The bill which I have the honor of introducing, S. 964, I think does meet this problem. It also includes a provision for loans to assist in the development of low-income rural areas. We heard a good deal of testimony in support of this bill last year, but the problem of the rural areas was not fully developed. We expect to do that with this very capable group of witnesses who are to appear before us today. This afternoon we are fortunate to have a number of agricultural economists who have studied the problems of the low-income farm areas and have sought to find ways to enable these low-income areas to become prosperous segments of the national economy-to become efficient and profitable producers, as well as substantial paying cus tomers for our markets. Gentlemen, we appreciate your coming to Washington to give the subcommittee the benefit of your views on this legislation. We would like to call as our first witness Prof. Charles E. Bishop of North Carolina State College. Mr. Bishop, we appreciate your coming here very much indeed. STATEMENT OF CHARLES E. BISHOP, PROFESSOR, NORTH CAROLINA STATE COLLEGE, RALEIGH, N. C. Mr. BISHOP. Thank you, Mr. Chairman. There are large income differences among regions in the United States. On a State basis per capita income in 1956 ranged from $964 to $2,858. In 1950 there were 51 economic areas in the United States that had median incomes, of families, of less than $1,000. Senator DOUGLAS. I may say that Mr. Morse, the Under Secretary of Agriculture, testified that there were 112 million farm families which had total incomes of less than $1,000. Mr. BISHOP. That sounds about right. All but 4 of these economic areas with median family incomes of less than $1,000 were located in the South, and 2 more were contiguous to the South. These income differences are not of recent origin, but have existed for a long time. The differences in income among regions are larger than the differences in cost of living, and cannot be explained by differences in the composition and earning capacity of the population. Income differences seem to be associated to a large extent with differences in the occupational distribution of the population. In general, those areas that are characterized by a large proportion of the population engaged in agriculture, have low incomes. The low incomes of farm families result primarily from low earnings of labor in farming as compared with the earnings of labor in nonfarm occupations. Even after adjustments for differences in popu lation characteristics and in purchasing power of income in farm and in nonfarm sectors, the per capita income of the farm population in the United States in 1956 was about one-third less than that of the nonfarm population. Furthermore, there are large differences among regions in net income from agriculture per capita of the farm population. Net income from agriculture per capita of the farm population in the Southeast, for example, is only about one-half that of agriculture in the rest of the United States. Low-income areas in agriculture have certain characteristics. The amount of land and other capital investment per worker tends to be low in areas characterized by low income per farm worker. Capital per worker in agriculture is 3 to 4 times as high in some regions as in others. For example, the amount of capital invested per farm worker in the Southeast is only about one-third as much as the amount of capital invested per farm worker in the Corn Belt. Areas with small amounts of capital and land per farm worker tend to produce commodities which have a high value per dollar of capital invested, and per acre of land, but which yield a low return per unit of labor employed. Seasonal variation in labor requirements usually is high in the production of the major farm commodities produced in low-income areas. Hence, during much of the year there is a large amount of unemployed labor on farms in these areas. In the Southeast, for example, the man-hours of work performed on farms is three times as much in some months as in other months. Generally speaking, labor on farms is fully utilized at harvest seasons. At other seasons, however, it is not fully utilized and there is a lot of underemployment of labor on farms. The number of hours worked on farms per male farm resident is lower in low-income areas than in other areas. Studies in several regions, however, using the Cobb-Douglas type of index Senator DOUGLAS. That is a memory of another life. Mr. BISHOP. Studies in several regions, however, indicate that only a very low return can be expected from the use of additional labor on farms in the Southeast, without sufficient additional capital and land to change the type of farming. Low-income areas are also characterized by a relatively large proportion of the population in the young and the old-age groups, and a small proportion of the population in the income-producing age groups. The population of low-income areas also has less formal schooling than the population of other areas. The replacement ratios for the population are also high in low-income areas. During the present decade it is estimated that in the Southeast 2 males will enter the rural farm population between the ages of 20 and 64 for each 1 who retires or dies. In spite of the high replacement ratio, the farm population has decreased as a result of the high rate of migration from farm to nonfarm residences. During 1956 alone 1 person of each 11 living on farms transferred to nonfarm residences. Senator DOUGLAS. One person out of 11? Mr. BISHOP. In 1956. Senator DOUGLAS. In other words, there was a decrease of 9 percent in farm population in 1956 alone. Mr. BISHOP. That is right. The figures indicate over 1,800,000 people migrated from farm to nonfarm residences in 1956 alone. Senator DOUGLAS. Did they mostly come from poor farms? Mr. BISHOP. Studies we have made indicate the rate of migration tends to be highest in the low-income areas. Much of this migration, I might add, has been across State boundaries-from one State to another. Areas with low incomes of farm families also tend to have low incomes of nonfarm families. Basically the same characteristics tend to cause the low incomes of nonfarm families as cause the low incomes of farm families. Those areas with low incomes of nonfarm families are characterized by small firms and a low capital investment per worker in nonfarm occupations. This yields a low productivity per worker and results in a low wage of labor. There are several ways in which local industrial development may be expected to exert an influence on the incomes of farm families. Local industrialization increases the income in a community, and this may be reflected in increased consumption of farm products and a change in the relative amounts of the various farm products consumed locally. This effect, however, has apparently been minor in most low-income areas. Since industrial development increases the income of an area, it also increases the capital available for investment. This makes it possible for farm firms in the industrialized areas to acquire new equipment and to increase the productivity of labor remaining on the farms. In the industrial sections of the Piedmont, for example, the percentage of part-time farms that are mechanized is somewhat higher than the percentage of other farms producing comparable amounts of farm products. Families on part-time farms also purchase more labor-saving household equipment. There is some evidence that when members of farm households transfer to nonfarm employment, there is a tendency to invest in household equipment rather than in farm equipment. This seems to depend on whether the male or the female members transfer to non farm employment. At any rate, the increase in farm investment and the changes that have taken place in farm organization as a result of nonfarm employ ment have not been sufficiently great to increase the productivity of farm labor in low-income areas that have been industrialized. Perhaps the most important effect of local industrial development on the resource use and incomes of families in low-income areas has been its effect in providing higher paying opportunities for farm labor. This encourages migration and part-time farming. Local industrial development has been accompanied by a high proportion of ownership of farms, a reduction in farm tenancy, and a reduction in the extent to which farmers rely upon products with a small dollar value per unit of labor used in production. In some instances nonfarm employment seems to absorb underemployed labor. However, there is some evidence that competition develops between farm and nonfarm uses of labor as areas continue to industrialize. Some studies indicate that there is a tendency for increased indus trialization to be associated with a reduction in farm income per farm. I say the increased industrialization does in some instances Senator DOUGLAS. But the total incomes of the farm families do increase? Mr. BISHOP. My punchline is: Industrial development, however, is almost always accompanied by increased incomes of both farm and nonfarm families. Senator DOUGLAS. And what about the income of farm families from nonfarm sources? Mr. BISHOP. The increase there that the farm families receive from the nonfarm sources more than offsets their decrease from farming, and on balance there is an increase in the incomes of farm families. We have done some work, for example, in North Carolina, which indicates our farm families now get more income from nonfarm employment than from any other source. In other words, nonfarm employment is the major source of income to farm families. They receive about 45 or 46 percent of their net income from nonfarm employment of family members. Senator DOUGLAS. From the textile mills? Mr. BISHOP. Largely from textiles. Senator DOUGLAS. I want to thank you, Mr. Bishop, for this testimony. There are those who say we should not do anything except possibly assist in the further evacuation of farm families from the farms. It is urged that we should reduce the number of farms from 1 million to 2 million and transfer the people to the cities. What do you say to that? Mr. BISHOP. It seems to me as though the farm population in this country is highly mobile. I believe we have had something over 7 million people leaving our farms since 1950 and transferring to nonfarm residences. A paper put out by the United States Department of Agriculture shows that. I do not think we find very many regions in the United States where the outmigration has been large enough to bring about or cause a complete readjustment in agriculture to such an extent that we would greatly increase the productivity of labor, and increase the incomes of farm families. The migration has not been this great in most areas. Senator DOUGLAS. The migration in the main has been from the farms with lower productivity. Isn't that true? Mr. BISHOP. That seems to be true. Senator DOUGLAS. Therefore, the reduction in farm output has been much less than you would expect if they had been drawn from the more fertile farms? Mr. BISHOP. That is quite right. Senator DOUGLAS. Let me ask you this question: Have you had any chance to look over S. 964? Mr. BISHOP. Yes, sir; I have. Senator DOUGLAS. I wish you would tell us your opinion of the farm features of that bill. It contemplates, as you know, the making of loans to help industrial development in communities which are primarily rural, and which are low-income communities. What we are aiming at is trying to help the 200 or 300 farm counties which are farthest down on the per capita income level. Mr. BISHOP. There is a great deal of emphasis being placed on the development of processing plants all over the whole country, especially in the Southeast. I think that there are instances where these will be profitable and where they will stay in business over the long pull. However, I think they should be based on sound economic conditions or they will not stay in business. Senator DOUGLAS. Do you not think that governmental aid is needed, or should we simply trust to the profit motive for industry to move into these smaller communities? Mr. BISHOP. States are giving various kinds of subsidies to try to provide incentives for firms to locate in these areas. I think subsidies would help to encourage the development of the areas. 91201-58-pt. 2- 2 Senator DOUGLAS. Of course, sometimes we in the North think these subsidies are given to attract labor and industry from the North into the South. The purpose of this bill is not to enable one locality to steal industry away from another locality, but to stimulate the general growth of the economy and to concentrate that growth in those areas where there is a surplus supply of labor. Mr. BISHOP. We do know this, and we can agree that those areas that have been characterized by high migration over a time, especially on a county basis, have not made the type of economic progress we see where industry has developed. For example, when you go into the Piedmont you will find 4 or 5 counties that have grown and developed industrially, and within 50 miles you can find counties that have had a stable population and not much increase in income over 50 to 60 years. Senator DOUGLAS. And not much difference in the soil? Mr. BISHOP. Not much difference in the soils. Senator DOUGLAS. Any difference in the racial composition? Senator DOUGLAS. In other words, one set of counties has had the benefit of some aggressive leadership and other counties have lacked this; or what do you ascribe it to? Mr. BISHOP. This complex of things that seems to go along with industrial development. There are better schools, there are better hospitals, and there are better physicians, and public services of all kinds seem to be improved. Senator DOUGLAS. What I am trying to get at is this: There are people who believe in laissez faire and letting nature taking its course and trusting to the profit motive to seek out unused resources to be kept at the disposal of idle labor, and there are activists who say this is not a perfect method of bringing vital resources together and that governmental help will be needed. S. 964 was drawn on the activist model, so to speak. I wonder if you feel this is any better or not any better than the policy which we followed hitherto of just letting matters go. Mr. BISHOP. I must say I am not one who believes that a laissezfaire policy is the best policy a nation could follow. I don't believe we live in a world of perfect knowledge. Otherwise I could see no reason for conducting research. I think we conduct research to get answers to questions for the purpose of having a better basis for policy. Therefore, I would have to say that I can see some need for subsidies to find out whether there seem to be economic conditions that would mean that industry might succeed in some of these lowincome or underdeveloped areas. Senator DOUGLAS. We always get money for research. That is a very magic word. But the question is, do you believe in loans to help industry get started in these areas of low farm income and a good deal of farm unemployment and underemployment? Mr. BISHOP. Where we have reason to believe that these firms are locating with a good, sound economic base, yes. I think it is con sistent with your bill. You have these qualifications in your bill. Senator DOUGLAS. In other words, you think this is a good thing, but you should watch the loans carefully and not make them to unsound ventures? |