INCOMES IN THE UNITED STATES

The United States is the richest nation in the world. In 1967, for example, we produced some $785 billion worth of goods and services.Over $175 billion of this total went for nationaldefense and other government services like high-ways and education. Another $110 billion con-sisted of “producers’ goods”—factories, machinery,new buildings, and other equipment for producing more and better consumer goods in the future. The biggest chunk, two-thirds of the total, was made up of consumer goods and services—autos,beef steak, clothing, medical services, and the like.

Against this background, consider Fig. 1-1, which shows the incomes received by American families in 1966. The median family income was $7,400 for a statistically average family of about three and one-half individuals; half of all families received more than this and half less. At the top, nearly 10 per cent of all families received incomes over $15,000, and the five million families in this group received over $150 billion, more than 20 per cent of the national income. At the very top, 1.7 per cent received over $25,000. Another 20 per cent of all families received between $10,000 and $15,000, so that nearly 30 per cent of all families had incomes above $10,000. At the bottom, even with America’s affluence, 8 per cent of all families received incomes under $2,000, and those families received only a little over 1 per cent of the total income.

FIG. 1-1 The United States has a wide range of family incomes. Each bar shows one-fifth of all families. Threefifths of all families received between $3,500 and $11,-600 in 1966, but the fifth receiving more than $11,600 hod 41 per cent of all the income. Half of all families qot more than $7,400, and half less. (Source: U.S. De-portment of Commerce.)

Why? Why does our society exhibit these great differentials in family incomes? Why do the top 10 per cent receive nearly a quarter of all income, while the bottom 10 per cent receive only 2 per cent.

FIG. 1-2 The past century has seen a dramatic change in the way Americans earn their livings. Today 60 percent of all jobs are in service industries, only 40 percent in industries which produce physical goods. Note the drastic decline in agriculture. (Source: National Resources Committee and U.S. Deportment of Commerce.)

A related question: Why is poverty still a massive social problem in our prosperous economy? In 1966, about seven million families had money incomes of less than $3,000; their median income was only $1,800, and over one million of the families were raising four or more children on that income. About five million people living alone had incomes below $1,500. Together these two groups included nearly 30 million Americans, nearly one-sixth of the population. Many social observers have written that the world of poverty is a world of desolation, of hopelessness, of bitterness and resentment, of slums, of discrimination.It is a world of Negroes and Puerto Ricans living in the great slums; of old men and women living alone in rented rooms; of poor southern farmers living in ramshackle huts without plumbing; of fatherless families whose mothers struggle to support their children; of failures and rejects for a dozen other reasons.

Economists ask: Why these income differentials? Why are the poor, poor, and the rich, rich? They also ask: If we don’t like it, what can we do about it? These are two themes that will recur over and over in the chapters to come—why are things the way they are (economic analysis),and what can we do to improve them (economic policy)?

CHANGING JOB PATTERNS IN THE U.S.

Figure 1-2 shows the jobs Americans work at today, and the great changes in our job patterns that have occurred over the past century. A hundred years ago, nearly 75 per cent of all jobs involved the production of goods (coal, steel,food, clothing, etc.), only one-quarter the production of services (doctors, lawyers, amusements,transportation, etc.). Today, the picture is reversed. Only 40 per cent of all jobs are devoted to producing physical goods, 60 per cent to producing services. And the trend toward more services continues.

Figure 1-3 shows even more vividly how job patterns have been changing since 1929. Why have they changed? What will job patterns look like in 1975? What determines the jobs at which we work and make our livings? And, looking back to the preceeding section, which will be the highpaid, and which the low-paid jobs? Economics is
about these issues.

GOVERNMENT AND THE ECONOMY

Most people in the U.S.—about five-sixths of the total—work for themselves or for private employers. But looked at another way, one person out of six is on a government payroll (if we include the armed services)—over 14 million people.
In 1967, governments (federal, state, and local) bought about one-fifth of all the goods
and services produced in the economy. Government spending included not only salaries of government jobholders, but primarily payments for missiles, highways, schools, and other things bought for the benefit of the citizens. In addition,
governments made nearly $70 billion of “transfer payments”—payments like old-age pensions, unemployment benefits and interest on the national debt, for which the recipient renders no direct service. To get the money for these expenditures,
governments took a huge chunk of our incomes and taxes—about $240 billion in 1967. Figure 1-4 shows the picture for that year.

In addition, governments make and enforce a maze of regulations over what we may and may not do in our economic activities. They regulate our banks and financial institutions. Federal law sets the minimum wage employers must pay, and prescribes that business must deal with workers and unions when they so choose. In their contracts with businesses, governments set elaborate standards of performance and specify that businesses cannot discriminate against employees on the basis of race, creed, or color. Government says businesses cannot agree to fix prices and cannot
merge together to form bigger businesses if this would substantially reduce competition.

How big should government be? How much should it intervene in the economic processes of our basically private market economy? These are questions that will recur over and over through the chapters to come. They are questions that raise some of the most difficult issues of public policy, at federal, state, and local levels.

FIG. 1-3 The pattern of employment has continued to change rapidly over recent decodes. American economic growth has been characterized by a high degree of mo-
bility. (Source; U.S. Department of Labor.)

FIG. 1-4 Of $243 billion of federal, state, and local government spending in 1967, national defense and international aid took about a third, with social security and education the other biggest single items, (Sources;U.S. Budget and U.S. Department of Commerce.)

GOVERNMENT SPENDING, 1967
Total; $243 billion (slices in billions of dollar