 - 1 7 ) .............. - 146 - -

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 18 or o v e r) . . - 149 - -

One p a re n t, 5 c h ild re n or more ...................................................... 125 137

^The scale values shown here are the percentages of the cost of goods and services for fam ily consumption of the base fam ily 

(4 persons— husband, age 35-54, w ife , 2 children, older ch ild 6-15 years) required to provide the same level of liv in g for urban 

fam ilies of d iffe re n t size , age, and com position.

^Husband-w ife and one-parent fam ilies w ith th e ir own children (including adopted and stepchildren) present, but w ith no other 

persons liv in g w ith the fa m ily.

^Scale values for in d ivid u a l fam ily types weighted by the number of fa m ilie s of each type in the universe. The averages include 

some types for which values were not shown separately because of the small number of such fam ilies in the sample.

^R evised.

SOURCE: Derived from BLS Survey of Consumer Expenditures, 1960-61*

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Effect of Family Composition

and Age of Head

The scale value for each size and type of family in 

each age class shown in table 1 is expressed as a percent 

of the spendable income for four-person urban families, 

composed of husband age 35 to 54 years, wife, and two 

children, the older of whom is 6 to 15 years old. This 

general type is most comparable to that described for 

the City Worker’s Family Budget, which consists of an 

employed husband 38 years old, his wife, a 13-year old 

son, and an 8-year old daughter.14 Application of the 

scale to costs for consumption goods and services in the 

City Worker’s Family Budget (CWFB) provides estimates 

of budget costs for consumption goods and services 

(spendable income) required by different types of urban 

families. Income and other personal taxes, social 

security deductions, etc. vary by family size, age, and 

level of income, and therefore must be calculated separately. An adjusted scale appropriate for application to 

income before taxes or total budget costs is described 

in appendix A.

The new scale based on the 1960-61 food expenditure-income relationship confirmed the relationships 

revealed by the previous BLS scale based on 1950 data. 

To maintain an equivaient15 level of “well being,” (1) as 

family size increases, more income is necessary regardless 

of the family composition and age of head; and, (2) for 

families with a husband, wife, and children present, 

income requirements rise as the age of the oldest child 

increases from under 6 years to 16 or 17 years old.

The chart shows that for all husband-wife-children 

families in which the husband is under 65, the age of 

the oldest child makes a difference in the income 

required for the family. Families headed by a husband 

under 35 are predominantly of two types—the oldest 

child is 6 to 15 years or is under 6. Although the first 

type needs more income for all family sizes than the 

second type, the differences are relatively small. The 

reason for the similarity may be that in many families 

having a father under 35 and the oldest child 6 to 15 

years, that child is under 12,16 attends elementary

14U.S. Department of Labor, Bureau of Labor Statistics, City

Worker’s Family Budget for a Moderate Living Standard, Autum 1966 (Bulletin 1570-1).

!5lt should be kept in mind that equivalent “well being” is

measured by the percent of income spent on food.

^Available CES tabulations classify husband-wife families

only by the age range of the oldest child and do not show the

distribution of children within these age classes.

school, and has not begun the period of rapid growth 

and the pattern of expenditures associated with teenage 

youth. A comparison of these young families and the 

same type families having an older head (35 to 54 years) 

supports this observation. For all family sizes, the income required for equivalent consumption is higher for 

the group headed by 35 to 54-year-old fathers than by 

younger ones. When the father is 35 to 54, probably his 

oldest child is more frequently 13 to 15 than under 12 

years. This 35 to 54 age group, which includes the basetype family, shows most completely the range of changing income requirements as the children grow up.

Families whose oldest son or daughter is 16 or 17 

years old in general need more income than other famines; those whose oldest child is 18 years old and over 

tend to have income requirements similar to families 

whose oldest child is 6 to 15 years old. Study of 

the food-income relationships for these groups suggests 

that although average food expenditures continue to 

rise for the 18- and -over type, incomes rise faster.

Families having a child 18 and over had higher average incomes and also a higher average number of fulltime earners (1.3 earners) in 1960-61 than any other 

type of family.17 These data indicate that in a third of 

the families having a child beyond high school age, not 

only the father but the mother and/or children were 

working. If the number of earners had been held constant and, in effect, it was assumed that the children 18 

years old or over were dependent on the parent’s income, the decrease in the scale value probably would 

not have occurred. However, it must be stressed that 

the data underlying the family equivalence scale had no 

limitations on employment of family members, such as 

those specified in the standard budgets for the city 

worker’s family and the retired couple. The decreasing 

scale reflects the anomaly that while the presence of 

children 18 and over adds to the costs for equivalent 

well-being in some families, these young adults also contribute to the achievement of higher levels of living for 

the family. On the other hand, food expenditures for 

the 18-and-over group may have been understated because of difficulties in reporting amounts spent on meals 

by young people attending school away from home.

The one-parent-children family represents a less 

homogeneous group than a husband-wife family type 

specifying the age of the oldest child. Less than 7 percent of the families of two persons or more in the 1960-

17Survey o f Consumer Expenditures, 1960-61: Cross-Classification o f Family Characteristics, Urban United States, 1960-

61, Supplement 2 to BLS Report 237-38, pp. 17-22.

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or more or more or more

Source: Tablet.

Number of p e r s o n s In family

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61 urban sample were the one parent-children type. 18 

Because the sample was small, these families were not 

cross-tabulated by the age of oldest child. Sixty percent 

of the two-person, one-parent families had no children 

under 18 and in all probability the parent would be 

over 35 years. The scale, therefore, of one parentchildren composed of two persons, the head being 35 

years and over would be roughly comparable to the 

scale values for the husband-wife only type in that age 

range. (See table 1.) The same size family that had a 

parent under 35 conceivably could have a lower scale 

value than the husband-wife type because of the presence of a young child rather than another adult.

Comparatively few families in which the husband is 

65 years or older have children living at home. The scale 

values in table 1 for such older families are based on 

small samples. However, there is a general tendency for 

the income required for family equivalence to rise as 

the age of head increases, but to decline for families 

headed by persons 65 years and over.

C om p arison with Other Scales

Selected values from the Bureau’s revised equivalence 

scale are compared with values from previous BLS scales 

and from scales estimated by other agencies in table 2. 

As already indicated, the BLS used essentially the same 

procedures for estimating the scales based on data from 

its 1960-61 and 1950 surveys. Each of the other scales 

was derived by different methods, described briefly ia 

the footnotes to table 2.

The BLS scale values derived from the 1960-61 survey 

are lower than comparable values from the 1950 survey 

on both sides of the base-type (four person) family. 

However, the 1960-61 BLS scale is in line with the three 

other scales (identified in table 2 as IDA, Nutritive 

Adequacy, and SSA) developed during the 1960’s to 

arrive at a poverty cutoff level. The close correspondence between the 1960-61 BLS scale and the IDA 

scale is of particular interest, since the latter also is 

based on food and income information from the BLS 

Survey of Consumer Expenditures, 1960-61, but was 

estimated by a different type of regression analysis.

Increases in income and reduction in the proportion 

of income families spent for food in the decade following 1950 affected the relationships between the scale 

values derived from the two surveys. Although it is 

difficult to isolate specific causes of change or to measure their effect on the scales, some unusual conditions

l 8Ibid.,p. 17.

in 1950 can be noted. Housing shortages persisted and 

rent controls imposed during World War II remained in 

effect in most large cities throughout 1950. In mid-year, 

the outbreak of hostilities in Korea stimulated such 

demand for consumer durables that in September and 

October the Federal Reserve Board issued regulations 

to reduce inflationary pressure by curtailing credit for 

automobiles, homes, and many household durables.

There is evidence that these restraints affected spending of some types of families more than others and may 

be relevant in explaining the decrease after 1950 in the 

scale for one-person families. In 1950, the average single 

consumer spent 52 percent of his total food bill for 

food away from home, compared with 17 percent for 

meals away from home by families of two persons or 

more. By 1960-61, the single consumer was spending 

only 42 percent of his food budget for food away from# 

home. This difference suggests that rather than living in 

boarding houses or in a rented room and eating in restaurants as in 1950, a larger share of the single consumers 

were living in apartments and preparing many of their 

meals in 1960-61. After allowance for price changes 

between 1950 and 1960-61, food expenditures of single 

consumers declined about 9 percent, and those of families of two persons or more were practically identical in 

the two periods. 19

The decrease in the proportion of nonhousekeeping 

families from almost 10 percent of all urban families in 

195020 to only 4 percent in 1960-61 corroborates these 

observations. In brief, families had greater freedom of 

choice in their living arrangements and purchases and 

generally higher incomes in 1960-61 than in 1950, and 

the consequent adjustments of individual family spending plans affect the indicators of equivalent levels of 

well-being as measured by BLS expenditure surveys. 

Also, it can be speculated that the relative position of 

small families on the scale might be altered by a different set of assumptions for deriving the measure of 

equivalence. For example, they might be higher on a 

scale based on some combination of food and housing 

expenditures that allowed for “economies of scale” in 

housing referred to earlier. *2

l^These comparisons were developed by Laura Mae Webb in

“Food Expenditures of Urban Families, 1950 to 1960-61,”

Monthly Labor Review, February 1965, pp. 151-52.

2®Helen H. Lamale, Methodology o f the Survey o f Consumer

Expenditures in 1950, p. 107. A housekeeping family contains

at least 1 member who regularly eats at least 10 meals a week at

home or carried from home.

7

Digitized for FRASER 

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Federal Reserve Bank of St. Louis
Table 2. E quivalent Income Scales from Selected Studies 

(Specified 4-person fam ily = 100)

Fam i ly s iz e

BLS

P e rcen t of incom e 

spent on food in

N u tritiv e

adequacy

SSA P o ve rty 

index--econom y

WPA

M a intenance

A dequacy 

o f d ie ts

Am ount of 

savings

1935-36,

1960-61' 19502 ID A 3 19624 le v e l5 b u d g e t^ 1935-367 1941, 1944®

One p e r s o n ............................................................... 36 50 ... .. . 549 ... ... 46

T w o p e r s o n s ........................................................ j

... ... 64 59 564 ... 65 66

M arried c o u p le ..................................................... 60 66 ... ... ... 67 ... ...

T h re e p e r s o n s ......................................................... ... ... 82 81 78 .. . 84 84

M arried c o u p le , c h ild 6 - 1 5 ........................... 82 87 ... ... ... ... . . . . . .

M arried c o u p le , boy 13 .................................

. . . . . . . . . . . . . . . 87 . . . . . .

F our p e r s o n s ............................................................ . . . . . . 100 100 100 . . . 100 100

M arried c o u p le , 2 c h ild re n , o ld e r 6-15 • . 100 100 . . . . . . . . . . . . ... ...

M arried c o u p le , boy 13, g irl 8 ....................

... ... ... ... ... 100 ... ...

F iv e p ersons ............................................................ ... ... 116 116 118 ... 115 114

M arried c o u p le , 3 c h ild re n , o ld e s t 6-15 • 116 120 ... .. . ... ... ... ...

M a rrie d c o u p le , boy 13, g irl 8, c h ild 6 * * ... ... ... ... ... 114 ... ...

S ix p ersons ...............................................................

M arried c o u p le , 4 or more c h ild re n ,

... ... ... 130 132 ... 129 127

o ld e s t 6-15 ........................................................

M arried c o u p le , boy 13, g irl 8, 2 c h ild re n ,

132 137 .. . ... .. . ... ... ...

4 and 6 ...............................................................

... — 128 ...

^ See ta b le 1. A g e o f h e a d , 3 5 -5 4 y e a r s .

^ “ E s tim a tin g E q u iv a le n t In c o m e s o r B u d g e t C o s ts by F a m ily T y p e ,” M o n th ly L a b o r R e v ie w , N o v e m b e r 1 9 6 0 / p* 1198* A g e o f h e a d , 3 5 -5 4 y e a rs .

^ E ll i o t W e tz le r, D e te r m in a tio n o f P o v e rty L in e s a nd E q u iv a le n t W e lfa re , R e s e a rc h P a p e r P -2 7 7 , In s titu te fo r D e fe n s e A n a ly s is , S e p te m b e r 1 9 6 6 / p. 8 . B a se d on fo o d c o n s u m p tio n -in c o m e r e la tio n ­

s h ip s fo r u rb a n fa m ilie s d e riv e d b y re g re s s io n a n a ly s e s o f c ro s s -s e c tio n d a ta fro m th e B L S S u rv e y o f C o n s u m e r E x p e n d itu re s , 1 96 0 -6 1 *

^ R o s e D . F rie d m a n , P o v e rty , D e f in itio n a n d P e r s p e c tiv e , A m e ric a n E n te rp ris e In s titu te fo r P u b lic P o lic y R e s e a rc h , W a s h in g to n , D „C „, F e b ru a ry 1 9 6 5 , p. 26* B a se d on 196 2 in c o m e s a t w h ic h n o n ­

fa rm h o u s e h o ld s o f v a ry in g si ze s a c h ie v e n u t r it iv e a d e q u a c y --w h e re n u tr itiv e a d e q u a c y is d e fin e d as 75 p e rc e n t o f th e fa m ilie s m e e tin g tw o -th ird s o f th e re co m m e n d e d a llo w a n c e s o f th e N a tio n a l R es e a rc h C o u n c i I .

^ M o llie O rs h a n s k y , “ C o u n tin g th e P o o r: A n o th e r L o o k a t th e P o v e rty P r o f ile , " S o c ia l S e c u rity B u lle tin , J a n u a ry 1965, p. 9* N o n fa rm fa m ilie s o f 3 p e rs o n s o r m ore w e re c la s s ifie d as poor w hen 

th e ir a n n u a l m o n ey in c o m e w a s le s s th a n 3 tim e s th e c o s t o f th e IL S . D e p a rtm e n t o f A g r ic u ltu r e e c o n o m y fo o d p la n d e s ig n e d to p ro v id e a d e q u a te n u tr itio n . D iffe r e n t d e fin itio n s w e re d e v e lo p e d fo r 

1 -o r 2 -p e rs o n fa m ilie s .

® L e lia M. E a s s o n a nd E dna C„ W e n tw o rth , “ T e c h n iq u e s fo r E s tim a tin g the C o s t o f L iv in g a t th e W P A M a in te n a n c e L e v e l fo r F a m ilie s o f D iffe r e n t C o m p o s itio n ," S o c ia l S e c u rity B u ile tin ,M a r c h 

1 9 4 7 , p* 12* S c a le s c a lc u la te d fro m c o s ts o f W P A M a in te n a n c e B u d g e t in S t. L o u is , Ju n e 15, 1 9 4 1 . A g e o f h e a d , 3 6 -4 7 y e a rs .

^ W o rk e rs ’ B u d g e ts in th e U n ite d S ta te s : C ity F a m ilie s and S in g le P e rs o n s ...1 9 4 6 and 194 7, B L S B u lle tin 927 (1 9 4 8 ), p* 5 1. B a s e d on p e rc e n t o f fa m ilie s w ith a d e q u a te d ie ts by in c o m e , 1 93 5-36 , 

a g e o f h e a d a nd fa m ily c o m p o s itio n n o t s p e c ifie d .

Digitized 

°lb id . Based on percent of income saved by fam ilies of different size; age of head and fam ily com position not specified.

for FRASER 

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Federal Reserve Bank of St. Louis
A p p lication of the Scale

Underlying the Revised Equivalence Scale based on 

the food expenditure-income relationship, as has been 

stated, is the assumption that families who spend an 

equal percent of their income on food have attained an 

equivalent level of consumption. Implicitly the use of 

this scale also assumes that a family first satisfies its 

need for food, and then disburses the remaining income 

for less essential goods and services. Thus, when one 

family type spends a smaller percent of its income for 

food than another type, it is assumed that the first 

family type needs less income to satisfy its food requirement, that is, to provide an equivalent level of consumption.

In general these assumptions are reasonable for most 

families, but for some family types the percentage of 

income spent for food may not be an adequate measure 

of equivalent well-being. Even within the rather narrowly defined family types specified in table 1, there is 

room for considerable variation in composition and 

spending patterns, and such variation increases as the 

number of children and the age of the oldest child 

rise.21 Also, the scales are based on the market behavior of families as recorded in the Survey of Consumer 

Expenditures, rather than on standards satisfying specified physical or social requirements. The nature of food 

expenditures makes them more flexible than those for 

housing or automobiles that frequently involve longterm obligations, and it may be easier for families to 

economize on food to offset temporary reductions in 

income than to reduce contractual payments. Implicitly, 

the averages on which the scale values are based take 

account of such variations among families of specified 

types, but the scales should be used as guidelines and not 

interpreted in too literal or precise a manner.

The only type of family other than the four-person 

city worker’s for which BLS has prepared a standard

21 These observations are particularly pertinent in using scale

values for the open-end classes of size and age of oldest child.

The average number of persons in urban husband and wife families having 4 children or more ranged from 6.1 in families in

which all the children were under 6 years to 7.4 persons in

families having children 18 and over. The latter group had an

average of 3.9 children under 18 and 1.5 children 18 and over.

(See CES report cited in footnote 17.) No data were tabulated

on the sex or employment status of the children in the CES

sample.

budget is the retired couple.22 The U.S. urban average 

of costs for a retired couple’s budget for a moderate 

living standard at autumn 1966 prices was 49.6 percent 

of the costs of goods and services in the budget for the 

four-person city worker’s family. The Revised Equivalence Scale value for a two-person family in which the 

husband was 65 years or older was 51 (table 1). The 

slightly lower percentage indicated by the comparison 

of standard budgets for the two family types is in the 

direction that might be expected because the scale value 

for the couple headed by a husband 65 years or older 

was derived from family accounts for both employed 

and retired persons.

Cost of Goods and Services

In using the Revised Equivalence Scale with the City 

Worker’s Family Budget to estimate the cost of equivalent consumption for other sizes and types of families, 

the scale values should be applied to the cost of family 

consumption, i.e., the costs for goods and services. 

Other outlays or deductions—for income taxes particularly—vary by family size, age of head, and level of 

income, and must be calculated separately to estimate 

total budget costs.

Estimated autumn 1966 costs of goods and services to 

maintain a moderate living standard for selected types of 

urban families are shown in table 3. For families headed 

by persons under 65 years, averages were estimated by 

applying the Revised Equivalence Scale to the estimated 

annual cost of consumption in the City Worker’s Family 

Budget in each of the 39 metropolitan areas and regional 

groups of nonmetropolitan places for which separate 

costs were calculated for the CWFB. For the 65 years 

and older classes, however, the Retired Couple’s Budget 

is shown for the husband-wife family and has been used 

as the base for estimating costs for the retired single 

person. (See footnote 5, table 3.) As indicated in the 

earlier reference to the Retired Couple’s Budget, these 

amounts tend to be slightly lower than would be obtained by applying the Revised Equivalence Scale values 

for the older families to the CWFB. The size and 

direction of the small differences vary among cities, 

because the percentage that the Retired Couple’s Budget 

is of the CWFB varies from city to city.

22Costs of the City Worker’s Family Budget and the Retired

Couple’s Budget for a moderate living standard, priced in 39

metropolitan areas and 4 regional classes of nonmetropolitan

areas in autumn 1966, and the Revised Equivalence Scale are

shown in the 1968 edition of the Bureau’s Handbook o f Labor

Statistics (BLS Bulletin 1600).

9

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Federal Reserve Bank of St. Louis
^ r b a n U n ite d States, 39 M e tro p o lita n A reas and N o n m e tro p o lita n A reas by R e g io n , A utum n, 196£]

T a b le 3« E stim ated A nnual C o s t o f Goods and S e rvice s for F a m ily C o n s u m p tio n 1

A t a M oderate Standard fo r F a m ilie s o f D iffe rin g S ize, T yp e , and Age

A rea

S ingle person, 

under 35 

y e a rs 2

H usband and w ife under 35 y e a rs 2 Husband and w ife , 35-54 years Husband and 

w ife re tire d , 

65 years 

and o v e r4

S in g le person 

re ti red,

65 years

No c h ild re n and overS

1 c h ild under 

6 years

2 ch ild re n 

o ld e r under 

6 years

1 c h ild 6-15 

years 2

2 chi Idren 

o ld e r

6-15 years3

3 ch ild re n 

o ld e s t 

6-15 y e a rs 2

Urban U n ite d S t a t e s ................................................................. $2,570 $3,590 $4,540 $5,280 $6,010 $7,329 $8,500 $3,637 $2,000

M e tro p o lita n a re a s .................................................................... 2,620 3,660 4,630 5,380 6,130 7,474 8,670 3,766 2,070

N o n m e tro p o lita n a r e a s .......................................................... 2,340 3,270 4,140 4,810 5,480 6,681 7,750 3,252 1,790

N o rth e a s t:

B o s to n , M a s s "............................................................................ 2,820 3,940 4,990 5,790 6,600 8,045 9,330 4 ,040 2,220

B u ffa lo , N . Y .............................................................................. 2,680 3,750 4,750 5,510 6,280 7,657 8,880 3,952 2,170

H a rtfo rd , Conn ....................................................................... 2,830 3,960 5,010 5,820 6,630 8,086 9,380 4,091 2,250

L a n c a s te r, P a ........................................................................... 2,530 3,540 4,470 5,200 5,920 7,215 8,370 3,681 2,030

New Y o rk -N o rth e a s te rn New J e r s e y ............................. 2,810 3,940 4,980 5,780 6,590 8,031 9,320 4 ,064 2,240

P h ila d e lp h ia , Pa. - N. J ....................................................... 2,560 3,590 4,5 4 0 5,270 6,000 7,319 8,490 3,765 2,070

P itts b u rg h , P a ............................................................................ 2,490 3,490 4,410 5,120 5,840 7,117 8,260 3,682 2,030

P o rtla n d , M a in e ....................................................................... 2,620 3,670 4,640 5,390 6,140 7,491 8,690 3,861 2,120

N o n m e tro p o lita n areas ....................................................... 2,510 3,510 4,440 5,160 5,880 7,166 8,310 3,603 1,980

N orth C e n tra l:

C edar R a p id s , Iowa ............................................................. 2,610 3,650 4,620 5,360 6,110 7,446 8,640 3,721 2,050

C ham p a ig n -U rb a n a , III ....................................................... 2,650 3,710 4,690 5,450 6,210 7,568 8,780 3,782 2,080

C h ic a g o , III.-N o rth w e s te rn In d ia n a ................................ 2,690 3,770 4,770 5,530 6,300 7,685 8,920 3,732 2,050

C in c in n a ti, O h io - K y . - I n d .................................................... 2,511 3,520 4,450 5,170 5,880 7,173 8,320 3,535 1,940

C le v e la n d , O hio ....................................................................... 2,630 3,690 4,670 5,420 6,170 7,525 8,730 3,770 2,070

D a yto n , O hio .......................................................................... 2,460 3,440 4,350 5,050 5,750 7,016 8,140 3,545 1,950

D e tro it, M ich ....................................................................... 2,530 3,550 4,490 5,210 5,940 7,241 8,400 3,618 1,990

Green B ay, W i s ....................................................................... 2,470 3,460 4,380 5,080 5,790 7,057 8,190 3,584 1,970

In d ia n a p o lis , I n d .................................................................... 2,630 3,680 4,650 5,400 6,150 7,503 8,700 3,832 2,110

K ansas C ity , Mo. - K a n s .................................................... 2,550 3,560 4 ,510 5,240 5,960 7,272 8,440 3,634 2,000

M ilw a u k e e , Wis ....................................................................... 2,640 3,700 4,680 5,430 6,190 7,547 8,760 3,838 2,110

M in n e a p o lis -S t. P a u l, Minn ............................................. 2,570 3,590 4,540 5,280 6,010 7,329 8,500 3,733 2,050

St. L o u is , Mo. - I I I ................................................................. 2,580 3,610 4,570 5,310 6,050 7,376 8,560 3,703 2,040

W ic h ita , K a n s ........................................................................... 2,520 3,520 4,460 5,180 5,900 7,189 8,340 3,616 1,990

N o n m e tro p o lita n areas ....................................................... 2,390 3,340 4,230 4,910 5,590 6,819 7,910 3,360 1,850

South:

A tla n ta , G a ................................................................................. 2,370 3,320 4,200 4,880 5,560 6,774 7,860 3,366 1,850

A u s tin , T e x .............................................................................. 2,280 3,190 4,030 4,680 5,330 6,774 7,550 3,322 1,830

B a ltim o re , M d ........................................................................... 2,420 3,390 4,290 4,990 5,680 6,505 8,030 3,641 2,000

B aton R ouge, L a .................................................................... 2,400 3,360 4,260 4,940 5,630 6,863 7,960 3,277 1,800

D a lla s , T e x ................................................................................. 2,400 3,360 4,250 4,940 5,630 6,861 7,960 3,421 1,880

Durham , N - C .............................................................................. 2,390 3,350 4,240 4,920 5,610 6,838 7,930 3,392 1,870

H o u sto n , T e x .......................................................................... 2,380 3,330 4,210 4,890 5,570 6,794 7,880 3,411 1,880

N a s h v ille , T e n n ........................................................................ 2,430 3,400 4,300 4,990 5,680 6,928 8,040 3,498 1,920

O rla n d o , F la ............................................................. ................... 2,390 3,340 4,230 4,910 5,590 6,820 7,910 3,467 1,910

W ashington, D .C .- M d .- V a .................................................... 2,600 3,630 4,600 5,340 6,080 7,419 8,610 3,801 2,090

N o n m e tro p o lita n areas ....................................................... 2,210 3,090 3,910 4,540 5,170 6,310 7,320 3,051 1,680

W est:

B a k e rs fie ld , C a lif ................................................................. 2,490 3,480 4,400 5,110 5,820 7,103 8,240 3,559 1,960

D enver, C o lo ........................................................................... 2,580 3,610 4,570 5,300 6,040 7,363 8,540 3,673 2,020

H o n o lu lu , H a w a i i .................................................................... 3,020 4,230 5,350 6,210 7,070 8,626 10,010 4 ,168 2,290

L o s A n g e le s -L o n g B each, C a l if ....................................... 2,630 3.680 4,660 5,410 6,160 7,514 8,720 3,752 2,060

San D ie g o , C a lif .................................... ............................... 2,590 3,630 4,590 5,330 6,070 7,405 8,590 3,610 1,990

San F ra n c is c o -O a k la n d , C a lif ....................................... 2,750 3,850 4,870 5,660 6,450 7,860 9,120 3,921 2,160

S e a ttle -E v e re tt, W a s h .......................................................... 2,740 3,830 4,850 5,630 6,410 7,821 9,070 4,005 2,200

N o n m e tro p o lita n a r e a s .......................................................... 2,450 3,430 4,350 5,550 5,750 7,008 8,130 3,466 1,910

'E x c lu d e s g ifts and c o n trib u tio n s , lif e in s u ra n c e , oc c u p a tio n a l exp en ses, social s e c u rity and d is a b ilit y paym ents, and pe rson al ta x e s .

2 E s tim a te d by a p p ly in g the re v is e d e q u iv a le n c e s cale in ta b le 1 to c o s t of fa m ily c on sum p tio n fo r the C ity W orker’ s F a m ily B udget (see fo o tn o te 3)f and rou nd ing to ne are st $10.

^ E s tim a te s fo r the 4-person fa m ily d e s c rib e d in C ity W orker’ s F a m ily Budget for a M oderate L iv in g Standard, Autum n 1966, BLS B u lle tin 1570*1 (1967), pp. 9-1 2- 

^ E s tim a te s fo r th e R e tire d C o u p le ’ s B u dg et de scribe d in BLS B u lle tin 1570-3 (1968), pp. 3-6.

^ E s tim a te d by a p p ly in g the ra tio o f the rev is e d eq uiv a le n c e s cale v alue for one person to husband and w ife fa m ilie s , 65 or over, to c o s t of fa m ily con sum p tio n in R etire d C o u p le ’ s B udget (see fo o tn o te 4), and rou nd ing 

Digitized to ne a re s t $1 0.for FRASER 

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Federal Reserve Bank of St. Louis
Total Budget Costs

As has been explained, the Revised Equivalence Scale 

was derived from the relationship of food expenditures 

to income after personal taxes. For some purposes, 

however, a scale that more closely approximates total 

income requirements for different family types is 

needed. Therefore the BLS has adjusted the Revised 

Equivalence Scale to include all costs in the CWFB 

except State and local income taxes and disability insurance. The scale and a statement on its derivation are 

presented in appendix A. Differences between the two 

scales are relatively minor. The scale adjusted to measure income before taxes is slightly higher than the 

Revised Equivalence Scale (table 1) for families of one, 

two, or three persons, and a little lower for families 

having five members or more. The direction of these 

small differences may be attributed to the fact that larger 

families have more exemptions than smaller families in 

computing taxes for Federal income tax purposes.

The adjusted scale has been applied to the total budget costs (excluding State and local personal taxes) for 

the CWFB in 39 metropolitan areas and four regional

groups of nonmetropolitan areas23 (table 4). This scale 

is also appropriate to use with family income statistics 

that are reported generally as total income before taxes, 

for example, in the decennial censuses and in Current 

Population Surveys conducted by the Bureau of the 

Census. Adjusted scale values are not shown for families 

headed by persons 65 years and over, because in the 

Retired Couple’s Budget it was assumed that most of the 

income taxes, deductions for social security, etc., were 

not applicable for older families at a moderate living 

standard. 2

2 3 In 11 of these areas, such taxes either were not collected or

only in nominal amounts (less than $10). In the remaining

areas, these taxes represented a small fraction of the total budget

costs but estimating the amounts for different family types

would be time consuming and difficult, particularly in metropolitan areas including several tax jurisdictions such as Washington, D.C.-Va.-Md. Payments for disability insurance included in

the CWFB were applicable only in the States of California, New

York, and New Jersey. Users needing more precise budget costs

for different family types within a particular area may derive

their own estimates of these taxes from local tax sources.

11

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Federal Reserve Bank of St. Louis
CT Urban U n ite d S tates, 39 M e tro p o lita n A reas and N o n m e tro p o lita n A reas by R egion, Autum n, 1966 U

T a b le 4. E stim a te d A nnual C o s t o f a B u d g e t1 P ro v id in g a M oderate L iv in g

Standard fo r F a m ilie s o f D iffe rin g Size, T yp e , and Age

Area

S ingle person, 

under 35 

y e a rs 2

Husbiand and w ife under 35 y e a rs 2 Husband and w ife 35-54 years

No chi Idren

1 c h ild under 

6 years

2 c h ild re n 

o ld e r under 

6 years

1 c h ild 6-15

years2

2 chi Idren 

o ld e r

6-15 y e a rs 3

3 ch ild re n 

o ld e s t 

6-15 y e a rs 2

Urban U n ite d S t a t e s ....................................... $3,350 $4,530 $5,610 $6,430 $7,510 $ 9,051 $10,410

M e tro p o lita n a re a s ........................................... 3,420 4,620 5,720 6,560 7,660 9,233 10,620

N o n m e tro p o lita n a r e a s ................................. 3,050 4,120 5,110 5,850 6,840 8,242 9,480

N o rth e a s t:

B o sto n , M ass ................................................. 3,700 4,990 6,190 7,090 8,290 9,986 11,490

B u ffa lo , N Y .................................................... 3,520 4,750 5,890 6,750 7,890 9,505 10,930

H a rtfo rd , C o n n ................................................. 3,700 5,000 6,200 7,100 8,300 10,000 11,500

L a n c a s te r, P a ................................................. 3,310 4,470 5,540 6,340 7,410 8,932 10,270

New Y o rk -N o rth e a s te rn New J e rs e y . . . 3,690 4,990 6,190 7,090 8,280 9,981 11,480

P h ila d e lp h ia , P a .-N J ................................. 3,350 4,530 5,620 6,440 7,520 9,065 10,430

P itts b u rg h , P a ................................................. 3,260 4,410 5,460 6,250 7,310 8,809 10,130

P o rtla n d , M a in e .............................................. 3,420 4,630 5,740 6,570 7,680 9,254 10,640

N o n m e tro p o lita n a r e a s ................................. 3,280 4,440 5,500 6,300 7,370 8,876 10,210

N orth C e n tra l:

Cedar R a p id s, Io w a ....................................... 3,420 4,620 5,730 6,560 7,670 9,235 10,620

C ham p a ig n -U rb a n a , I I I ................................. 3,460 4,680 5,800 6,640 7,760 9,350 10,750

C h ic a g o , 111.-N o rth w e s te rn Indiana* . . . 3,510 4,750 5,900 6,740 7,880 9,497 10,920

C in c in n a ti, O h io - K y . - I n d ........................... 3,280 4 ,440 5,500 6,300 7,370 8,877 10,210

C le v e la n d , O h io .............................................. 3,440 4,650 5,760 6,600 7,720 9,297 10,690

D a yto n , O h io ..................................................... 3,210 4,340 5,380 6,160 7,200 8,669 9,970

D e tro it, M ich ................................................. 3,310 4,480 5,550 6,350 7,430 8,949 10,290

Green B a y, W i s .............................................. 3,250 4,390 5,440 6,230 7,280 8,776 10,090

In d ia n a p o lis , I n d ........................................... 3,440 4,650 5,760 6,600 7,710 9,290 10,680

K ansas C ity , M o .-K a n s ................................. 3,330 4,500 5,580 6,390 7,470 9,005 10,360

M iIw a u k e e , W i s .............................................. 3,480 4 ,700 5,830 6,670 7,800 9,396 10,810

M in n e a p o lis -S t. P a u l, M in n ....................... 3,380 4 ,5 6 0 5,660 6,480 7,580 9,128 10,500

3,380 4,570 5,660 6,480 7,580 9,133 10,500

W ic h ita , K a n s ................................................. 3,300 4,450 5,520 6,320 7,390 8,906 10,240

N o n m e tro p o lita n a r e a s ............. ................... 3,120 4,220 5,230 5,990 7,010 8,440 9,710

South:

A tla n ta , G a ........................................................ 3,100 4,190 5,190 5,940 6,950 8,372 9,630

A u s tin , T e x .................................................... 2,970 4 ,010 4,980 5,700 6,660 8,025 9,230

B a ltim o re , M d ................................................. 3,180 4,290 5,330 6,100 7,130 8,588 9,880

Baton R ouge, L a ........................................... 3,140 4 ,240 5,260 6,020 7,040 8,481 9,750

D a lla s , T e x .................................................... 3,130 4 ,240 5,250 6,010 7,030 8,469 9,740

D urham , N . C .................................................... 3,140 4 ,240 5,260 6,020 7,040 8,484 9,760

H o u sto n , T e x ................................................. 3,100 4,190 5,200 5,950 6 ,960 8,384 9,640

N a s h v ille , T e n n .............................................. 3,160 4 ,2 8 0 5,300 6,070 7,100 8,551 9,830

O rla n d o , F l a ..................................................... 3,110 4,210 5,220 5,980 6,990 8,416 9,680

W ashington, D .C .- M d .- V a .......................... 3,400 4,600 5,710 6,530 7,640 9,201 10,580

N o n m e tro p o lita n a r e a s ................................. 2,290 3,900 4 ,830 5,540 6,470 7,797 8,970

W est:

B a k e rs fie ld , C a lif ....................................... 3,260 4,400 5,450 6,250 7,300 8,796 10,120

D enver, C o l o .................................................... 3,370 4 ,5 6 0 5,650 6,470 7,570 9,118 10,490

H o n o lu lu , H a w a i i.......................................... 3,990 5 ,390 6,690 7,660 8,950 10,782 12,400

Los A n g e le s -L o n g B e a ch , C a lif .... 3,450 4 ,660 5,770 6,610 7,730 9,310 10,710

San D ie g o , C a lif ........................................... 3,400 4 ,5 9 0 5,690 6,510 7,620 9,175 10,550

San F ra n c is c o -O a k la n d , C a l i f ................. 3,610 4 ,8 7 0 6,040 6,920 8,090 9,743 11,200

S e a ttle -E v e re tt, W a s h ................................. 3,580 4,830 5,990 6,860 8,030 9,665 11,120

N o n m e tro p o lita n areas .............................. 3,220 4 ,3 5 0 5,400 6,180 7,230 8,702 10,010

1T he bu dg et c o s ts be lo w in c lu d e the c o s t o f goods and s e rv ic e s for fa m ily consum ption show n in ta b le 3, plus g ifts and c o n trib u te 

F ed eral incom e ta x e s . T he y do not in c lu d e personal ta xes paid to State and lo c a l governm ents and paym ents fo r d is a b ilit y in suran ce,

lif e in s u ra n c e , o c c u p a tio n a l e x p en ses, em ployee c o n trib u tio n s for s o c ia l s e c u rity , and

E s t im a te d by a p p ly in g th e s c a le o f e q u iv a le n t incom e in ta b le A-1 to the c o s t of a bu dg et fo r the c ity w o rk e r’ s fa m ily (see fo o tn o te 3), and rounding to ne are st $10. 

E s t im a te d to ta l budget c o s ts le ss pe rson al ta xes paid to State and lo c a l governm ents and paym ents fo r d is a b ilit y in suran ce fo r th e 4*person fa m ily d e s c rib e d in C ity W orker'; 

A utum n 1966, B LS B u lle tin 1570-1, (1967) pp. 9-12.

F a m ily B u dg et fo r a M oderate L iv in g Standard,

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A p p e n d ix A. Revised Scale of Equivalent Income before Taxe s

The Revised Equivalence Scale in table 1 has been 

adjusted to provide a scale that could be used with the 

total budget costs in the City Worker’s Family Budget 

(CWFB) to estimate the cost of living or income before 

taxes, for families differing in size, age of head, and 

composition. The weighted average costs of renter and 

homeowner families, derived from the CWFB for the 

Urban United States, were used in the adjustment process. Steps in the adjustment were as follows:

1. Values in the Revised Equivalence Scale for each 

family type except those headed by persons 65 years 

or overl were applied to the sum of the cost of Family 

Consumption and Other Costs (i.e. Gifts and Contributions and Life Insurance) at a moderate living 

standard.

2. The estimated average outlays of $80 for occupational expenses in the CWFB were added for all family 

types.

3. The following formula was used to estimate income before taxes for each family type:

X=CO + .042X + F

Where:

X= total budget costs or income before taxes

iN o adjustments in the Revised Equivalence Scale were made

for families headed by persons 65 years or over because in the

Retired Couple’s Budget it was assumed that contributions to

social security and payments on life insurance policies had been

completed before retirement, and that most of the income of

retired couples at the moderate standard was tax-exempt

because of source and the remainder insufficient to require payment of income taxes.

CO = Sum of costs of family consumption, other 

costs, and occupational expenses (i.e., obtained in 

Steps 1 and 2 above)

4.2 is the percentage (applicable in 1966) of gross 

income deducted as the employee’s contribution to 

social security for Federal old-age, survivors’, disability insurance, and Medicare (OASDHI). For gross 

income of $6,600 and over the maximum of $277 was 

substituted for .042X in the formula

F = Federal income tax, estimated by using the Internal Revenue Service tax schedules as follows:

Schedule I for 1-person families

Schedule II for husband and wife families

Schedule III for one-parent families

4. Values of X were converted to a scale in which 

the value of X ($9,051) for the 4-person family of 

husband, age 35-54, wife, and 2 children (older 6-15) 

was equal to 100.

For purposes of adjusting the Revised Equivalence 

Scale, no attempt was made to estimate State and local 

income taxes for which the weighted U.S. urban average 

for the CWFB family was $128. Estimates were not 

made for payments for disability insurance that were 

mandatory in California, New York, and New Jersey. 

Experimental computations for San Francisco, California, which had both types of taxes, and Austin, 

Texas, which had only nominal ($3) State and local 

taxes, indicated that the omission of these taxes made 

little difference in the scale value adjustments, because 

these taxes were a small fraction of total budget costs.

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T a b le A - l . R e v is e d S ca le o f E q u iv a le n t In c o m e 1 fo r U rban 

F a m ilie s o f D iffe re n t S ize , A g e , and C o m p o s itio n

|~4-person fa m ily -h u s b a n d , age 3 5 -5 4 , w ife , 2 c h ild re n , o ld e r 6 -1 5 = 10(Q

A ge o f head

S ize and ty p e o f fa m ily

U nder

35 35-54 55-64

One p e r s o n ............................................................................................................ 37 38 33

T w o p e rs o n s :

H usba nd and w i f e ........................................................................................... 50 61 60

One p a re n t and c h i l d ..................................................................................... 40 59 62

T h re e p e rs o n s :

H u sb a n d , w ife , c h ild un d e r 6 ................................................................ 62 69 -

H u sb a n d , w ife , c h ild 6 -15 ....................................................................... 62 83 89

H u sb a n d , w ife , c h ild 1 6 - 1 7 ....................................................................... - 92 89

H u sb a n d , w ife , c h ild 18 or o v e r ............................................................. - 83 86

One p a re n t, 2 c h ild r e n ................................................................................. 68 77 84

F o u r p e rs o n s :

H u sb a n d , w ife , 2 c h ild re n , (o ld e r u n der 6 ) ..................................... 71 79 -

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 6 - 1 5 ) ............................................ 76 100 105

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 1 6 - 1 7 ) ......................................... - 114 126

H u sb a n d , w ife , 2 c h ild re n , (o ld e r 18 or o v e r ) ............................... - 96 110

One p a re n t, 3 c h ild r e n ................................................................................. 88 97 —

F iv e p e rs o n s :

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t un d e r 6 ) .................................. 85 95 -

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t 6 - 1 5 ) ......................................... 94 115 119

H u sb a n d , w ife , 3 c h ild re n , (o ld e s t 16-17) ..................................... - 128 138

H u s b a n d , w ife , 3 c h ild re n , (o ld e s t 18 or o v e r) ........................... - 118 124

One p a re n t, 4 c h ild r e n ................................................................................. 108 117 —

S ix p e rso n s or m ore:

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t un der 6 ) ................. 98 - -

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 6 - 1 5 ) ........................ 107 130 139

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 1 6 - 1 7 ) .................... - 145 -

H u sb a n d , w ife , 4 c h ild re n or m ore, (o ld e s t 18 or o v e r) . . . . - 149 -

One p a re n t, 5 c h ild re n or m ore ............................................................. 124 137

1 The s c a le v a lu e s show n here are percentages to be a p p lie d to the to ta l c o s t o f a budget (e x c lu d in g S tate and lo c a l incom e ta xe s 

and d is a b ility paym ents) fo r the base fa m ily (4 p erso n s— husband, age 35-54, w ife , 2 c h ild re n , o ld e r c h ild 6-15 y e a rs ) to e s tim a te the 

to ta l incom e re q u ire d to p ro vid e the same le v e l of liv in g fo r urban fa m ilie s o f d iffe re n t s iz e , age, and c o m p o s itio n . In a d d itio n to the 

c o s t o f goods and s e rv ic e s fo r fa m ily c o nsu m p tion the to ta l budget c o s ts in c lu d e g ifts and c o n trib u tio n s , life in s u ra n c e , o c c u p a tio n a l 

e x p e n s e s , em ployee c o n trib u tio n s fo r s o c ia l s e c u rity , and F e d e ra l incom e ta x e s . E s tim a te s o f p ersonal ta xe s paid to State and lo c a l 

governm ents and o f paym ents fo r d is a b ility in s u ra n c e may be added in those urban areas w here a p p lic a b le .

S O U R C E : D e riv e d from B LS Survey o f C onsum er E x p e n d itu re s , 1960-61.

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A p p e n d i x B.

Experimentation with Food Consum ption and Total Consumption in Scale

The Survey of Consumer Expenditures in 1960-61 

showed, as had earlier surveys, that families in the lower 

income classes, on the average, spent more than their 

current year’s income. The class at which income was 

more than enough to cover expenditures for current 

consumption varied among family sizes and types. For 

one-person families it was all after-tax income classes 

above $2,000 and for families of 2 persons or more, 

above $5,000. Families spending beyond the current 

year’s income might use their savings or go into debt to 

meet current expenses. At the upper end of the income 

scale, families spent less than their income, on the 

average, and had a margin for net saving. Another consideration is that famiHes may receive food, clothing, 

medical care, and other goods and services from relatives, 

welfare agencies, etc. The value of such goods and 

services received without a corresponding expenditure 

may represent a substantial supplement to the level of 

living of some families, particularly those having low 

income, but such “free” goods were not included in 

either the food expenditures or income from which the 

BLS has derived its Revised Equivalence Scale. Therefore, some experimentation was undertaken with an 

alternative equivalence scale based on the relationship 

of the value of food consumption and the value of 

total consumption in 1960-61.1

The method for deriving a scale based on consumption was essentially the same as that using food expenditures and income (see page 3 ). The relationship of 

food consumption to total consumption for urban families and single persons was found to be log-linear with a 

regression coefficient (or consumption elasticity) close 

to 2/3. For each family size-type-age of head class, 

food consumption (fj) and total consumption (vj)

iFood consumption was defined as the sum of food expenditures (y in equation 1, p. 2) and the value of food received without expense (i.e., gifts from persons outside the family or allotments from public or private welfare agencies) and the value of

home-produced food (usually a nominal amount for urban

families). Total consumption was the sum of expenditures for

current consumption, the value of food and all other goods and

services received without expense, and the value of homeproduced food.

were substituted for food expenditures and income, 

respectively, and the exponent 2/3 replaced Vi in equation (1) and equation (2) as follows:

(3) f, = K,(v/*

<4)A l - l| 3

nv

Substitution of consumption for expenditure/income 

averages made comparatively little difference in the scale 

values for persons living by themselves and for the husband and wife families in which the oldest child was 6 

years or older. Values were substantially lower, however, 

on the consumption scale than on the expenditure/ 

income scale for younger families, i.e., the husband was 

under 35 and the oldest child was less than 6 years old. 

Consumption expenditures averaged higher than aftertax income for these young families across all familysize classes.

This difference among young families raises the 

question of how the use of credit may affect computations of scale values. According to the University of 

Michigan’s 1965 Surveys of Consumer Finances,2 there 

was a preponderance of younger families, and especially 

younger families with children, among those making use 

of consumer credit. Early in 1965, 49 percent of all 

family units (including single persons) owed installment 

debt. The proportion varied according to the age of the 

family head from 69 percent for families having a head 

under 35 years to 12 percent for those having a head 65 

and older. In terms of economic level, the largest users 

of installment credit were family units having annual 

before-tax income between $5,000 and $15,000. In the 

Michigan classification by family type the incidence of

2George Katona, Eve Mueller, Jay Schmiedeskamp, and

John A. Sonquist, 1965 Survey o f Consumer Finances (Ann

Arbor, Michigan, University of Michigan, Institute for Social

Research, Survey Research Center, Monograph No. 42, 1966),

pp. 27-38.

See also Dorothy S. Projector and Gertrude S. Weiss, Survey

o f Financial Characteristics o f Consumers, Board of Governors

of the Federal Reserve System, August 1966, pp. 30-31, 126,

and 141.

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installment debt was highest- 73 percent-among married couples in which the husband was under 45 and the 

youngest child was under 6.3 About a sixth of these 

young families reported installment debts of $2,000 or 

more early in 1965. They made the greatest use of 

credit in buying automobiles. In observing that installment debt was most common in the under 45-year 

group and in that stage of the life cycle where incomes 

are usually rising, the Michigan analysts made crosstabulations of debt with recent and expected income 

changes and noted that persons having a rising trend 

borrow more often than persons that have stable or 

declining income.

Preliminary results of substituting consumption for 

income in deriving a family equivalence scale suggest

3For couples under 45 with no children the proportion was

68 percent and for couples whose youngest child was 6 years or

older, 65 percent.

that as the level of living and the use of credit have 

risen, in recent years, total consumption varies more 

among different types of families than was anticipated. 

Use of installment credit by a generally optimistic group 

of younger families could result in a substantial increase 

in total consumption accompanied by little or no change 

in food consumption. However, if a mother with several 

dependent children received food allotments as an 

income supplement, both food and total consumption 

would be increased. The experimentation with the 

alternate scale has been useful in highlighting differences 

in the results from the two approaches, but closer study 

of the causes of divergences between the income and 

consumption scales and reexamination of the definition 

of total consumption is needed before introducing a 

variant of the BLS Revised Equivalence Scale. General 

use of a scale based on total consumption would require 

current estimates of the total value of consumption. At 

present, such estimates are not available; data on 

families’ money income are available and used more 

universally in research in consumer economics.

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A p p e n d i x C. Technical References

1. Barten, A.P., “Family Composition, Prices and Expenditure Patterns,” Proceedings of Sixteenth Symposium of Colston Research Society, April 6-9,1964.

Measurement by mathematical formulas of a system of price effects from cross-sectional 

data of families varying in composition.

2. Brady, Dorothy S. and Barber, Helen A., “The Pattern of Food Expenditures,” The Review 

of Economics and Statistics, Vol. XXX, August 1948, pp. 198-206.

Reports on an experiment with linear transformations of the food expenditure curve 

(i.e., food expenditures expressed as percentage of income) to reduce the difference between 

food expenditures of urban families in relation to income for the surveys made between 

1901 and 1944.

3. Brady, Dorothy S., “Family Saving 1888 - 1950,” Part II in A Study of Saving in the United 

States, Vol. Ill, Princeton, N.J., Princeton University Press, 1956, pp. 149-156.

Discusses income elasticities for food and other categories of expenditures observed in 

examination of about 300 family expenditure surveys in different localities of the United 

States over the period 1888 - 1950.

4. ____ , “Scales of Living and Wage Earners’ Budgets,” Annals of the American Academy of

Political and Social Science, March 1951, pp. 32-38.

Discusses subjectivity of “standards of living,” influence of Engel’s law, and relationship 

of the “living” wage and income levels.

5. Burk, Marguerite C., “Ramifications of the Relationship Between Income and Food,” Journal 

of Farm Economics, Vol. 44, No. 1,1962, pp. 115-125.

Outlines the scope of historical application of Engel’s law, and considers further generalizations needed for analysis of problems involved in food consumption.

6. Clark, Faith, “Changing Patterns of Family Food Spending,” paper presented at 44th Annual 

Agricultural Outlook Conference, Washington, D.C., November 16,1966,11 pp.

Presents preliminary results of analysis of income-food expenditure relationships based on 

U.S. Department of Agriculture’s 1965 Survey of Household Food Consumption.

7. Cowhig, James D. (U.S.D.A.) Urban and Rural Levels of Living: 1960, Agricultural Economic 

Report No. 79, July 1965, 18 pp.

Presents information on five indicators of level of living (e.g. availability of automobile, 

telephone) of urban and rural population, based on a special analysis from 1960 Census of 

Population and Housing.

8. Crockett, Jean, “Demand Relationships for Food,” Proceedings of the Conference on Consumption and Saving, Vol. I, Philadelphia, University of Pennsylvania, Wharton School of 

Finance and Commerce, 1960, pp. 293-310.

Reviews estimates of income elasticity for food from time series of aggregates and from 

cross-sectional analyses for a single point of time. Uses data from BLS Survey of Consumer 

Expenditures in 1950 to estimate effects of family characteristics such as size, age of head, 

and race on elasticity for food.

9. Friedman, Milton, “A Method of Comparing Incomes of Families Differing in Composition,” 

in Studies in Income and Wealth, Vol. 15, New York, National Bureau of Economic Research, 

1952, pp. 9-20.

Describes a method for obtaining a measure of the economic size of the family, by 

equating the requirements of individuals on the basis of actual expenditures rather than on the

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basis of a standard of need. Uses the food expenditure-income relationship to illustrate the 

author’s method, but contains a self-critical note on a possibly crucial defect in the method: 

the basic assumption that a scale of equivalence derived from the food-income relation 

measures economic welfare.

10. Friedman, Rose D., Poverty Definition and Perspectives, American Enterprise Institute for 

Public Policy Research, Washington, D.C. February, 1965.

Presents a scale for estimating equivalent income, defined as the income levels at which 

households of different size achieve adequate nutrition. Derives the income levels (at 1962 

prices) from reports from the U.S. Department of Agriculture’s 1955 Household Food Consumption Survey. Defines nutritive adequacy as 75 percent of the families meeting twothirds of the recommended allowances of the National Research Council.

11. Goldstein, Sidney, Consumption Patterns of the Aged, Philadelphia, University of Pennsylvania, 

Wharton School of Finance and Commerce, 1960, Chapters IV-VI, pp. 81-100.

Analyzes consumption differences in 1950 with respect to total consumption, food 

expenditures, and housing expenditures for various ages of family heads.

12. Lamale, Helen H., “Present Day Concepts of Income Adequacy,” presented at 86th Annual 

Forum of the National Conference on Social Welfare, San Francisco, California, May 28,1959.

Discusses the recent social and economic changes involved in the concept of income 

adequacy.

13. Manderscheid, Lester V., “Some Observations on Interpreting Measured Demand Elasticities,” 

Journal of Farm Economics, Vol. 46, February 1964, pp. 128-136.

Relates some of the problems in measuring price and income elasticities to the interpretations of these measures.

14. Orshansky, Mollie, “Counting the Poor: Another Look at the Poverty Profile,” Social

Security Bulletin, January 1965, pp. 7-9.

Describes method used to define equivalent incomes at a poverty level for families of 

different sizes. Bases the scale on food costs for individuals, according to the U.S. Department 

of Agriculture’s economy food plan at January 1964 prices.

15. Prais, S.J., “The Estimation of Equivalent Adult Scales for Family Budgets,” Economic 

Journal, December 1953, pp. 791-810.

Presents a method to determine scales of adult equivalents, based on an explicit consumption function. This method was applied to family budgets in the United Kingdom in 

1937-38.

16. Prais, S.J. and Houthakker, H.S., The Analysis of Family Budgets, New York, Cambridge 

University Press, 1955.

Surveys the literature on scales, examines the theory of scales of equivalence, and presents results of a method for analyzing the effects of household composition on consumption 

as applied to food.

17. Snyder, Eleanor M., “Financing a Family,” Eugenical News, December 1953, pp. 120-129.

Summarizes major contributions to research on costs of rearing children in moderate and 

higher income families and to the more general analysis of living standards of different groups 

in the population.

18. -------, “The Impact of Long-term Structural Changes on Family Expenditures: 1888-1950”

in Consumer Behavior, New York, Harper and Brothers, 1958, pp. 359-393.

Examines secular changes in consumption functions derived from cross-section surveys of

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U.S. urban families from 1888 to 1950. Provides historical detail on values of K (the measure 

of level of family food expenditures) and of the income elasticities of food expenditures that 

are basic to BLS estimates of family equivalence scales derived from expenditure surveys for 

1950 and 1960-61.

19. _____, Measures of the Dimensions of Poverty in New York City, Hunter College, Urban

Research Center, June 15,1965.

Presents six selected scales of equivalent incomes by size of family and discusses how the 

estimated number and distribution of poor families will vary according to the scale used.

20. Stigler, George J., “The Early History of Empirical Studies of Consumer Behavior,” Journal of 

Political Economy, April 1954, pp. 95-113.

Refers briefly (pp. 101-102) to early applications of income elasticity technique of family 

budget studies by Del Vecchio (1912) and Ogburn (1919).

21. U.S. Department of Agriculture, Income and Household Size: Their Effects on Food Consumption, Marketing Research Report No. 340, June 1959,152 pp.

Uses data from the USDA’s 1955 Household Food Consumption Surveys for extensive 

computations of elasticities of demand with respect to income for all food and major classes of 

food, in terms of both quantities of food consumed and value of consumption. Evaluates 

effects of household size separately.

22. U.S. Department of Labor, Bureau of Labor Statistics, “Estimating Equivalent Incomes or 

Budget Costs by Family Type,” Monthly Labor Review, November 1960, pp. 1197-1200.

Describes a scale for measuring the relative after-tax income required by families of 

differing composition to maintain the same level of material well-being, or for estimating comparable costs of goods and services for families of different age, size, and type.

23. _____, Workers’ Budgets in the United States: City Families and Single Persons, 1946 and

1947, BLS Bulletin 927,1948, 55 pp.

Presents two separate scales for determining the cost of maintaining families of different 

size at the same level of material well-being. The scales developed by the BLS for use with its 

original calculation of the City Worker’s Family Budget were based: (1) on the percentage of 

families with good or fair diets in terms of nutrition and (2) on the percentage of income allocated to savings.

24. Watts, Harold W., “The Iso-Prop Index: An Approach to the Determination of Differential 

Poverty Income Thresholds,” Journal of Human Resources, Winter 1967, pp. 2-18.

Describes procedure for constructing an index to measure equivalent levels of poverty 

for families of varying size in different regions and in urban and rural areas. Uses the share 

of income devoted to particular categories of consumption as the basis for defining equivalence (e.g. families spending an equal fraction on food or on necessities are considered 

equally poor). Investigate the properties and suitability of alternative forms of Engel curves 

and uses data from the BLS Survey of Consumer Expenditures, 1960-61, in regression analysis.

25. Wetzler, Elliot, Determination of Poverty Lines and Equivalent Welfare, Research Paper P-277, 

Institute for Defense Analyses, September 1966, 23 pp.

Presents results of a study undertaken for Office of Economic Opportunity to construct 

poverty cut-off levels that take into account size of family, farm/nonfarm differences, and 

age of the family head. Bases the method for calculating welfare-equivalent income levels on 

the assumption that families are at equivalent welfare levels when the percentage of their 

income spent on food is identical. Derives two general types of food-consumption equations 

by regression analysis from data from the BLS Survey of Consumer Expenditures, 1960-61.

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26. Woodbury, Robert Morse, “Economic Consumption Scales and Their Uses,” Journal of 

American Statistical Association, December 1944, pp. 455-468.

Describes a technique employed by Edgar Sydenstricker and W.I. King in 1921 to develop 

a consumption scale based on actual expenditures on food and on all items by families of 

varying composition (in preference to scales having a nutrition or calorie basis) and reviews 

the direction of research in the 20 years following publication of their study, “The Measurement of the Relative Economic Status of Families.” Contains source references and annotated 

tables bringing together scales estimated by various methods.

27. Zimmerman, Carle C., Consumption and Standards of Living, New York, Van Nostrand, Co., 

1936.

Includes references to early research on scales of adult equivalents in the United States and 

other countries.

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A p p e n d i x D. R e s e a r c h on S c a le s o u ts id e the B u r e a u of L a b o r Statistics

(Num bers in bra ckets [ ] refer to a p p e n d i x C, T e c h n ica l References)

Almost all of the numerous equivalence scales cited in 

the present report or in the technical references listed in 

appendix C refer to Engel’s work and have used food as 

the point of departure for estimating equivalent costs. 

Some have used actual expenditures on food; others, 

requirements to maintain specified standards of nutritional adequacy. Some, including the BLS scales based 

on the 1950 and 1960-61 expenditure surveys, have 

relied primarily or exclusively on a food relationship; 

others have used food and nonfood expenditures. The 

extensive quotations that follow have been selected to 

indicate that in approximately 45 years of research, no 

consensus has emerged on a method that is objective 

and operationally practical. The latter consideration 

probably accounts for the preponderance of scales derived from a food expenditures-income relationship.

Sydenstricker and King published in 19211 “The 

Measurement of the Relative Economic Status of Families,” which Prais and Houthakker in 1955 [16] characterized as a “fundamental paper.” Referring to these 

authors Woodbury wrote in 1944 [26]: *

Sydenstricker and King rejected a nutrition or calorie

basis for an economic or expenditure scale; and moved in

the direction of greater specificity in adopting separate scales

for food expenditures, for expenditures on all other items

than food and for general expenditures. Their scale for

general expenditures was derived from the other two by

weighting by the average expenditure on food and all other

items. .. .(p. 457)

After reviewing work on expenditure scales in the 20 

years since the Sydenstricker-King paper, Woodbury 

observed [26]:

The paucity of all-items scales is in marked contrast to the

relative abundance of new food expenditure scales; the latter

reflect the increased attention being paid to diets and parallels the development of specific scales for different nutrients.

.. .(pp. 460-61)

An important reason for the paucity of all-items scales on

the same level of technical elaboration as those for food and

clothing is the tendency observed in a number of recent

studies to calculate the number of consumption units in

each family, not from the sex and age composition in conjunction with an all-items scale, but as a weighted harmonic

average of the number of specific food-expenditure units,

lln Quarterly Publications of the American Statistical Association, Vol. XVII, No. 125, September 1921, pp. 842-57.

clothing-expenditure units and other-items-expenditure units

following the procedure first suggested by Kirkpatrick in

1921-22. This method was followed also, for example, in

the U.S. Wage Earner Study of 1934-36.2

This technique suggests two important points. First, that

all-items scales can be constructed by weighting specific

scales for the component elements of the budgets as well

as by a direct technique. Secondly, this draws attention

immediately to the inequality of coverage of the different

elements of the budget: food and clothing are relatively

well covered, but rent and miscellaneous items almost not

at all. If these latter enter into the final all-items scale with

a weight of approximately 50 percent, the inadequacy of

coverage is serious. To these difficulties must be added the

further fact that the determination of scale values in the

case of expenditures which are family rather than individual

in character, such as rent, household expenditures and certain miscellaneous items may involve arbitrary judgments or

exclusions.

A second reason for the relative lack of all-items scales

lies in the technical difficulties of preparing a new all-items

scale in time for use in analyzing the data of the study on

which it is based. . . .

Finally, the adoption of the classification according to

family type has led to a somewhat lessened emphasis upon

all-items scales. 3 The latter have served various purposes,

one of which has been to express in numerical relation the

demand for consumption goods represented by different

family members or additions to the family. But the demand

for consumption goods represented by infants or very young

children, for example, in families of man, wife and one child

can be studied more closely and the results presented more

convincingly by an analysis in which families of this type are

segregated for examination than by a technique which

merely adds their consumption unit value to that of other

family members in all types of families. It follows, however,

that in the analysis by family type each type group is studied

separately, and no attempt is made to summarize or cumulate the results.

When the mass of material permits, detailed study of habits of consumption and expenditure can be made for each

important family type; the types chosen are, for example,

families with two adults only, families with man, wife and

one child, families with man, wife and two to four children,

families with man, wife and five or more children, etc..........

Obviously, also with the greater degree of specificity in the

families selected for study, a larger total mass of material is

required to yield a sufficient volume for the detailed groups,

(pp. 461-63)

^This reference is to Money Disbursements o f Wage Earners

and Clerical Workers, 1934-36, Summary Volume, U.S. Department of Labor, Bureau of Labor Statistics, Bull. 638, pp. 362-66.

^Woodbury’s note: “In the U.S. Consumer Purchases Study,

1935-36, the analysis according to all-items expenditure units

was dropped.”

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Prais and Houthakker in 1955 [16] referred to 

Woodbury’s survey of economic consumption scales. 

They presented a method for the analysis of the effects 

of household composition on consumption and applied 

the analysis to data from 1937-39 British expenditure 

surveys to yield scales for six food groups. The following quotations from their “conclusions” and “implications for further research” are similar to Woodbury’s.

Obviously the next step in research along these lines is to

obtain comparable estimates for various non-food expenditures; . . .But the straightforward application of the method

of this chapter (i.e., 9) would be inadequate for most nonfood items on account of the existence of economies of

scale to a significant extent, (p. 145)

The concept of economies of scale gives expression to the

possibility that, with given levels of income per person, a

larger household may be able to attain a higher standard of

living than a smaller household. . . .(p. 146)

As indicated at the beginning of this book, a given piece of

research work can hope to fill in only a small portion of any

field of knowledge................There is, it will be apparent,

considerable scope in our case for a synthesis of the various

developments presented in the previous chapters which

should lead directly to improvements in almost all the

estimates presented in this book. The most obvious of these

required extensions is the simultaneous estimation of unitconsumer scales and the coefficients of economies of scale

so as to bring together the approaches of Chapters 9 and 10.

(p. 167)

Prais and Houthakker concluded their extensive analysis with three observations summarized below:

1. Analyses for food commodities have been more 

successful than those for nonfoods; future research 

should be directed to bringing analyses for nonfoods to 

a comparable level.

2. Analyses should begin by grouping nonfood commodities as broadly as possible and then carrying out 

analyses on successively finer subdivisions.

3. For the successful analysis of the demand for 

many nonfoods, such as consumers’ durables, reliable 

information is desirable on current, past, and expected 

incomes. “Its absence has been at any rate part of the 

reason for our not taking the inquiries into nonfoods 

further than we have done and for the relative overattention given to foodstuffs.” (p. 168)

Two recent approaches to finding equivalent levels of 

income have used data published in BLS reports on the 

Survey of Consumer Expenditures, 1960-61. (See 

Wetzler [25] and Watts [24].

Wetzler outlined three alternative techniques generally 

employed to measure incomes needed to yield equivalent levels of welfare for different groups:

1. Estimate physical needs for one or more commodities (food; or food, clothing, shelter, etc.) of males and 

females in different age categories, based on standard 

criteria, and then convert these physical needs into 

dollars, using market prices to obtain the equivalent 

dollar need. (Wetzler cited Orshansky’s scale [14] as 

an example)

2. Use actual expenditures on necessities such as 

food, or food and clothing, by families of different age 

and sex composition; calculate expenditures of each 

family per “consumption unit;” and then classify families into “expenditures-per-consumption-unit” groups.

3. Use the BLS method based on the 1950 CES [22]. 

Wetzler’s evaluation follows:

. . . Any one of these measures, from a theoretical standpoint, is arbitrary since they all make interpersonal-and

intergroup—utility comparisons. From an operational or

practical point of view, it is necessary to use a method, preferably simple, which can be generally accepted as giving a

good approximation of equivalent levels of welfare.

A good approximation of equivalent levels of welfare

appears to be given by the method adopted by the Bureau of

Labor Statistics. . . .The BLS method appears to be somewhat less subjective than the first approach. Whereas the

first approach tries to make a comparison of welfare which

is based on an opinion of physical requirements, the BLS

approach is based on the actual market behavior of the

groups involved. The main advantage of the BLS method

over the second approach is that it is easier to apply in

practice, (pp. 2-3)

Wetzler continues with a comparison of the BLS 

method and the method he used for the Institute of 

Defense Analysis (IDA):

The method used by IDA to determine equivalent income

scales was similar to the BLS method, but differed from it in the

following respects:

1. Less restrictive types of equations were used by IDA. The

BLS exponent on the income variable was not allowed to vary

(being always set equal to Vi) whereas the IDA exponent was

permitted to change with family size. In effect, this allowed for

variations, which were to be expected, in the percentage change

in food consumption associated with a given percentage change

in income for different sized families.

2. The IDA equations also permitted estimates to be made, if

the need arose, for family types not included in the available

data, which was not the case for the BLS or other studies. In

other words, IDA equivalent income scales could be derived for

any size family (and for any age of head-of-family).

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3. Since the BLS took average values to determine its coefficients (a’s), it had no numerical estimate of the ‘explanatory

power’ of the food-consumption equation it used or of the

degree of confidence it could place in the values derived for the

a’s. By using regression analysis, it was possible to determine the

degree of ‘explanatory power’ of our equations and the amount

of confidence that could be placed in our coefficients.” (pp. 3-4)

Watts devised “The Iso-Prop Index” [24] which he 

explained as:

The name Iso-Prop is an abbreviation for iso-proportional,

suggested from the general category of index numbers based

on equivalence in terms of the fraction of income (or some

other total available for disposition) allocated to a class of

expenditures (or subset of possible dispositions), (p. 1)

Watts also reviewed the literature on scales and explained his specific interest in deriving geographic differentials:

In the theoretical and empirical analysis which follows, the

Wetzler-BLS-Friedman [25, 22, 9] approach is examined as a

method for arriving at geographic differentials. It is probably impossible to give an entirely rigorous or even convincing argument that this procedure adequately reflects all the

factors which relate to locational differentials. .. .

The procedure’s most certain advantage lies in its objectivity—it can be calculated directly from measures of observable

household behavior as reflected in available data. Its most

serious deficiency, in the view of those who prefer to base

equivalence on technically prescribed levels of minimum

adequacy (e.g., for nutritional intake), is that it may not produce threshold levels which admit the possibility of attaining

all such minimum levels, (p. 6)

Watts used published summaries of the CES 1960-61 

to carry out regressions for two categories of expenditures: for food and for a group roughly corresponding

to necessities-food, housing, clothing, and transportation. He carried out preliminary regressions using 

income before tax and income after tax as alternative 

income measures. The results were quite similar, but 

only the pre-tax income regressions were reported 

because they corresponded with the officially recognized Orshansky thresholds of poverty.

In his concluding remarks, Watts stated:

Further empirical work is needed to explore the Iso-Prop

Index for inter-city variations. This would provide a more

convenient way of graduating the equivalence scales at the

borders. For this it would be desirable to use the individual

observations from the Consumer Expenditure Survey, instead

of the grouped data used here. The city tabulations provide

means for income classes or family size classes, but they are

not cross-classified.^

In view of the non-constancy of income elasticities,5 it

would also be useful to carry out further research on other

forms of the Engel curve. When the elasticity is not constant, the income and expenditure data should be deflated

by an equivalence index before the relation is estimated.

Perhaps an iterative scheme could be used here to obtain

successive approximations to an appropriate index, (p. 18)

^Editor’s note: Unpublished cross-tabulations of income after

taxes and family size are avaliable for individual cities in the

BLS Division of Living Conditions Studies.

5Tests carried out by Watts rejected the hypothesis that income elasticity is constant, (p. 13). It should be noted that

this conclusion refers to income elasticities among geographic

areas and not among different types of families.

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