Evening star., 1936-12-31
GAIN MORE RAPIDLY THAN COST OF LIVING in YEAT
PURCHASE POWER
IS CLOSE TO PEAK
Dollar Revenue of Average
Family Keeps Ahead
of Rising Prices.
(By Cambridge Associates)


(By Cambridge Associates)
In the strange wonderland that we
have become accustomed to accept, the
welfare of the average man Is hard
to gauge in reference to past dates.
When dollars become net dollars. but
5e.o6 cents: when the value of the
English pound depends on the day-to-
day opinion of international specula-
tors; when unemployment continues
above the 100000 mark and yet we
are told that business is back to normal
who is to say that Americans have
more or less material wealth than IN
1899?
Wages in dollars in 1929 were approx
imately IS per cent higher than In
1886. Yet this statement does not
prove that the average man now has
35 per cent less real income. But there
is a criterion which, regardless OF
fluctuations Of currencies, prices ana
whatnot, reflects rather accurately the
present status of John @ Public. This
indicator now states unequivocally that
the prosperity of the average Ameri-
can family Is no'X very close to that
of the peak year teceding the world
wide depression.
Despite shifting sands and confusion
of thought, there is a certain logic in
the use of goods rather than money as
an indicator of the state OF wealth.
Wages are in money; goods are pur-
chasable with money. At any given
time the money which is paid in wages
has the same value as the money which
buys goods. Therefore, if our figures
on wages are accurate and We choose
the right goods in the preparation OF
an index of prices, We can combine
them to set forth the purchasing power
of the wage Garner in an absolute figure
which is directly comparable with any
other given period. This is the con-
sumer's real income
Arriving at Real Income.
The average family spends certain
proportion of its income for food, for
clothing, for shelter and for miscella-
neous items. From this relationship
We are enabled to prepare an index of
the cost of goods which takes into ac-
count the effect of increases and de-
creases in the prices of certain items
on its budget. Further, We can add to
the wage index salaries, farm income,
dividends and interest in their relative
proportions to gain comprehensive
index of average income.
These refined figures give as close an
approach to the actual real income
of the average man as 1t is possible to
prepare without such extensive special
research that the figures will have
little current value when they are
compiled.
From an average level of 100 in
the year 1929, the index of real income
dropped more slowly than wages,
reaching low point of approximately
rs in the latter part of 1882. BY the
middle of 1884. after climbing with
only one minor interruption, the index
had reached the 90 level. But the
influence of price increases and faded
faith in recovery dropped it back to
30 before the close Of the year.
Since that time the index has fol-
lowed employment levels very closely,
but at higher relative level to the
1929 period than employment has
shown. This Is explainable by rapid
recovery Of wage levels and a not so
rapid recovery of retail prices. The
average Of monthly indices of real in
come for the year 1886 is approximate
ly SO. but the actual figure at the close
of the year is estimated to be SO or
better. with 1929 as 100.
Retail Sales Gain.
Small wonder that department
stores throughout the Nation we're
enabled to report increases in sales
averaging better than 10 per cent
higher than last year. and ranging for
some districts as high as 19 per cent.
Samples Of the improvement reported
for the first IL months of the year:
New York per cent up; San Fran
cisco 10 per cent up and Chicago
. 13 per cent up. Not one of the Federal
Reserve districts showed decline in
that period. Again, dollar volume is
now a conservative indicator of the
volume of goods moving over the coun-
ter, because retail prices have not fol-
lowed recent sharp gains in prices Of
raw materials.
The prospects for real income gains
In 1887 are somewhat clouded. While
production is likely to expand mate
rally. a large part of the expansion
will be accounted for by the production
of new machinery and facilities for
manufacturers, not by consumers
goods.
And it is likely that the increased
wages made available to the public by
the employment gain which is almost
sure to come, will be largely eaten up
by substantial increases In prices Of
goods. The raw material prices Just
referred to will begin to have effect
on prices of goods at retail as soon
as current supplies in the hands of
manufacturers begin to dwindle.