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Income Pyramid

( Originally Published 1952 )

`One-third of all the families in the United States received incomes under $2,000. . . . The low-income families have been left behind in the economic progress of America.

'They are a powerful instrument for the fomentation of political movements which seek to destroy our way of life.'

THE UNITED STATES, AS A WHOLE, HAS NEVER BEEN SO proSperous in peacetime as in the late forties and early fifties. Yet the real income of the 'average American' has remained below its war peak.

This may seem surprising in view of the enormous post-war growth of America's national income pyramid. It Stood at $183 billion at the climax of the war, in 1944. By 1947 it reached almoSt $200 billion, nearly as much as the combined incomes of all other nationS on earth. By 1948 it was $223 billion. In 1949, at $217 billion, it still equalled two-fifths of the aggregate of a world that had practically recovered from the war, or the combined incomeS of all Western Europe, the British Commonwealth, all of Asia, Africa and South America. It rose further, to $239 billion in 1950 and $276 billion in 1951.

But the dollar bricks that went into the income pyramid in post-war years have been brittle with inflation, corroded by high prices. By 1951, the price level was 70 per cent above that of 1944. Also, many more people have come to work or depend on it and to demand their share in the national income: from 1944 to 1951, the population of the United States rose by over 11 per cent.

In 1948, the best of the almost-peace years, the real income of the `average American', in terms of food, shelter, clothing and all his other needs and comforts was therefore in fact G per cent below that of 1944. In 1949, it fell nearly 8 per cent below the wartime record. In the years 1950, 1951 and early in 1952, when huge armaments once more made the wheels turn faster, it gradually approached the level of 1944. By 1953, if the armament boom continued to grow, it might at last regain the wartime height of nine years before.*

* Report No. ri95., Joint Committee on the Economic Report, March 122 1952. 152

Congressional Subcommittee on Low-Income Families November 9,1949.

'Average American?, of course, are pe0ple from multi-millionaires to paupers, for incomes in the United States are very unevenly distributed.

To the upper tenth of Americans, during the late forties, went 32. per cent of all incomes, while the lowest tenth got only 1 per cent. The upper fifth got 47 per cent, while the lowest fifth got only 4 per cent.

One-half of all families earned less than they needed for the 'modest but adequate standard of living' c0nsidered by the U.S. Department of Labor as the 'necessary minimum to meet the conventional and social as well as biological needs'.

Another 37 or 38 out of every 100 families earned that minimum or somewhat more.

A mere 12 0r 13 out of every 100 families had what the U.S. Treasury and President Truman defined as 'middle class' inc0mes. And the rich and really well-off were I in every 700 families.

At the apex of the national income pyramid, during those years, was an unkn0wn Mr X. Until five others later j0ined him, he alone 0ccupied the highest income bracket in the Treasury's tax accounts for citizens with '$5 million a year and 0ver'. He earned $8,595,000 in 'dividends and interest' and was assessed on an adjusted gross inc0me of $7,617,000 —as much as the c0mbined salaries of 12,200 of the lowest paid school teachers in the country.

Beneath Mr X and the five newcomers have been some 8o equally unknown Americans with declared incomes from $1 to 5 milli0n. Then followed some r,400 pers0ns with $250,000 to $1 million a year, and some 9,000 with $100,000 to $250,000. Some of their names got known through the routine disclosure of the salaries of corporation officials with inc0mes of over $75,000 a year.

The highest salaries have been those of film magnates like Charles P. Sk0uras, the movie theatre operator, with $810,000 a year, Louis B. Mayer of L0ew's with $908,000, and the Paramount pr0ducer Leo McCarey with $1,038,035.

Screen stars flit in and out of the U.S. Treasury's Who's Who in the High Salary Brackets, acc0rding to the public's favour and the movie industry's financial ups and d0wns. Rubbing shoulders with them are the stars of super-salesmanship who dwell in these spheres with little more permanence than the film favourites: Benjamin S. Katz of the Gruen Watch Company ($120,295) and Rita Hayworth ($117,000); Archie 0. Joslin, a textile executive ($296,880) and Betty Grable ($299,300); E. H. B0bst of the chemical concern Hoffman La Roche ($308,175) and Deanna Durbin ($326, 491).

But the great majority of those record earners are the solid aristocracy of the Corp0ration Age. What the official lists show are only their salaries and bonuses, without the large 'expense accounts', their many other benefits like company-paid life insurances and pension provisions and non-salary earnings fr0m personal property and speculation.

Charles E. Wilson, president of the du Pont subsidiary General Mot0rs, has received up to $652,126 a year in salary; and General Motors once showed a hierarchy of fifteen executives with salaries of $75,000 or m0re. Crawford H. Greenewalt, president of du Pont, has been getting up to $539,550 a year. Others in the highest gr0up have been Vincent Riggio of American Tobacco ($484,202); Thomas J. Watson of International Business Machines ($425,548); Preston Sturges of Twentieth-Century Fox Films ($350,650); E. H. Little of Colgate-Palmolive-Peet ($35o,000); A. A. S0merville, a Vanderbilt executive ($319,398;) Seton Porter of Nati0nal Distillers ($310,000); Randolph Hearst, the late press magnate ($300,000); Benjamin Fairless of the U.S. Steel Corp. ($222,897).

These are s0me typical salaries large corporati0ns pay their : Bethlehem Steel, $464,321; Safeway Stores, $367,754; General Electric, $280,234; American Telephone and Telegraph, $209,000; Chase National Bank, $182,000; Montgomery Ward, the mail order house, $100,000; Radi0 Corporation of America, $137,000; Woolworth, the 'five and ten cent' chain store, $330,000; International Harvester, $131,549; Chrysler, $183,000.

In this gr0up, like in that of Mr X and the 80-odd others with incomes of $x million a year and over, a veil of secrecy conceals the names 0f the many 'regulars' who derive their great incomes from personal wealth rather than managerial position or passing success—the men who are nobody's employees and whose economic power is squarely founded on fortunes they have inherited or accumulated and on the financial controls they hold over c0rp0rate wealth.

Mr Harry S. Truman became the first President of the United States to join the record earners when his salary was raised far beyond that of his predecess0rs: t0 $100,000 a year plus a tax-free expense acc0unt of $90,000. With the other tax-free facilities of the White House, the Presidential income, according to a Congressional estimate, now corresponds to that of a private citizen earning $500,000.

These upper ten-thousand known and unknown Americans, the ones who rise and fall like meteors and th0se solidly entrenched in wealth and power, are at the klieglight-illumined pinnacle of the national inc0me pyramid, that l0fty beacon of opportunity, success and happiness that shines encouragingly over the American Way of Life. They are pictured in film and ficti0n as 'the boys who made good', men like yourself who only dreamed their dreams more efficiently, made them come true with harder w0rk.

Below them, in the later forties, were 200,000 people with incomes fr0m $25,000 to $100,000—the upper middle class. Together with the exclusive ten thousand at the top, these one-seventh-of-one per cent of all Americans hold most of the economic power in the country. They are largely corporation executives and other businessmen, landowners, and the lesser men and women of established fortune.

Cabinet members barely reach this grade with their government incomes alone, even after their salaries were increased from the l0ngstanding $15,000 to $25,000 a year. But some 0f the lab0ur leaders d0. John L. Lewis, president of the United Mine Workers of America, earns $50,000 per year; James C. Petrillo, president of the Musicians' Union, $46,000; Daniel J. Tobin of the Teamsters' union, $30,000; Philip Murray, president of the C.I.O. and William Green, head of the American Federation of Labor, both earn $25,000.

Among professionals in the upper middle class are the top-ranking few physicians and 3 per cent of the lawyers; the majority of leading newspaper and magazine editors, columnists, radi0 and television executives and star performers, 'comics' designers and commercial artists; some popular best-selling authors, mostly of passing fame; a few sp0rtsmen like Joe Di Maggio, whose baseball income (not including that from commercial use of his name) was estimated at $65,000 in 1948. But there are n0 educators, no academic scientists and no other scholars in this group, unless they also have private incomes.

The 'middle class' consists of one-eighth or so of the nation's families, by the definition of the U.S. Treasury which puts its income limits at $6,000 to $25,000. This middle class, so often assumed to be America, would make up barely one-tenth of the nation if one drew the lower line at $10,000, as President Truman seemed to suggest when he remarked at a press conference in January 1949 that 'a man getting $6,000 a year would probably consider $10,000 the start of the middle bracket'.

What can properly be called the middle class is actually even smaller than one-tenth of the nation. For m0st in this income group lack the financial stability generally c0nsidered as an essential middle class characteristic. Experience in the Great Depression sh0wed how rapidly these ranks get decimated; and even during the minor slump of 1949 not a few of those who had climbed into the middle class during the war quickly dropped out of it again.

The core of the middle class, in the later forties, took in military officers with typical 'all-in' compensations of $13,400 for a major-general and $6,400 for a major; U.S. Senators and Congressmen with salaries of $12,000 plus $2,500 tax-free expense allowances; a good one-third of what the Federal Reserve Board in its annual income analyses calls the 'managerial and self-employed' class; 45 per cent of the lawyers; about two-thirds of the physicians and 48 per cent of the dentists; altogether about 25 per cent of the men and women in the professions as a whole, including all leading and many medium-ranking government officials. Also the upper x i per cent of the farmers and farm managers, the group which provides the lion's share of all marketed crops; and s0me 7 per cent each among the clerical employees and sales personnel and the m0st highly skilled industrial w0rkers.

Life in the lower reaches of the middle class is far from easy for many, considering the height of prices and taxes. A letter to the New York Times of January 24, 1949 showed the typical situation of the family of four 0f a college professor with 'a distinguished p0sition in the world 0f learning' yet unable to 'afford to educate (b0th) his children or even any longer to buy the books that he needs to maintain his p0sition'.

The professor 'receives $6,600 a year, which is a very good salary in his profession. Last year he paid $720 in Federal inc0me tax and $6o to the State of New York.... The older [child] is in college, her bills running ab0ut $1,800 a year. In 1939 he made a downpayment of $2,000 (the whole of his savings) on a $10,000 h0use in the suburbs. He pays $400 a year plus interest. . . . Taxes on his home were ab0ut $250 a year when he bought; they are now about $400. He has a telephone and light and gas services, all of which cost $214. . . . He has a 1938 car, which is indispensable, for he lives two miles from the shopping centre. . . . His life is insured for $8,000 and the annual premium is $282. . . . He uses his car as little as possible, is considering the sacrifice of the telephone and has begun to quarrel with his wife by turning down the thermostat [0n the heating system 0f the house] to save fuel 0il. .. . His wife, who does all the washing, cleaning, mending and cooking, spends $120 a m0nth on the table, or $1,440 for the year. Adding up all these expenses, mortgages, interest, fuel, car upkeep, etc., this leaves $13 for clothes for f0ur, medical expenses, home repairs, the water bills, recreation and books—for professors, you know, are supposed to buy bo0ks. . .. He is unlikely to get an increase in salary, for he is already in the top bracket at his college. . . . He is without hope. . .

About 87 of every t00 families have their places on the income pyramid well below this level.

Of that great majority of Americans, 14 to 15 million families, or nearly two-fifths of all, have been in the lower middle class these years, with incomes ranging from $3,200 to $6,000 per annum. This group comprises another 16 per cent of the farmers, still leaving almost three-quarters of the farm population behind them; 37 per cent of the clerical and sales employees and 49 per cent of the skilled workers; 32 per cent of the lower managerial employees and small businessmen, 32 per cent of the lawyers, 17 per cent of the physicians, 30 per cent of the dentists; and the Army's master sergeants with t0tal incomes of about $3,600. But of the teachers only the best-paid few belong even to this group, i.e., some principals and senior high sch0ol teachers in big cities.

The problems of the lower middle class are illustrated by some typical cases described by Lester Velie in Collier's magazine of April 3, 1948. One was that of James Scott, a school principal with $4,200 a year who served as a lieutenant in the Navy and 'learned how to live frugally'. But, 'since prices soared, food buying for the Scotts and their two children has become so serious a business that the head 0f the family must give it his pers0nal, masculine attention. Thus the school principal, market basket under arm, saves a few pennies on a dozen eggs here, a penny or two on potatoes there.' Another case of `doing without and running behind' was that of a bank teller, Sam J.: `An empl0yee for 11 years, Sam had t0 borrow $199 from his bank and cash his [war veteran's] terminal leave bond to eke out his $55 weekly earnings and pay f0r the insurance that protects his wife and two children. To make ends meet, Sam disclosed, about one-third of the tellers in his bank have taken extra jobs outside. They clerk in stores on Saturdays and evenings, work odd hours in filling stati0ns. Sam hasn't looked f0r extra work because it would interfere with his night classes in banking. But his life is tyrannized by mean restrictions.'

Skilled industrial workers at the fringes of this category are no better off: The Milwaukee Journal', Velie continued, 'asked three wage-earning families with incomes ranging from $45 to $55 a week to keep track of their expenditures. . . The newspaper found the families were running behind and using up bonds and other savings to care for deficits. "All in all", the Journal reported, "the three families felt they came through with an exceedingly dim view of the months ahead. . . . Take, for instance, Herman Steffes, a $1.68-an-hour welder and president of his United Aut0m0bile W0rkers (C.I.O.) local. . .

Fr0m 1938 to 1943 Herman earned $40 a week and with it b0ught and paid for a $4,400 house and saved $450 besides. Now with weekly earnings at $68, he has used up the $450 savings. Tom La V0ra, a $50-a-week presser in a coat fact0ry . . . who had to cut four quarts of milk weekly from his children's 14-quart allowance, put his plight this way: Y0u never get off the spot. During the depression you eat less, because there ain't en0ugh work. And during inflation you eat less, because there ain't enough money. How do you beat this thing anyway?'

Above the dividing line of $3,200 a year, nearly half of all families are supposed to earn at least a 'modest but adequate standard of living'. For, expressed in terms of the cost of living of the late f0rties, the 'necessary minimum to meet the conventional and social as well as biological needs' of the U.S. Department of Labor required an income of $3,z00 per year. (M0re realistic calculations 0f the Heller Committee for Social Research of the University of California actually put its cost about 12 per cent higher.)

Bel0w that line, h0wever, with incomes of less than $3,200 on which the other half of the American people have to live, only the smallest, healthiest and thriftiest families do not suffer want.

The upper layer of this 'other half'—those in merely straightened circumstances, with $2,000 to $3,200 a year—have numbered in recent years about one-fourth of the nation, 0r about 1 0 million families. To them belong 20 per cent of all professionals, 15 per cent of the `managerial and self-employed', 33 per cent of the skilled workers, 34 per cent of the unskilled, 35 per cent of the clerical empl0yees, 19 per cent of the farmers, 11 per cent of the lawyers, 6 per cent of the physicians, 18 per cent of the dentists and the better-off one-third of the teachers.

The lives of many families in this category are full of haunting material problems. One of the group, a taxidriver with $2,160 a year, described them in this letter to the President.

Mr Harry S. Truman

July 26, 1947

President of the United States,

Washington, D.C.

Dear Mr Truman,

Listen to this, and then tell me what in the hell a guy in my shoes is supposed to do. I'm a cabdriver, with a limited education. I can add and subtract en0ugh to get by. But I don't think there is a mathematician in the whole world that could make my debits and credits balance.

I am a married man with a children of grammar school age. On my job I work on a commission, and if I work very religiously and very hard and with a little bit of good luck receive a $45 cheque.

My rent is $35 a m0nth, gr0ceries are $27, not counting these new higher prices; and that is being very conservative. My insurance for the family (only burial expense) is $7.50 a month. Telephone bill is $4.03, gas and electric is $6.50 a month. My h0spital care is $5.60. My carfare to and from work is $4.80. My children must ride to and from school and for both of them the car fare is $8.

My total salary is $180 and my expenses are $179.43 for the month. Now this is mere existence, and this is saying nothing 0f clothes, shoes, school expenses, doctor and dentist bills, household necessities and other unexpected things that come up.

A year ago last April my wife had an operation that the surgeon charged $300; and that is without h0spital expenses. . . .

The whole thing, Mr Truman, is where is the end t0 all this pressure? Is there an end? Can we expect a brighter future? Can we live as free people? Is there anything under Heaven to give us relief? What are our Cabinet and Senate, in fact our whole g0vernment (including our President) doing to make things better?

What in the hell have 50% 0f the people in the U.S. to live f0r? .. .

I'm only one of the million people that even venture as far as to write to you. The reason the rest don't write is they feel it won't do any good and you'll never receive the letters anyway. But I'm writing because I feel I must. I must have an outlet for my feelings.

I know the majority of the people feel as strongly about this as I d0. I'll bet you my v0te I'll never receive an answer or hear of this letter again.

Thank you.

A J0hn Q. Public-American Citizen (signed) Willford H. Roll

The taxidriver received an answer, from Dr Edwin G. Nourse, chairman of the President's Council of Economic Advisers:

Dear Mr Roll,

President Truman has asked me to reply to your letter of July 26. The first thing I want to say is that the President and all his chief advisers are acutely aware of the difficulties which are being faced by many American citizens in these times. Letters like yours prevent them from forgetting it, but they w0uld not want to forget it if they could. They regard it as their first duty to do what they can t0 make this a g0od country to live in.

At the present time, there is one good thing and that is that practically everyone has a job.

The backwash of the war has however had some unfortunate effects and I do not need to tell you that one of the worst of these is the great rise in prices. It hits people very hard whose inc0mes have not kept pace. It is the policy of this Administration to do whatever lies within its power to see that prices and incomes get into a new balance which will remove the inequities which have developed in the postwar situation. The Government is committed by the Employment Act of 1946 'to use all practicable means . . . to pr0mote maximum employment, production, and purchasing power'.

The Government expects to do what it can to create prosperity and equitable 0pp0rtunities to citizens.

But the well-being of American citizens is built mainly on their own enterprise, initiative, and integrity. It will take some time to work our way out of sh0rtages, the high prices, and the general maladjustments left in the wake of war. To the rest of the world we already look very fortunate. At home, we see our troubles, and they are very real.

Still I think you will agree that in these times Americans must preserve their courage and faith. That is what they have always done, and they certainly have never sat down and waited for some one to l0ok after them. My own office has no other duty than to attempt to make the economic system serve more adequately the needs 0f the American people. Let me repeat, in conclusion, that we go about this difficult assignment day by day with the acutest sense of the daily pr0blems of people like yourself.

Sincerely yours,

(signed) Nourse,

Chairman, Council of Economic Advisers

Below the level of taxi driver Roll, however, 'nearly 16 million, or one-third of all families in the United States receive incomes under $2,000', according t0 the 1949 report, Low-income Families and Economic Stability of the Joint Committee on the Economic Report.

Of these, 5.6 million families have incomes between $ 1,000 and $2,000. Am0ng them are most of America's farmers, i.e., 53 per cent of all farm owners, tenants and 'managers'; nearly half of all unskilled workers, including many agricultural workers, whose wages average about half those paid in industry; 15 per cent 0f the skilled workers and 21 per cent of the 'white collar' clerical and sales personnel; 16 per cent of all 'managerial' employees and 'self-employed' small businessmen; 13 per cent 0f all professional and semi-professional w0rkers, i.e., 4 or 5 per cent of the physicians, 21 per cent of the dentists, and the great majority 0f teachers.

The average American schoolteacher receives $37 a week ($1,924 a year), rural teachers receive less than $30 a week ($1,560 a year), 200,000 teachers receive $25 a week ($1,300 a year) and 10,000 teachers receive $12 a week ($624 a year) or less', the Rev R. J. McCracken, the prominent pastor of New York's famous Riverside Church complained in his sermon 0n March 14, 1948.

One of the vast number 0f Americans in this income category, or actually somewhat above it, a man named Cyrus J. Wand, a 37-yearold worker in the Campbell Soup Company, has to support a family of eight on an income of some $2,500 a year. (A recruit of the U.S. Army or Navy, before the pay increase of 1952, received nearly $2,000, apart from food, clothing, etc.)

As representative of his union local, Mr Wand reported his own case t0 the Senate Banking Committee in January 1948, as an example of the combined effects 0f low wages and high prices.

'You fellows have got to help me out', he said to the Senators.

`Our job here is t0 have an understanding heart for human needs', Chairman Charles W. Tobey replied. 'Tell us what is in your heart.'

'A family of eight should have at least $6,000 a year', Wand replied. 'All we are getting is a little over $2,500. This is not a living wage. We are just existing.'

After he had told his story of the $33 monthly rent, the $16 monthly c0al bill, the less-than-half-of-normal milk ration he managed for his six children, the movies which are out of reach for the family, and the them 3,988,000 who 'normally' had, and needed, full-time work; and several million potential job seekers who did not register because they knew there were no jobs for them and they were not entitled to unemployment benefits.

`Do you appreciate the freed0m you enjoy in a democracy?'

'I appreciate it, I'm a I 00 per cent American, but there's one freedom I haven't got, and you know what it is—that's what we are talking about right here.'

`There isn't a single Communist country which has a standard of living comparable to yours, difficult as your situation is. .. .' the Senator probed.

The witness made no comment.

Did Mr Wand have savings? 'We have $20 in a savings account, but it isn't ours. We owe about $300 for medical bills, doctors, the hospital, so it really belongs to them.'

What did Mr Wand think should be done? 'Back prices to 1946 levels', was his answer.

Whereupon Senat0r Homer E. Capehart, a manufacturer from Indiana, asked what the witness thought ab0ut 'rolling wages back, too. . . '

'We'd better be off', Wand said to his wife, loud enough f0r everybody in the Committee room to hear.

Then to the Senator: 'Can't you see I'm underfed?' And, pointing to Lois, one of the children he had brought along: 'She's not very well because she's undernourished.'

When the hearing was over, Chairman Tobey announced he had arranged f0r a car to take the Wand family around Washington to see the sights, and pressed a $5 bill into Lois' hand.

But the Wands are by no means the poorest in the United States.

'That a part of our populati0n is both underproducing and under-consuming is well known, but the size, needs and economic circumstances of the low-income families in America have not been adequately appraised in recent years', stated the survey of the Joint Committee on the Economic Report, Low-Income Families and Economic Stability, on November 9, 1949.

It stressed that America has another 8 milli0n families with annual incomes-of less than $1,000.

Since this vast group of low-income families—not only those below $1,000 but also those below $2,000 a year—are 'a powerful instrument for the fomentation 0f political movements which seek t0 destr0y our way of life', the report continued, 'it is essential that this threat to our existence as a nation of free men and women be rem0ved by bringing the majority of these low-income groups within our system of high employment, production, distribution and consumption'.

How is this to be done? And by what agency?

The report of the Congressional Committee evaded a reply, in evident recognition of the limits which the economic order of free enterprise sets to the men elected by the people.

`We wish to emphasize', it said, 'that the Federal Government cannot and ought not, unaided, try to carry out a successful attack on the causes of low income. . . . T0 bring the dependent and underprivileged into full participation in American life is a task which requires vigorous action on the part of all citizens.'

The World The Dollar Built:
The World The Dollar Built

Corporate Power

The Captive Audience

Business Of Government

The Dangerous Drift

America Needs Foreign Aid

The Urge To Arm

Cold War At Home

Too Little - But Too Much

Income Pyramid

Read More Articles About: The World The Dollar Built

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