Off-farm Income Sources Research Articles

Labor Supply Decisions of Farm Families

Faced with changing economic opportunities, farm operators have increasingly been dividing their work time between self-employed farm work and the wage labor market--a situation that can be best described as multiple labor market participation. By 1969, the year in which the Rural Income Maintenance Experiment (RIME) began, over 54% of all farm operators in the United States had off-farm sources of income, primarily from wage work (U.S. Dep. Commerce). This figure had risen almost ten percentage points since the end of the previous decade. Wage market participation rates of the two samples in the RIME are quite similar to the national averages for farm operators with the respective levels of farm sales. Over 33% of the experiment's Iowa farm operators and 58% of the North Carolina operators held wage jobs at some time during the three experimental years. When the labor market activities of both husbands and wives are considered, in almost 50% of the Iowa farm families and 78% of the North Carolina families either the farm operator, his wife, or both held wage jobs. However, wage work provided only a secondary source of income: for families participating in both labor markets, only about 23% of all earned income in Iowa and 48% of that in North Carolina derived from wage work. These figures for the labor market activities of farm families clearly indicate that a study of their labor supply should focus on both the self-employment and the wage labor markets. Thus, this study analyzes the effects that an experimental negative income tax (NIT) program would have on farm family labor supply given multiple labor market opportunities. Theoretical considerations related to the study are presented, followed by a summary of the actual analysis. The final section of this paper discusses the main findings and places them in the perspective of the overall farm-related analysis conducted as part of the evaluation of the RIME.