The Secular Trend in Income Distribution by Type, 1869-1948: A Preliminary Estimate

Abstract

THE present paper is an initial attempt to determine the secular trend in the proportions of each of the major functional types of to the national in the United States during as long a period of time as available data permit. It relies on the classical studies in this field, supplemented by important new data. The well known studies of King1 and Martin 2 covering the early periods were concerned with the distribution of what has come to be called income payments to individuals or personal income. The lack of adequate estimates of business savings, estimates which exclude capital gains and losses, has limited severely the use of these studies for the purpose at hand. This deficiency is now being overcome by the efforts of such researchers as Simon Kuznets 3 and Raymond Goldsmith.4 For the period since Ii9, the studies of Kuznets and the U.S. Department of Commerce Office of Business Economics (hereinafter abbreviated as O.B.E.) are well known.5 point has been reached where it may be worthwhile to combine the data of some of these studies in an effort to cast new light on the secular changes in shares during the past eighty years, recognizing from the outset that the reliability of the data diminishes progressively as the inquiry delves backward in time, that the effort to combine independent statistical studies must ride roughshod over numerous discrepancies in concepts and methods which cannot be eliminated without reworking the data to an extent impossible here, and that the well known differences between the statistical and theoretical categories in the field of distribution seriously limit the usefulness of the empirical findings in answering the important problems raised by distribution theory. The ultimate objective motivating the present investigation is to seek new light on the market power or bargaining power of quasifunctional classes of income-recipients, although the conceptual problems raised by this approach are too complex to be given more than an occasional mention in the present article. The method of procedure followed was to begin with each of the more or less comprehensive and self-consistent sets of time series, each covering a period of about twenty years and overlapping with another set at ten-year intervals, to introduce some slight changes for comparability with the other sets, and to add business savings, thereby arriving at estimates of national more or less compatible with the estimates of the shares. Annual ratios of major shares to the composite national were then computed, and from these ratios ten-year arithmetic means were drawn. The percentage point changes in arithmetic means of annual ratios in each of the overlapping sets of series were then added together to provide an admittedly rough and preliminary estimate of the secular trend in each series. The procedure was applied first to the series covering all industries and then, in order to reduce the gap between the empirical and theoretical areas of distribution analysis, to the private nonagricultural sector. Certain modifications in the above basic data are here pubI Willford I. King, The Wealth and Income of the People of the United States (New York, I9I5); The National Income and Its Purchasing Power (National Bureau of Economic Research, New York, I930). 2Robert F. Martin, National Income in the United States 1799-1938 (New York, I939); Conference Board Studies in Enterprise and Social Progress (New York, I939). 'Simon Kuznets, National Product since 1869 (National Bureau of Economic Research, New York, I936), and Capital Requirements Study (in process of completion, same organization and publisher). 'Raymond W. Goldsmith, Saving and Capital Market Study (in process of completion, National Bureau of Economic Research, New York); especially Summary of Annual Estimates of Saving, I897 to 1949, Advisory Committee Memorandum No. 4I, same publisher, February I5, I95I, mimeographed, not for publication or quotation. Preliminary published quadrennial data may be found in same author, A Perpetual Inventory of National in Conference on Research in Income and Wealth, Studies in Income and Wealth, Vol. I4 (National Bureau of Economic Research, New York, I95I), pp. 5-73. 'Simon Kuznets, National Income and Its Composition, 2 vols. (National Bureau of Economic Research, New York, I94I); reprinted in one vol., I947. U.S. Office of Business Economics, Department of Commerce, National Income: 1951 Edition. Supplement to the Survey of Current Business (Washington, D. C., I95I).