COST OF LIVING. Until recently the phrase "Cost of Living" was used only loosely by economists when the relation between movements of wages and prices was in question, but from 1914 onwards during the World War the need of a measure ment of the rise of prices gradually resulted in making the ex pression prominent in industrial and statistical discussions. It has frequently been assumed that the term "Cost of Living" has a unique and definite meaning, and that accurate measurements can be applied to it, but in fact the meaning is vague and the statistical methods appropriate to it are complex and lead to results whose precision is not of a high order.
The phrase may be regarded as an abbreviation for "the cost in a defined region to persons of a defined social or industrial class of goods of a kind usually purchased at frequent intervals, by the consumption of which a certain standard of economic welfare is reached." We may usefully distinguish four cases:— (a) Where the standard is the physiological minimum necessary to maintain life, health and strength; (b) where some customary or average budget of expenditure is taken and the cost of the items in it is measured at different times or places; (c) where the items are varied but the whole contents of the budget result in an unchanged standard of welfare; (d) where both the con tents of the budget are modified and the standard is raised or lowered. Case (b) is that which has in recent years been the subject of measurement, but case (c) is that which is in reality appropriate to the problem of measuring or adjusting real wages. Case (d) confuses two factors, the change of price and the change of standard.
The standard is, however, not scientifically definite; apart from questions as to the validity and applicability of the measurement by calories, it is clear that there must be a great difference between the amount of food necessary for work of low and of high efficiency. For example, the Indian, Chinese and Japanese peasants live on a sparser diet and produce a lower output than English or American workmen. Two definable points are where efficiency is a maximum, which needs a more liberal diet than that considered by Mr. Rowntree, and where the value of addi tional efficiency exactly equals the cost of the additional food, etc., necessary, for whose ascertainment there are no observa tions; and Atwater's standard is in fact lacking in precision of definition, an arbitrary one (see Bowley, Measurement of Social Phenomena, chap. viii., '9'5). If we drop the word "minimum" and speak of Mr. Rowntree's as a convenient and intelligible standard for demarcating poverty, we can properly measure the change in the cost of living at this standard (if the facts are ascertainable). The varying cost of the official civilian rations, computed in Germany circa '9'9, gave a measurement similar to that described. The cost of Mr. Rowntree's standard, and one Modified by Bowley, so as to correspond more closely with the dietary ordinarily followed by urban workmen (without increas ing the "calorie" value) was worked out for certain English towns in 1913, (Livelihood and Poverty), 1915 and 1924 (Has Poverty Diminished? 1925). A legal minimum wage could be based on a standard thus defined, but in fact it is generally related to a higher conventional standard.
This method cannot be carried out in its entirety for two reasons, namely, lack of information and change of quality of the commodities in the market. In most countries data of ex penditure and prices are only obtained for principal commodi ties (meat, bread, etc.), and not for those on which little is spent (currants, pepper, etc.), or in whiciLlie unit is variable (fruit, vegetables, etc.); but unless owing tY'Shortage of supplies there is a run on the articles not included, these omissions cannot affect the result significantly. In some countries the expenditure is not known, but only prices; then the resulting calculation is generally valueless; and in others currency has been so vari able that the computation has been meaningless. In nearly all cases there is no sufficient knowledge of expenditure on clothing either in total or in detail, and it is often difficult to obtain ade quate data for fuel and light or for miscellaneous items. The sums included in the calculations, in fact, account for only a part of ordinary household expenditure, but where most care has been given to the question the part is a large proportion of the whole. Classes of expenditure that are not strictly necessary, such as amusements, tobacco, alcohol, etc., are generally omitted, as are occasional expenses (doctors, purchase of furniture, etc.), but in some cases subscriptions to trade unions, etc., insurance payments and travelling to work are included. The miscellaneous expenses omitted become a larger proportion of total expenditure as we go up the scale of incomes.
The difficulty due to the change of quality of goods which has been so marked since 1914 is even more fundamental. Over any long period the actual constituents and quality of a pound of bread, a cut of meat, a pair of boots, change considerably. From some points of view these gradual changes are not important; during the war, however, substitution of one commodity or ingredient for another sudden and common, and the pre-War quality was unobtainable at any price, or if obtainable had a quite altered position in domestic economy. Consequently the prices included in the calculations were frequently not for the same things at different dates, and the precision of the measurement was greatly diminished. After the Armistice there was some return to former qualities, but the change has been sufficient to under mine the foundation of the numbers, and it is very desirable that a new investigation should be made to ascertain what modification in the basis is expedient.
It should be added that separate budgets ought to be formed (and in some countries have been formed) for different grades of income and for different classes of occupation, and also for single persons and for married persons with dependants.
The structure of the index-numbers of the cost of living on this basis may be illustrated by the details of the retail food index-number of Great Britain, whose origin and method are described in Section II., p. 5o3. In the table on p. 5o2 the first two columns give the commodities and quantities in the weekly budget which forms the basis, and the third column the basic prices. The next column (E) shows the cost of these quanti ties (Q) at these prices (P). The next (p) are the prices at a later date, which applied to the original quantities (Q) give the cost (e) of the same quantities at the new prices.
The total of the column E is the whole cost of the budget in July 1914, viz.: 216.4d.; the total of the column e is the cost of the same budget at the prices of October 1927, viz.: 343.3d. Since 32 t 36:: X ioo = 159 approximately, the latter cost is '59 per cent. of the former, that is 59 per cent. greater. The food index number for October 1927 is written 159, and frequently quoted as X 59.
, The method is clearly exhibited by algebraic symbols. Write is possible to purchase the same quantities of commodities of precisely the same quality in both cases, and in order to make a strict numerical comparison we need a test of equality of stan dard, and it is also expedient to devise a method of measuring the relation between two standards. The problem so stated has not yet been completely solved. A measurement could be made on a strictly nutritive basis and the cost of purchasing in the most economic way the amount of calories (including the neces sary protein) considered proper to health and efficiency could be ascertained in both countries or at both periods ; but this would only give a theoretic solution, since it ignores the influence of custom and taste in diet, and, in fact, in developed countries relatively few people have been compelled to purchase their nutriment in the cheapest possible way. The actual practical question in Britain in 1921 was, what was the cost of main taining the pre-War standard of living in nutritive power and in satisfaction or pleasure derived from food and clothing, allow ance being made for changes in prices and available qualities. This statement introduces the vague word satisfaction, which it is not practicable to define exactly, though some mathematical methods based on economic principles have been suggested for ascertaining its equality in two cases.
One method would be to frame a new budget of goods obtain able and in fact purchased by housekeepers with the same skill of adjusting purchases to desires as in the case of the earlier budgets. This would mean obtaining from representative working class women a budget which in their opinion would now give the same variety and pleasure as a selected budget of 1914, care being taken that the energy value is the same. The result would be a new conventional budget, the ratio of whose cost to that of the pre-War budget would give a rough measure of the cost of living (cf. Bowley, "Measurement of cost of living," Journal of the Royal Statistical Society, May P. 354 ; and "Cost of living and wage determination," Economic Journal, March 1920, p. I17).
Another method was used in the British Board of Trade's inves tigation into the cost of living in Great Britain, United States, France, Belgium and Germany, which was initiated in 1905 (cf. official papers Cd. 3864, Cd. 4032, Cd. 4512, Cd. 5065, Cd. 5609). A comparison was made of the cost of living in Great Britain and in each other country on a double basis as follows: It was found that an English housewife purchasing in 1909 in the United States a week's supply of food as customary in England, would have spent 38% more in the first-named country, the ratio of the costs of living being on this basis 100:138; on the other hand, an American housewife purchasing in England a week's supply of food as customary in the United States would have found her expenses reduced in the ratio 125:100 (Cd. 56og, pp. lxvi., lxvii.). If these ratios had been reciprocal either would measure the differences in the cost of living (so far as food is concerned) ; as it is, their divergence illustrates the want of definiteness in the problem.
Another method gives, perhaps, the most practical solution, and its theoretic basis is shown in the Economic Journal, June, 1928 (Notes on Index Numbers). Obtain typical budgets of expenditure at two dates ; compile a new or mean standard of quantities which, item by item, are the averages of the entries in the budgets. Thus, if in one the consumption of 33 lb. of bread is stated, in the other 35 lb., enter 34 lb. in the mean standard; now find the cost of the mean standard at each date and take the ratio of these costs as the measurement of the change in the cost of living.
If all prices rose in the same ratio the methods now described would necessarily yield the same results; the need for choice arises from inequalities of increase, which in some cases are very wide. Now if at one date purchases are made so as to maximise the satisfaction in the outlay of the week's housekeeping allow ance, as we may reasonably assume, and prices rise irregularly, it is evident that somewhat less will be bought of the commodities which have risen most and more of those which have risen least if a maximum is still obtained, and that consequently the increase in the expenditure necessary to obtain the same satisfaction as before is less than the increase if exactly the same quantities had been purchased. For example, if oranges are doubled in price and bananas increased only one-half, more bananas and fewer oranges will be purchased.
In this way we are led to consider a conventional standard of living which changes from time to time. When there is no reference to a physiological minimum, the cost of living may be regarded as the cost of maintaining the standard customary to the social or occupational class concerned at a given time and place. In this sense the cost of living of Chinese labourers is lower than that of the Americans, though they pay the same prices for commodities. When "cost of living" is used in this sense it should always be accompanied by a description of the standard attained. Thus the British Committee on the Cost of Living in 1918 (Cd. 8g8o) estimated the average expenditure of working-class families in 1914 and 1918, and at the same time reported on the change of standard. In some of the statistics quoted below a conception of this kind is involved in the figures.
Relative importance being determined, the next step was to ascertain the movement of prices. Prior to 1914 the records were obtained exclusively for London, but it was shown (Cd. pp. and 306) that from i 9o7 to 1912 the average move ment was very nearly the same in provincial towns as in London. From Aug. 1914 statements of prices were obtained for 65o towns and villages.
The index numbers of the cost of living, so far as food is concerned, were then obtained by the method b described above; prior to 1914, the year 'goo was taken as base, and the prices then equated to i oo ; from the beginning of the War, July 1914 was taken as base.
There are certain weaknesses in the method. It is assumed, without explicit evidence, that expenditure on meat was in the proportion 2s. on beef to is. on mutton, and that British and foreign meat were of equal importance, while the price ratios taken for meat are for four selected joints only ; during the period 1915 to 1 9 i 9, when the relative quantities available varied and relative prices were altered, these assumptions affect the index numbers. The weight assigned to margarine is arbitrary. The number of eggs consumed (about 12 per household per week) is based on summer records and is no doubt higher than the average for the year.
Rent, Clothing, etc.—Next in importance to food comes rent. The figure included in the index number allows for such increases for rates, repairs, etc., as are legally permissible and is accurate for persons who by remaining in the same house since 1914 have the benefit of the Rents Restriction Acts; the increase for those who have moved must have been variable and for it no estimate is available.
The cost of clothing, which ranks next to rent in expenditure, is always awkward to measure owing to the difficulty of defining the garments or stuffs purchased, and of assigning their rela tive importance in the budget, and also there was great variability in the qualities in the shops during the period 1921. The diffi culties can be understood by comparing the estimates and method of the Cost of Living Committee (loc. cit., pp. 21-3) with those of the official index number described in the Labour Gazette, April 1921, pp. 178-79; the former found an increase of 96% between July 1914 and the summer of 1918, the latter reached increases of 210% in June and 24o% in Sept. 1918. The differ ences are partly attributable to the great variability of the in creases among the articles in consequence of which the relative importance given to each has great effect, and in this respect the committee's measurement was the more systematic; and partly due to the difficulty of obtaining quotations for the same qualities of goods or in allowing for substitution. The question is too intricate to discuss here; it can only be suggested that the results have little precision, and that the process of obtaining an esti mate based on a new budget in which modifications of custom are allowed for is even more necessary than in the case of food.
Fuel and light present little difficulty when a general average for the country is in question since the retail prices of coal and of gas are ascertainable. The variations from north to south in price and consumption and that between winter and summer are not very important, since where coal is dear gas is used for cook ing, and in working-class households one fire is necessary through out the year for cooking and this also provides heat.
The official index number allows only one-twelfth of the weekly expenditure for all items not already included, or about is. 6d.
the following proportions, stated for clearness on the basis of a pre-War urban weekly expenditure of 37s. 6d. Food 22s. 6d., rent (including rates) 6s., clothing 4s. 6d., fuel and light 3s., sundries is. 6d. Here the proportions on food, rent and light rest on good evidence; that on clothing, for which the expendi tures vary greatly according to the income and personnel of the family and for which there has never been a satisfactory investi gation, is little more than a guess based on vague estimates; that on sundries is the residuum when other expenses are met and is probably too low.
The results for selected dates are as follows:— per household in 1914. This sum is exhausted by cleansing mate rials with a very small margin for tobacco, newspapers, house hold replacements and fares. Insurance and trade-union sub scriptions are not included, nor is alcohol.
The five classes of expenditure now named are combined in *Not stated separately at these dates.
The statistics are for the beginning of each month.
These numbers, corresponding to those in the last column month by month are shown in the diagram, and with them a rough index of average wage movements. The latter differs in many ways from a complete account of earnings, which should allow for many other factors, but serves to show the relation of the movements of time-wages (and some price-earnings) in the normal working week.
It is probable that the increase in cost was exaggerated, at least to the end of 1920, owing to evasion of the higher prices by the substitution of cheaper articles, without lowering the general standard obtained. From 1921, however, supplies have been adequate and the final change in the composition of the budget can hardly have reduced the number effectively by more than five points. The winter is higher than the summer number, partly owing to seasonal dearness, partly owing to the assump tion that eggs, etc., are bought in the same quantities winter and summer. On the average the July number is about 2% below the average for the year. For fine measurements this variation should be taken into account, but in fact the index-number is not precise within, say, five points, even for the most general pur poses, and still less is it a perfectly accurate measurement of the change in the cost of living in particular localities or occupa tions.
The prices are, of course, strongly affected by the relative value of the currencies in the countries. The result of expressing them on a gold basis may be illustrated as follows, July 192o being selected as near the date of the maximum of prices:— Thus, if an American had gone to Paris in July 1927 with $113 he could have converted them into as many francs as would buy the food that cost $1oo in Paris in July 1914. In New York he would have needed $15o to purchase food that cost $Ioo in July 1914. The great variation in the index from country to country, even after conversion to a gold basis, is noticeable. The increase is generally the less the greater the depreciation of cur rency. (See INDEX NUMBERS ; PRICES ; WAGES.) (A. L. B.) History.—The first comprehensive cost of living study made in the United States was carried out by the U.S. Bureau of Labor in 1890 (see Sixth Annual Report of the Commissioner of Labor, 189o, Washington, D.C., 1891). Information relating to incomes and expenditures was collected from 3,26o families, including 16,581 persons. The heads of the families studied were employed in the iron, steel and related industries. In the year 1891 another cost of living study was carried out by the bureau (see Seventh Annual Report of the Commissioner of Labor, 1891, Washington, D.C., 1892). This study included 5,284 families, with members. The cotton, woollen and glass industries were covered. In 1901 and 1902 the U.S. Department of Labor, as it was then called, made another study of the cost of living, dealing with 2 5,44o workingmen's families, with 124,188 members. The lead ing industries in all the principal industrial centres of 33 States were covered.
During the first half of 1916, the Bureau of Labor Statistics, by direction of Congress, made a study of the cost of living of wage earners in the District of Columbia. The results of this study, showing incomes and expenditures of workers' families and of single women workers, were published in a series of articles appearing in the Monthly Labor Review of the U.S. Bureau of Labor Statistics, Oct. 1917 to April 1918. The latest compre hensive study of the cost of living by the bureau was begun in 1917 for the Emergency Fleet Corporation of the U.S. Ship ping Board. This study covered 35 ship-building centres, and was extended during 1918 and 1919, for the use of the War In dustries Board, to include 92 cities and towns in 42 States. The results of these latest studies by the bureau were published as soon as completed in the Monthly Labor Review (March 1918 to Aug. 1919). Bulletin No. 357 of the bureau gives the tabulations of incomes and expenditures by income groups for 12,096 families of 59,27o persons. The quantity as well as the cost of every item purchased by each family for an entire year was obtained. The average quantity of each item purchased was computed for all families in all the cities.
These average quantities, classified into six major groups, con stitute the average quantity family budget for the 92 cities studied in 1917-19. This quantity budget was and still is the basis for cal culating the bureau's index numbers of costs of living and changes therein.
In to 1938 the bureau completed two country-wide studies of incomes and expenditures of wage earners and lower-salaried workers. One included some 16,000 families in 55 cities; the other covered more comprehensively 32 cities. Only three cities were included in both studies. Several important special studies of expenditures and budget costs have also been made. In 1935 the bureau co-operated with the Works Progress Administration in compiling the monograph, Intercity Differences in Costs of Living, based on the pricing of a theoretical "maintenance budget" in 59 cities. These later studies have apparently been used to supple ment, not to supersede, the studies of 1917-18. The bureau still uses, with some necessary modifications, the average quantities of 1917-18.
The aim is to price a list of goods as nearly identical as possible at different times so as to show by index numbers relative changes in costs of goods and not relative changes in quantities, qualities and kinds of goods.
However, new qualities of goods are substituted for those dis placed and new articles, such as automobiles, radios, electric re frigerators, rayon garments, are added to bring the workers' budget up to date.
During and immediately following the World War, many com panies established systems of wage adjustments on the basis of changes in the cost of living. Some of these companies made more or less complete surveys periodically in order to determine the extent of changes in the cost of living. Since the crisis and de pression of 1920--21, most of these cost of living wage systems were given up, partly because of the difficulty of persuading the workers that the cost of living had fallen and that therefore their wage rates should be correspondingly reduced, but principally because employers felt that "wages should be deflated" and that wage rates could again be determined by "supply and demand" with little regard for cost of living. One of the most successful of these wage adjustment plans based on cost of living was estab lished in 1925 for the employees of the Philadelphia Rapid Transit company and operated satisfactorily for several years.
The first method has the great advantage of greater intimacy of contact and therefore greater accuracy for each budget. Its great disadvantage is that it is unavoidably very limited in the number taken as a sample to represent the whole. It is likely to misrepresent the incomes and expenditures of the classes and occu pations it purports to represent, not only because the number studied is small but also because the period covered by the study is so short. Families which are willing and able to report detailed information over a considerable period are hardly typical of workers or any other class. The advantages of the second method consist in the larger numbers included and the longer period of time covered by the budgets. The different classes and occupations in the community and country are, therefore, better represented, as also the variations in incomes and expenditures in winter as compared with spring, summer and autumn. The great disad vantage of this method is the impossibility of securing accurate records of expenditures over so long a period as one year. There is no apparent reason why errors in estimates of expenditures should counterbalance each other. Intensive studies and checks made by the U.S. Bureau of Labor Statistics, however, show that these errors do cancel to a large extent, so that the results shown by the extensive budget studies made by that bureau may be taken with confidence as truly representative of the incomes and expenditures of working-class families of the income groups specified in the different cities studied.
The cost of living studies made before the World War supplied some valuable information as to the conditions of life among the labouring classes. Above all, they blazed the trail and made pos sible the more detailed and specific studies which have followed. The obvious criticism which applies to them all is that the infor mation obtained was inadequate for the accurate determination of the degree of comfort and well-being enjoyed by the workers in the different income groups. Furthermore, these early studies supplied the quantities and descriptions of things consumed only in the case of foods. It was, therefore, impossible to calculate accurately changes in the cost of living. An average cost of living budget, expressed in dollars instead of physical units of quantity, is of little value for determining whether the lot of the workers has improved or sunk lower with changing prices, wage rates and incomes. In fact, very little use was made of these studies in wage disputes.
During the period of rising prices from 1897 onward, the de mands of the workers for increased wages to offset increases in prices were frequently met by the statement that the workers' difficulties in making both ends meet were due not so much to the "high cost of living" as to the "cost of high living." This assertion that family expenditures were increasing because of the growing and extravagant demands of the workers and their families could not be answered by any cost of living data at that time existing. In the study made by the U.S. Bureau of Labor in i9oo and 1901, the food budget was itemized and the actual quantities purchased by each family were ascertained for nearly 8o% of the total spent for food. From these facts a quantity food budget for the average workingman's family was compiled. Beginning with 1904 retail prices of food commodities have been published by the Bureau of Labor. These prices were weighted by the quantities of each article consumed by the average family as shown by the 19oi study. Thus a fairly accurate measure of the change in the cost of the food budget as it existed in 19o1 was obtained.
The other items of the family budget, however, were not given quantitatively, so that changes in the cost of living could only be estimated from changes in the cost of the food budget alone. In making such estimates, some assumed that the cost of all items in the family budget changed in the same degree and in the same direction as food prices; others assumed that only food prices changed and that all other items in the worker's family budget remained stationary; still others assumed that food prices in creased more rapidly than the prices of other articles of consump tion, and compromised by assuming that all items other than food increased only half as much as food.
The facts were gathered through personal visits by experienced agents. The schedules of inquiry listed the articles of family consumption in minutest detail. Quantities, costs and prices were obtained for al! articles, so far as possible. The costs of clothing, furniture and other durable articles were distributed over the entire lifetime of the articles and the annual costs computed. For example, a suit of clothes costing $3o.00, estimated to last three years, would be entered as an annual charge of $1o.00. The food schedule contained approximately so separate articles of food. Annual rents or costs of occupancy of all varieties of dwellings were obtained. Probably not less than 4o different types of house or flat were scheduled. One hundred and forty-four types of arti cles of wearing apparel were listed on the schedule of inquiry. Of course a much larger number of specific grades and qualities were recorded by the agents in the survey. The quantities and costs of all kinds of fuel and lighting consumed were scheduled. Prob ably not less than 20 specific varieties of coal, coke, wood, gas and electricity were included. Sixty-two classes of household furniture and furnishings were designated in the schedule. The cost of probably more than 15o different grades and qualities of these articles was obtained. Sixty-two different items were in cluded in the miscellaneous schedule. The cost of many of these items can be expressed only as a lump sum of money. No quan tity figure is obtainable. For example, school expenses, medicines and most other expenses for health, vacations, travel, church, charity and various kinds of contributions can be expressed only as specific sums of money or fractional parts of the total expendi ture of a family.
All told, the prices, quantities consumed, and annual costs were obtained for approximately 55o to 600 different grades or descrip tions of articles and services consumed in 12,o96 workers' fam ilies.
The price of each of these representative articles is weighted by the quantities which the given article represents in the total aver age family budget.
Second, it is not practical, because ot expense, to include all of the 9 2 cities and towns covered by the budget survey of 1918. Food prices are obtained from 51 cities while prices of other budget items are obtained from only 32 cities. To obtain group aggregates, the average cost of each of the six groups, as found by the periodic retail price surveys, is multiplied by the percent age which the given group bears to the cost of the complete budget of 1917-19. These six group aggregates are totaled to ob tain the aggregate average cost of the entire budget as of the date of the retail price survey. These budget aggregates are converted into cost of living index numbers on the base 1923-25, by divid ing each aggregate by the aggregate for 1923-25.
Second, the weights ascribed to the six major groups have been revised with the view of representing more accurately the percentage distribution of the cost of each group in the year 1913, the base year for the cost of living indexes.
The percentages for the several groups are computed from the aggregate costs of the articles in the groups. The old and the new weights are given in Table VI.
Third, a new and commendable system of weighting costs for different geographical areas according to the population of each area was introduced. Aggregate costs for each group are com puted for the principal cities and these group costs are multiplied by figures representing the population, not of the particular city, but of the adjacent area in which prices are assumed to move similarly. The base period of reference has been changed from 1913 to the period 1923-25.
Table VII gives the revised indexes. Between 1913 and 1938 the food index advanced 25%; clothing, 48% ; fuel and light, 61%; house furnishings, 77%, miscellaneous, 77%; rents only 13%, and the entire budget, 45%.
• These average changes in the cost of the different groups and of the entire budget have all the demerits of averages made from such divergent data. The accuracy of the calculations is unques tioned. Whether any one series of indexes based on data collected from only 32 cities can be assumed to represent costs of living in such a vast and variegated area as the United States may well be questioned.
The Minimum Quantity Health and Decency Budget.— Very soon after wage adjustments began to be made on the basis of changes in the cost of living, calculated as above outlined, the workers began to demand higher standards of living. In order to ascertain whether the workers' demands were just and reasonable it became necessary to set up a more precise standard of measure ment of changes in the cost of living. A budget made by averag ing the total incomes of all workers' families, the sources from which the incomes are derived, the amounts expended for differ ent items, and the surpluses saved or the deficits incurred, tells us little or nothing as to the adequacy of the income received by any worker's family.
In order to determine whether workers' incomes are sufficient to buy the right kinds, quantities, and qualities of food, housing, clothing, fuel, etc., it is necessary to establish a standard quantity budget which will be adequate to maintain the average family in health and efficiency.
Accordingly, in 1919 and 1920, the Bureau of Labor Statistics, in co-operation with experts from the Department of Agriculture, worked out standard minimum quantity budgets sufficient to maintain a single man, a single woman and the average worker's family in health and decency.
The standard minimum quantity family budget so compiled did not differ very much from the actual average budget purchased by families in the $1,800–$2,Ioo income group in the year 1918. These minimum quantity budgets were published in the Monthly Labor Review of the U.S. Bureau of Labor Statistics, Dec. 1919, Jan. 192o and June 192o.
The value of a standard minimum quantity budget is apparent. The actual consumption of workingmen's families may be quite inadequate or ill-adapted to support them in health and efficiency. It may be that they expend more than they should for certain items of food, clothing or amusements. It is much more likely that they are unable to expend enough on the right kinds and qualities of food, clothing, medical care, education and insurance.
With such a minimum standard quantity budget as a guide, any unreasonable demand by workers for a wage increase or by employers for a wage cut would be made at once apparent. How ever, neither employers nor workers accepted the standard quan tity budget as a base from which to measure changes in the cost of living. Instead, they agreed to the theoretically less precise method of measuring changes in the cost of the average family budget and obtaining the new wage rate by multiplying the old rate by the cost of living index number so calculated.
This method was used during the war and was employed in many establishments for several years thereafter. Imperfect as it is, industrial peace was furthered thereby and more reasonable wage rates were maintained.
The most reasonable policy would be to discard the 1917-19 country-wide budget and construct a series of new cost of living budgets, making use of the consumption data obtained in the surveys, to represent different geographical sections.