1 The family consists of an employed husband, aged 38, a wife not employed outside the home, an 8-year-old girl, and a 13-year-old boy.

The total represents the weighted average costs of renter and homeowner families. See the weights cited in footnote 4.

The moderate standard does not include an allowance for lodging away from home city but the higher standard includes $110 for metropolitan areas and $40 in nonmetropolitan areas. These costs are not shown separately or included in any of the housing subgroups.

The average costs of shelter were weighted by the following proportions: Moderate standard, 25 percent for families living in rented dwellings. 75 percent for homeowners: higher standard, 15 percent for renters, 85 percent for homeowners.

Average contract rent plus the cost of required amounts of heating fuel, gas, electricity, water, specified equipment, and insurance on household contents.

* Interest and principal payments plus taxes, insurance on house and contents, water, refuse disposal, heating fuel, gas, electricity, and specified equipment; and home repair and maintenance costs.

The average costs of automobile owners and nonowners in 'he moderate budget are weighted by the following proportions of families, Boston, Chicago, New York, and Philadelphia, 80 percent for owners, 20 percent for nonowners. Baltimore, Cleveland, Detroit, Los Angeles, Pittsburgh, San Francisco, St. Louis, and Washington, DC.. with 1.4 million of population or more in 1960, 95 percent for automobile owners and 5 percent for nonowners, all other areas, 100 percent for automobile owners. The higher budget weight is 100 percent for automobile owners in all areas. Moderate standard costs for automobile owners in autumn 1966 were revised prior to updating to Spring 1967 cost levels

In total medical care, the average costs of medical insurance were weighted by the following proportions 30 percent for families paying full cost of insurance. 26 percent for families paying half cost. 44 percent for families covered by noncontributory insurance plans (paid by employer).

For a detailed description, see the 1967 edition of the Standard Metropolitan Statistical Area," prepared by the Bureau of the Budget.

1 Places with populations of 2,500 to 50,000

consumption at comparable levels of living can be made for a variety of family types, if living costs for one are available.1 (See table 10.)

Where the head of the family was younger than 65 years of age, the range in consumption costs resulting solely from differences in the number and age of family members amounted to about $3,900 at the lower, $5,800 at the moderate, and $8,100 at the higher level of living.

In view of the magnitude of these ranges, the published costs of the budgets for a four-person family (or for a retired couple) must always be used with care. They are not appropriate measures of costs for other family types, and they should not be compared with average incomes for a variety of families or with average earnings for workers in a range of age groups.

1 See Three Standards of Living for an Urban Family of Four Persona, Spring 1967 (BLS Bulletin 1570-5, 1969), for a detailed report on the concepts, procedures, data sources, and estimating methods which underlie this article.

These budget cost estimates are in no way related to how much income families of this type actually had in spring 1967. Instead, they are estimates of the income required to maintain either a lower, an intermediate, or a higher level of living, as described by the list of goods and services included in each budget. It is estimated that in 1966 the average family of four persons (husband employed full time, nonworking wife, two children, 6-17 years) actually had a before tax income of between $11,000 and $12,000. It is not known how many of these families had incomes above or below each of the three budget levels.

'These estimates Include Federal but exclude State and local taxes. See pp. 15-16 for reference to equivalence scale from which the adjustments for differences in family size were derived.

See footnote 5, table 1, for the specific weights used in each

area.

'See City Worker's Family Budget for a Moderate Living Standard, Autumn 1966 (BLS Bulletin 1570-1, 1967) for a detailed report on the current and preceding moderate standards. A summary report of Bulletin 1570-1 was published in the Monthly Labor Review, November 1967, pp. 1-8.

Costs of the moderate budget at autumn 1966 prices (aver aging $9.191 in urban areas) were published in BLS Bulletin 1570-1. The spring 1967 estimate excludes the cigarette allowance and reflects differences in pricing procedures in the transportation and recreation components. If these changes had been incorporated in the autumn 1966 estimates, the budget would have averaged $9,049 In urban areas. Hence the cost of the moderate standard increased 0.3 percent over the 6-month period.

The original (1946) budget for this living standard was limited to rental housing because this was the more typical living arrangement at that time. Although the trend to homeownership began after World War II, the 1959 revision of the budget was also limited to rental housing because conceptual and technical problems in determining the cost of owned homes had not been resolved.

A description of the plans may be found in Family Food Plans and Food Costs (Home Economics Research Report No.

20, November 1962) and Family Food Plans, revised 1964 (CA 62-19, November 1964) Agriculture Research Service, Department of Agriculture.

The BLS Consumer Price Indexes for 23 metropolitan areas cannot be used for this purpose. These individual area indexes are not based on a uniform "market basket" of goods and services, but on the particular "market basket," or pattern of expenditures of wage and clerical-worker familles, in each area. Like the U.S. urban CPI, each city index is designed to measure changes in price levels over time; and the index weights for the city remain constant over time except for major periodical revisions. In the absence of a common set of weights, the Consumer Price Indexes for individual cities cannot be used to measure differences in price levels among the cities.

All indexes relate to costs for families established in the areas. They do not measure differences in costs associated with moving from one area to another, or costs for recent inmigrants. 10 Total budget, total consumption, food, and rental shelter costs for the three standards were significantly higher in Honolulu than in the mainland cities, as were also homeowner shelter in the lower and higher standards, and transportation and tobacco in the moderate standard. Therefore, the comparisons have been limited to the mainland cities.

11 Of course, an average cost could be obtained by developing budgets for a variety of family types, representing all stages in the life cycle, and weighting the costs by the proportions of these families in the population. However, resources for the construction of such a "family of budgets" have never been available. 1 See Retired Couple's Budget for a Moderate Living Standard, Autumn 1966 (BLS Bulletin 1570-4, 1968) for a detailed report. A summary of this bulletin was published in the Monthly Labor Review, June 1968, pp. 33-39. Bulletin 1570-6, describing three standards of living for a retired couple (with costs based on spring 1967 prices), will be published later this year.

13 See Revised Equivalence Scale for Estimating Equivalent Incomes or Budget Costs by Family Type (BLS Bulletin 1570-2, 1968) for a detailed description of the scale. These scale values cannot be used to estimate the component costs of consumption, e.g.. food or housing. However, the bulletin includes an adjusted scale, for selected family types, which can be used to approximate total income requirements except State and local taxes and disability insurance.

Three new estimates

by Bureau of Labor Statistics permit comparisons

with BLS budgets for younger families

MARY H. HAWES

Measuring

retired couples' living costs

in urban areas

THREE NEW BUDGETS detailing living costs for retired couples in urban areas of the United States have just been issued by the Bureau of Labor Statistics. In the spring of 1967, it cost a retired couple almost $2,700 to maintain the level of living specified in the lower budget, roughly $3,900 to live at the intermediate level, and about $6,000 to meet the requirements of the higher budget. Rising retail prices between spring 1967 and spring 1969 boosted consumption costs by about $220 in the lower, $315 in the intermediate, and $465 in the higher budget, and costs have continued to rise. How was the money spent? Costs of consumption claimed 96 percent of the lower budget, 94 percent of the intermediate, and 88 percent of the higher in spring 1967, with the remainder going for gifts and contributions in the lower and intermediate budgets, and for gifts, contributions, life insurance, and income taxes in the higher.

The budgets were developed for an urban family-husband age 65 or over and his wifewho are self-supporting, living independently, in reasonably good health, and able to take care of themselves. All three budgets provide for the maintenance of health and allow normal participation in community life, taking into account social and conventional, as well as physiological, needs. Within this framework, the three budgets differ due to variation of the assumptions concerning the manner of living, and provision of different quantities and qualities of goods and services.

The original Budget for an Elderly Couple was prepared by the Social Security Administration and published in 1948 to obtain a measure of

Mary H. Hawes is an economist in the Division of Living Conditions Studies, Bureau of Labor Statistics.

From the Monthly Labor Review, November 1969 Reprint 2646

living costs that could be used to evaluate the level of payments provided by Social Security programs. This first budget, forerunner of the current BLS intermediate budget for a retired couple, was described as "representing a modest but adequate level of living," in terms of the preWorld War II period. BLS produced a 1959 revision reflecting the living level of the 1950's. The current BLS budgets mirror the manner and conditions of living in the 1960's. In relation to the scale of consumption prevailing in each period, the level of the new intermediate budget is approximately the same as that in the two earlier budgets.3

How the budgets are used

One of the reasons for developing the lower level budget was to provide a more suitable benchmark than the intermediate budget for use by those who are concerned with the needs and problems of low-income older people. It is more useful as a guide in developing and appraising welfare standards, and in determining the eligibility of applicants for various programs.

Apart from such specific uses of the lower budget, three budget levels are more suitable than was the intermediate level alone for a variety of other purposes. For instance, private social and health agencies, and some public agencies, have increasingly adopted a policy of charging fees to persons who are able to pay. Where this procedure is used, guidelines are needed to determine which people are able to pay a fee and how much it should be, and which should receive free services. Three budget levels provide far more appropriate guides for setting graduated fees than did one level alone.

Intercity differences in living costs within each level can be helpful to persons about to retire, in

3

U.S. Department of Labor

Bureau of Labor Statistics

making decisions on where to live. However, a caveat is in order here, since the budget costs relate to couples who are already residents of a given area, with their living standards adjusted to local conditions. The costs, therefore, may not be immediately applicable to couples coming from another part of the country. For instance, the budget housing costs may not be valid measures of the costs of dwelling units currently available to new residents; and food costs reflect regional consumption patterns for individual foods that are not necessarily readily acceptable to newcomers.

Finally, the three budget levels should not only be useful in counseling older people concerning money management, but may be directly helpful to retired couples in making a general evaluation of their own living standards and spending habits, although the budgets are not designed as spending guides for individual consumers.

The budgets reflect living conditions in the 1960's. The style of living provided for in the lower budget differs from that in the intermediate and higher budgets in the following ways: A somewhat smaller proportion of couples own their homes, and there is no air conditioning in either rented or owned dwelling units. These couples rely more on public transportation, and those who own cars drive older ones. The couples perform more services for themselves, and they use free recreation facilities. By contrast, the higher budget assumes the largest proportion of homeowners, provides new cars for some couples, and allows more household appliances and equipment and more paid services than are found at the intermediate level. A majority of the items common to the three budgets are in greater quantity and of better quality at each higher level of living.

Data from experts and from expenditure surveys were used to derive the budget allowances. The food at home and housing segments were based on nutritional and health standards determined by scientists and experts. Selection from among the various kinds of food and housing arrangements meeting these standards was based on actual family choices as shown in consumer expenditure surveys. In food consumption, for example, recommended dietary allowances have been scientifically formulated for individuals in various sex-age groups. The U.S. Department of Agriculture has taken these criteria of nutritional adequacy, together with estimates of the actual

consumption patterns of families with varying amounts of money to spend for food, and has developed food plans at different cost levels. In the BLS budgets, the USDA low-cost plan was used for the lower budget, and the moderate- and liberal-cost plans for the intermediate and higher budgets.

In the absence of scientific standards-that is, for housefurnishings, household operation, clothing, personal care, reading, recreation, meals away from home, and alcoholic beverages-the allowances for the three levels were based on the choices reported by couples of the budget type in the BLS 1960-61 Survey of Consumer Expenditures. Data from this survey indicated the level at which the rate of increase in quantities purchased, or in expenditures, began to decline relative to the rate of change in income-that is, the point of maximum elasticity, or inflection point. This was considered the appropriate point for determining quantities in the intermediate budget. Quantities in the lower and higher budgets were derived respectively from the income classes immediately below and above the income level associated with the inflection point. This point has been interpreted as the income level at which families stop buying additional quantities of a category of goods or services, and begin buying other goods or services of higher quality. In the lower budget this level has not yet been reached, and in the higher budget it has been passed.

The lower budget

While the level of this budget is not as low as what is often termed "minimum subsistence," inspection of its costs in table 1, and of the allowances shown in the full report, will indicate that it has few, if any, frills. The U.S. urban cost of the lower budget for a retired couple in spring 1967 was $2,671. At this level, the average annual difference in cost between large metropolitan areas and small cities was under $250. Family consumption costs accounted for 96 percent of the total budget. The only additional cost, at this and also at the intermediate level, was for gifts and contributions, because the costs of these two budgets were below the level at which retired couples must pay income taxes, and it was assumed that payments on a basic life insurance policy were completed before retirement.