FAMILY INCOME IN GREATER DETROIT: Harry Sharp, Director, Detroit Area Study

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1 Detroit Area Study- Survey Researh Center University of Mihigan Projet 855 June, 1959 #11*77 FAMILY INCOME IN GREATER DETROIT: Harry Sharp, Diretor, Detroit Area Study The effets of the eonomi reession whih first were felt in greater Detroit about the last quarter of 1957 resulted in a substantial deline in family inome in After reahing a high point of #6,200 in 1957, median family inome fell to #5,900 last year. This redution of #300 represents a 5 per ent drop between 1957 and A median inome of #5,900 means that in 1958 one-half of the families in greater Detroit earned more than this amount and one-half earned less. "Family inome" inludes gross inome before taxes from any soure for all persons related by blood or marriage who live in the same housenold. The data reported here were olleted during personal interview surveys onduted by The University University of Mihigan's Detroit Area Study."*" The first annual Detroit Area Study estimated 1951 median family inome for metropolitan Detroit at #ii,600. Inome grew steadily through 1953, fell in 195u, and ontinued to rise thereafter until reahing its highest point to date in As a result of the 1958 setbak, Detroit area median family inome dropped to its lowest level sine Between 1951 and 1957, median The Detroit Area Study is assoiated with the Department of Soiology and the Survey Researh Center of the Institute for Soial Researh at The University of Mihigan. Eah year sine 1951 the Detroit Area Study has onduted an interview survey with a probability sample of the population of metropolitan Detroit. The sample universe, whih is that part of greater Detroit that was trated by the U. S. Bureau of the Census, inludes about 86 per ent of the population of Wayne, Maomb and Oakland oounties. Inome data were obtained by asking a randomly seleted adult in eah sample household: "What was your total family inome in 1958, onsidering all soures suh as rents, profits, wages, interest and so on?" Every additional adult in the sample household was asked: "Did you have an inome apart from what has already been reported in your total family inome?" If the answer to this question was "Yes," the adult was then asked: "What was your total inome in 1958?" Responses from the first and seond questions were summed for all related adults to obtain a total family inome figure.

2 Projet # 12*77 inome grew by 35 per ent. The 1958 deline, however, has redued the rise in dollar inome over the last eight years to 28 per ent. The 1958 reession, when measured by msdian inome data, i s quite omparable to that experiened by greater Detroit families during the U period. Between 1953 and 195U median inome dropped by 8 per ent. The reovery in 1955, however, immediately brought the 1955 median bak to 1953 levels, and inome ontinued to limb until Most urrent indiators point to a healthy resumption of eonomi expansion whih started in late For example, i t is estimated that ar and truk prodution for the United States in 1959 will be 31 per ent higher than in the preeeding year. Even so, the 1959 estimate plaes total ar and truk prodution for this year at a figure whih is 20 per ent below that ahieved in It is doubtful, therefore, i f 1959 family inome in greater Detroit an ome bak as rapidly as did inome levels after the 195U reession. Between 1957 and 1958 the Department of Labor Statisti's onsumer prie index for Detroit rose by 2,7 per ent while median family inome i n the ommunity was falling by 5 per ent. Thus, Detroit area families in 1958 were in the position of having fewer dollars with whih to buy items whih ost them more than in As seen in Figure 1, however, median family inome grew approximately two and. one-half times faster sine 1951 than did the ost of goods, the 1958 deline notwithstanding. During the 1951 to 1953 period median family inome in Detroit was growing at a muh faster rate than was the prie index. Inome delined in 195U and then reovered in 1955 when the auto industry reahed an all time high in prodution. Pries were at a fairly onstant level between 1953 and In 2 John R. Steward, "Detroit Area Business to Rise Throughout 1959," The Detroiter, 1*9 (February 23, 1959), p* 1. Atually, this predition may prove to be too low. U. S. ar and truk prodution during the first five months of 1959 was U3 per ent ahead of the omparable 1958 period. The Detroiter, 50 (June 29, 1959), p. 2.

3 Projet, #1*77 n " ~< * 20 ^ ^ ^ ^ aflated Hadian Inome ex Prie Index 0 -H leara 958 Jaipur* I Par ent inrease,, 195l«1958 in madian family inome^ the ^ornitumef f.-rl^o indox p and in deflated dollar inoma., Index dat#. are based on awragis of eah yea.r& Soures laapartment of Labor Statistie.s Monthly htsbor R*Ti«w r 82 (Aprils 1959) B p* un»

4 Projet 855 If Dxll 1956 and 1957, with many of the eonomi indexes for the Detroit area at reord or near reord peaks, both pries and inome inreased. Car and truk output in 1958 fell to levels far below the prodution reahed during the omparatively off-year of 195h. Consequently, inome i n 1958 also f e l l. Instead of remaining stable as in 195ii, however, the Detroit area prie index of 1958 rose to a new high. Changes in the purhasing power of the dollar between 1951 and 1958 an be measured by expressing the median inome figure for eah year in terms of the dollar deflated to 1951 values.^ As is seen ih Figure 1, buying power in greater Detroit rose steadily from 1951 to 1953, fell with median inome in 195u» and then inreased to a peak in Although median inome in terms of urrent dollars ontinued to grow through 1957, the deflated dollar inome of Detroit area families underwent little hange between 1956 and The 1958 deline in median inome, assoiated with the inreasing ost of goods, resulted in a sharp redution in deflated dollar inome last year as ompared with /Vhen expressed in the equivalent of 1951 dollars, the median inome of Detroit families in 1958 was atually lower than in 1953, and was only slightly above the reession year of 195ii. The proportion of families at different inome levels hanged notieably between 1957 and The perentage of greater Detroit families who earned less than $3,000 jumped from 12 per ent in 1957 to 19 per ent in 1958 (Table 1). The proportion of households with inomes of $3,000 or more dropped somewhat during the two years. Over the entire eight years from 1951 to 1958, the proportion of low inome families hanged remarkably l i t t l e. Although median inome inreased by ^Inome deflated to 1951 dollars is obtained by dividing the median inome for a given year by the rate of growth of the prie index sine 1951.

5 Projet #11*77 TABLE 1 FAMILY INCOME M THE DETROIT AREA: Family Inome Less than #3,000 $3,000 - k,999 $5,000-6,999 $7,000-9,999 $10,000 or more Total Median family inome Number of ases Year * * 11** 18* 111* 13* 12* 19* 1*2 3k 21* ; * 100* 100* 100* 100* 100* 100* 100* 600 $5,000 $5,700 $5,300 $5,700 $6,000 $6,200 $5,90C 7h $1,300 during t h i s period, eah year sine 1951 from 12 to 19 per ent ofgreater Detroit's families earned less than $3,000. Many of the households in this group are living on fixed inomes from pensions, soial seurity and similar soures. Flutuations in wages therefore have little effet on the dollar inomes of these families. The perentage of households with annual inomes of $3,000 to $1*, 999 delined by over one-half between 1951 and Throughout these years a relatively onstant 2k to 28 per ent of metropolitan Detroit families had inomes of $5,000 to $6,999 annually. The number of omparatively high inome Detroit area households has inreased onsiderably. One out of every ten families earned $7,000 to $9,999 in 1951; by 1958 the omparable proportion was one in five. Very high inome families also beame a less exlusive group between 1951 and As pointed out in an earlier Detroit Area Study report,^ although some low inome households moved into middle inome brakets and were replaed by low **A Soial Profile of Detroit; Ann Arbor: The Detroit Area Study, 1957, pt2o\

6 Projet # 1U77 inome migrants to Detroit, this movement is probably not so great as that of middle and upper-middle inome families into higher inome brakets. Data presented in Table 2 allow us to analyze the impat of the reent reession on different population groups in greater Detroit. In 1958, as previously, median inome of families whose heads were not in the labor fore was onsiderably less than one-half of the amount reported for families whose heads were labor fore members. During the 1951 to 1957 period the family inome of labor fore members grew at a muh faster rate than did that of persons who were retired, housewives, disabled, or otherwise not employed or employable. Between 1957 and 1958, however, the inome differential between labor fore members, many of whom experiened a redution i n inome, and nonmembers, many of whom were living on fixed inomes, remained omparatively stable. Apart from its impat on the inomes of labor fore members, the 1958 reession influened the omposition of the labor fore itself. There is evidene from Detroit Area Study data that the redution in available jobs has had the effet of driving some wage-earners out of the labor market altogether. The proportion of households with no member in the labor fore was somewhat higher in 1958 than in 1957; orrespondingly, Detroit area families with multiple wage-earners delined in number over the last two years. Families of workers who were unemployed in early 1958 had a 1957 median inome substantially below that of employed workers.^ This differential is i n t e n s i f i e d i n the 1958 inome data. A sizeable number of persons who were unemployed in February or inarh of 1959 were working irregularly, if at all, throughout 1958, The 1958 median family inome of heads who were unemployed in -^"Unemployment in Greater Detroit." Ann Arbor: The Detroit Area Study, 1958 (mimeographed).

7 TABLE 2 MEDIAN FAMILY INCOME IN THE DETROIT AREA, 1951, 1957, AND 1958, Seleted Charateristis 1951 Median Inome 19bY Median % Change Inome from 1951 BY SELECTED CHARACTERISTICS OF THE FAMILY HEAD Median Inome Year* 1 TTTrTS * Change from 1951 NhmhfiT' of Cases * Change from o CJ. CEj O f CO VA Labor Fore Status Labor fore member Employed Unemployed Not in the labor fore #1*,700 $1,900 $6,500 $6,900 $U,uOO #2,1*00 38* 26* #6,1*00 $6,700 #3,000 #2,1*00 36* 26* -2% - 3* -32* 0* 61*8 ' 1*6 62I ; Oupation* 3 Laborers Operatives, servie workers Craftsmen, foremen Clerial, sales workers Professionals, managers, proprietors, offiials $3,900 $5,200 $l*,700 $6,500 $5,u00 $6,900 $6,300 $8,700 38* 33* 31** 31** $U,900 $6,700 $6,700 $9,100 26* 29* 1*3* 1*0* -9* -3* 6* 5* * * lj Eduation o years or less 7 to 8 years 9 to 11 years Completed high shool College Rae Negro White Plae of Residene Detroit, Highland Park, Hamtramk Suburbs $3,500 $1^,200 $1*,300 $5,000 $6,000 $3,500 $li,800 $1*,1*00 $U,900 $1,700 #5,1*00 #5,800 $6,500 $8,100 $l*,l*oo $6,600 $5,600 $7,200 31** 29* 35* 30* 35* 26* 38* 27* 1*7* $3,800 $1*,900 $5,600 $6,500 $8,600 $3,700 #6,300 $5,300 $6,900 9* 17* 30* 30* 1*3* 6* 31* 20* 1*1* -19* -9* -3* 0* 6* -16* -5* * 1*81* * U * * PT 0 a Comparable data for the years 1952 to 1956 are available from the Detroit Area Study, ^abor fore members only. Pasa too small for tabulation.

8 Projet # lii77 early 1959 was only $3,000; Detroit area families whose heads were working when interviewed had a 1958 median inome whih exeeded this amount by fully $3,700. In fat, the 1958 family inome of workers unemployed in early 1959 was only #600 above that of families whose heads were not in the labor fore at the time of the survey. From 1951 to 1957, a period of eonomi expansion, all oupational groups in Detroit experiened similar proportional inreases in dollar inome. The median inomes of blue- and white-ollar workers alike grew from 33 to 38 per ent during these seven years. The reession year of 1958, however, has had by far its greatest impat on the blue-ollar oupations. The inome of skilled and semi-skilled workers fell in 1958, while white ollar workers had a slight inrease in inome* As ompared with 1951, all oupational groups have enjoyed a growth in dollar inome. Unemployment in 1958, however, was muh more frequently faed by fatory workers than by other labor fore members.^ The omparative rates of growth in median inome, 1951 to 1958, are therefore substantially higher for white-ollar workers than for blue-ollar workers. The effet of the 1958 Detroiters was tremendous. reession on the inomes of less well eduated For example, families whose heads-had six years of shool or less reported a 1957 median inome of $U,700; 1958 inome for these households showed a deline of 19 per ent over the two years. College trained Detroiters, however, made more money in 1958 than in As a result, the 1958 median inome of family heads with some ollege experiene was onsiderably more than twie that of family heads who did not finish the seventh grade. The eonomi value of an eduation is highlighted by these findings. The Detroit Area Study's data indiate that even within oupational groups, 6 Ibid.

9 Projet fflkll workers with an extended eduation were muh less effeted by the 1958 reession than were similarly employed family heads with little formal eduation. During eonomi expansion a greater eduational level will be assoiated with higher inomes, but all eduational groups will share proportionately in the benefits of a healthy eonomy. When eonomi growth slows down, however, by far the greatest impat will be felt by those with the fewest years of eduation. Negro workers ih Detroit are lustered in semi-skilled fatory jobs and have had omparatively less formal eduation than have whites. In early 1958 Negroes were over three times more likely than whites to be out of work. 7 Median family inome for Detroit area Negroes fell by #700 (or 16 per ent) between 1957 and In omparison, the inome of white families in this ommunity delined by $300 (or 5 per ent) during this period. In 1951 the median inome of whites was 37 per ent higher than the Negro median; in 1958 this figure had grown to 70 per ent. The Negro family has been extremely vulnerable to the reession. While pries have inreased by 11 per ent sine 1951, the 1958 median family inome of greater Detroit Negroes was only 6 per ent higher than eight years previously. are taken Even when the differenes in oupational level of Negroes and whites into aount, Negroes fared far worse in 1958 than did whites. For example, our data indiate that while the median family inome of white semiskilled fatory workers fell by k per ent between 1957 and 1958, omparable Negro families found i t neessary to live with an inome redution of 23 per ent over the same period. A large number of Detroit area Negroes are omparatively reent migrants to this ommunity. These parsons, most of whom are southern-born, were working on low seniority jobs when the first wave of unemployment engulfed greater 7 Ibid.

10 Projet # 1V77 Detroit. They were thus the first to lose their jobs and the last to be rehired. Probably as a result of the growing number of blue-ollar workers in the suburbs, both entral ity and suburban families experiened omparable delines in inome between 1957 and Throughout the 1951 to 1957 period, however, suburban areas had inreasingly higher inomes than did the entral ity. The differential in inome growth between the ity and the suburbs remained sizeable in While the median inome of families in Detroit rose by 20 per ent over the last eight years, the omparable inrease in the suburbs was hi per ent. The movement of the more well-to-do white families out of the ity to the suburban ring, and the migration of blue-ollar Negro and white workers into the enter of the ommunity, probably are basi fators in the long range disparity between the inome levels of the entral ity and the suburbs. Summary Median family inome in the Detroit area fell from $6,200 in 1957 to $5,900 in This deline of 5 per ent represented a substantial drop in buying power, for pries in greater Detroit rose by 2.7 per ent last year. In terms of 1951 dollars, the "real" inome of Detroit area families was lower ih 1958 than in The impat of the eonomi deline in 1958 was felt to its greatest extent by the blue-ollar workers, the less well eduated, and Negroes. Thus, those population groups with the least finanial reserves to fall bak on when needed, have borne the brunt of the reession. Although inome delines were felt by families in the ity of Detroit and in the suburbs, the disparity between suburban inomes and those in the ity shows no sign of diminishing. Between 1951 and 1958, as a result of differential patterns of migration to and within metropolitan Detroit, the inome level of suburban ommunities has inreased at twie the rate shown by the entral ity.

Labor Demand: Lecture 8. Empirical Evidence of Effects of Immigration, continued

Labor Demand: Lecture 8. Empirical Evidence of Effects of Immigration, continued abor Demand: eture 8 Empirial Evidene of Effets of Immigration, ontinued Today we pik up where we left off on our disussion of the effets of immigration on labor supply and wages of natives. Reent immigration