رشه A 1947 report set forth the concept as follows: the Bureau of Labor Statistics has determined the annual cost of a worker's family budget which includes the kinds and quantities of necessary goods and services, according to standard prevailing in the large cities of the United States. (p.4) .. What the Congress decided, as the (Technical Advisory) Committee interpreted it, was the cost at current prices in large cities of family living which met American standards of what is required. The budget therefore should represent the necessary minimum with respect to items included and their quantities as determined by prevailing standards of what is needed for health, efficiency, nurture of children, social participation, and the maintenance of self respect and the respect of others. (p.6) This budget is not a 'subsistence' or 'maintenance' budget in the sense that directly or indirectly it attempts to provide only for physical needs, or what would be necessary to carry families through a limited period of stringency. (p.7) "When it is said that the budget recommended is intended to cover the necessary minimum, 'necessary' is to be given the common interpretation as including what will meet the conventional and social as well as biological needs. It represents what men commonly expect to enjoy, feel that they have lost status and are experiencing privation if they cannot enjoy, and what they insist upon having." (Italics ours.) "The prevailing judgement of the necessary will vary with the changing values of the community, with the advance of scientific knowledge of human needs, with the productive power of the community, and therefore what people commonly enjoy and see others enjoy." (p.7) When applying this concept to the retired population some modifications can be made; for example, the provision for "nurture of children" is largely inapplicable. However, the element most essential for the retired population needs no modification--what men commonly expect to enjoy, feel that they have lost status and are experiencing privation if they cannot enjoy, and what they insist upon having. Indeed, Mollie 4/ Orshansky specifically includes this part of the concept in her analysis of the budget for an elderly couple. 3/ 4/ "Living in Retirement: A Moderate Standard for an Elderly City Couple." Social Security Bulletin, October, 1968, Vol. 31, No. 10, pp 3 ff. Tackling the Problem This can be studied by following families from the pre-retirement age, say 55 to 64, into the retirement period and noting how they spend 5/ their money and in what amounts. If their income has remained unchanged and there are no price increases and no general upward movement in income for all families, then any changes in expenditures between the pre-retirement and retirement periods in life would indicate voluntary changes in consumption desires accompanying retirement and aging. For example, if with constant income they decreased expenditures on clothing we should assume that they are less interested in and desirous of consuming as much clothing as formerly. On the other hand, if retired families continue to spend the same amounts of money for the various consumption items then we must accept the fact that even in retirement they expect to continue to enjoy, and insist upon having, the same items as in pre-retirement. It follows, therefore, that the financial inability to consume these desired items would lead to a feeling of lost status and deprivation. If the latter were to happen then the most important element of the accepted concept of the "family budget level of living" is violated. In order to find out how retired families spend their money we studied the 1960-61 family income and expenditure data collected by the U. S. Bureau of Labor Statistics.6/ These data are shown by annual income of family (including individuals) cross tabulated by age of head. Thus we may discern possible changes in expenditure patterns with increasing age, as family income remains unchanged. Average family size also changes with increasing age of head; this factor can be controlled by calculating expenditures per person. For each item of expenditure, at each income level, we expressed the expenditures at ages 65 to 74 and 75 and over as percentages of the expenditures at age 55 to 64. Thus we can see the changes in amount of money spent with increasing age of family head. In order to summarize the seven income levels into an overall measure, we standardized each age group on the basis of the income distribution of the entire population of all ages. (For further details see the Appendix.) 5/It would have been preferable to divide the 10 year age group into ages 55 to 59 and 60 to 64, or perhaps 55 to 61 and 62 to 64; such divisions were not practicable. 6/"Consumer Expenditures and Income." Supplement 2 to BLS Report 237-93, June 1966. Comparison of 1950 and 1960 Findings We can follow the cohort with family heads aged 55 to 64 in 1950 over the following decade when they became 65 to 74 years of age and note the changes which took place. Goldstein adjusted the 1950 money to 1960 purchasing power, making direct comparisons possible. The changes experienced by this cohort from pre-retirement into retirement can It is clear that as income decreases in retirement, the families spend less. What alternative do most families have? On the other hand, we may infer that people prefer to continue consuming as much, if not more than formerly, since per capita expenditures increased. We may qualify this comment somewhat by nothing that there is less flexibility in certain expenditures such as housing (to be discussed in greater detail subsequently), and therefore the increase in per capita expenditures is only in part voluntary. Furthermore, the above data are not too conclusive for investigating the people's preferences, since they include Sidney Goldstein, "Changing Income and Consumption Patterns of the Aged," Journal of Gerentology, Vol. 20, No. 4, October 1965. We added expenditures for "personal insurance" and "gifts and contributions" to Goldstein's figures in order to have total money outlay. All money amounts rounded to nearest $10. 8/ The large majority, but obviously not all of the families with heads aged 65 to 74, contain only retired persons. In some families the head or other member is still employed full or part time. changes in income. It will be recalled that we hypothesized that the Expenditures by age and income, 1960 Expenditures per person. Older persons continue to spend money on consumer goods,insofar as they have the income, well beyond age 75. There is no sign of an overall cutback in per capita expenditures. From this we can only infer that increasing age is not necessarily accompanied by a decreasing desire or inclination to consume less. Retired persons like to consume at least as much as younger persons who are in the labor force. (Chart 1.) Total expenditures per capita at ages 65 to 74 and 75 and over are close to 10% above those in families in which the head is age 55 to 64. Some of this is the result of increased medical expenditures; nevertheless, even allowing for such expenses, per capita expenditures at ages 65 and above are higher than at age 55 to 64. We may consider as the basic items: food, clothing, shelter, and housing. Per capita expenditures when the head is aged 65 to 74 is a little less than 10% above that for heads aged 55 to 64; at age 75 and over it is just 10% higher. Food expenditures per capita increase about 5 per cent at ages 65 and over. It is likely that the older people tend to eat more special, restaurant, or factory prepared foods since the latter require less home preparation, rather than eating a larger quantity of food. Another factor perhaps resulting in increased expenditures is the smaller family and consequent buying in smaller quantities; such a change in purchasing pattern could result in higher prices per food unit. In addition, we believe that as long as family income continues unchanged, and there are fewer persons in the family, each individual remaining desires to eat "better." 9/0 Obviously it would have been preferable to follow the same families over the decade, but we were unable to do this with available data. also Appendix. See |