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Income analysis of a sample farming district with particular reference to the importance of self-sufficiency Taylor, Milton Cecil 1946

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INCOME ANALYSIS OF A SAMPLE FARMING DISTRICT WITH PARTICULAR REFERENCE.TO THE IMPORTANCE OF SELF-SUFFICIENCY by Milton Ceci l Taylor, B .S .A. A Thesis submitted in Part ia l Fulfilment of The Requirements for the Degree of MASTER OF SCIENCE IN AGRICULTURE in the Department of AGRICULTURAL ECONOMICS THE UNIVERSITY OF BRITISH COLUMBIA APRIL, 1946 ACKMOWLEDGEMBWT S The author is appreciative of the assistance given to him by the Board of Governors of the University of B r i t i s h Columbia in their pol icy of encouraging the research work of graduate students. Acknowledgement is made also of the co-operation of the people of the Rosedale D i s t r i c t , who generously offered the information required for this study. Particular gratitude is extended to Dean i 1 . M. Clement of the University of Br i t i sh Columbia, whose direction and assistance has been a constant encouragement, and to Mr. W. J . Anderson of the Dominion Department of Agriculture for valuable assistance in s ta t i s t i ca l analysis and for c r i t i c a l suggestions. PREFACE The author, in undertaking this study, has certain basic assumptions in mind. F i r s t of a l l , there is the general recognition, shared by both pract ica l and technical agr icul tur is ts , that agriculture is in a disadvantageous position in the. economy of Canada. Although this assumption may be fact, there is also the realization that the variation in income among the rural population is such that many farmers have what may be considered a satisfactory income. A third assumption is that there is an economic demarcation in some rural areas between commercial and part-time farmers. The farmer, however, whether a commercial or part-time farmer, i s unlike most workers in other lines of endeavour, in that he has at least two sources of income. In addition to his regular cash income derived from farm operations, from outside labour away from the farm, or from various other sources, there i s also the income aris ing from the rental value of his home and the value of food and fuel supplied by the farm for home consumption. The purpose of this study i s to measure the relative importance and limitations of these various sources of income. Such a project is thought to be of importance in considering the present and future welfare of both commercial and part-time farmers. It w i l l reveal, as far as source of income is concerned, why some farmers are more prosperous than others. As a result , there w i l l be an indication of those sources of income which may be extended in order to obtain an increase in net income. This indication w i l l not be applicable for specific cases, but should have mathematical probabil ity for the area as a whole. Particular emphasis is given in this study to the importance and limitations in the value of perquisites. . This information w i l l permit a deter-mination of the degree of production for sale relative to production for use in the area among commercial farmers. In the case of part-time farmers, i t w i l l indicate the degree to which they depend on home pro-duction of foodstuffs for their total net income. In organizing the data, the. author presents as an introduction a descriptive word-picture of the soc ia l , cultural and economic aspects of the area for those readers unfamiliar with the economy of the Fraser Valley of Br i t i sh Columbia. Following this introduction, a primary and comparative income analysis is given. The last section of the study concerns an interpretation of the results . TABLE OF CONTENTS Page METHOD OF SURVEY 1 GENERAL ASPECTS OF THE ECONOMY OF THE AREA 4 Topography 4 Soi l 4 Climate 5 Land Ut i l i za t ion " 6 Nationality Derivation 7 Composition of Families and Households 7 Ages of Operators 8 Education 9 FARM CLASSIFICATION 10 Part-time and Commercial Farms 10 Part-time and Commercial Farms sub-? c lass i f ied with Respect to Outside Labour 11 Owners and Tenants 12 Net Income 14 PRIMARY INCOME ANALYSIS - 15 Terminology 15 Farm Income 16 Outside Earnings 18 Other Income 18 Perquisites 19 Determination of Farm Income, Spendable Income and Net Income 21 TABLE OF CONTENTS (Continued.) Page COMPARATIVE INCOME ANALYSIS 28 Part-time and Commercial Farms 28 Part-time and Commercial Farms sub-c lass i f ied with Respect to Outside Labour 33 Owners and Tenants 38 Net Income Groups 43 Summary of Conclusions 46 AN INTERPRETATION OF THE RESULTS 48 Commercial Farms 48 Part-time Farms 52 BIBLIOGRAPHY 55 TABLES Page I Income Analysis of 94 Rosedale Operators 22 II Average Income Analysis of Part-time and Commercial Farms 29 III Average Income Analysis of Part-time and Commercial Farm Operators sub-class i f ied with Respect to Outside Work 34 IV Average Income Analysis of Owners and Tenants 39 V Average Income Analysis of $500 Interval Bet Income Groups 44 ERRATA P. 7 L-15 Each of the following nations was represented There was a great number perquisites account for essentially levelling off for their farm opera- tions were conducted 14 found that the 65 commercial farm opera-tors received  8 1 36 25 48 12 50 4 53 11 AN INCOMES ANALYSIS OP A SAMPLE FARMING DISTRICT WITH PARTICULAR REFERENCE TO THE IMPORTANCE OF SELF-SUFFICIENCY METHOD OF SURVEY The f i e l d work OQ this project was carried out during the months of June, July and August of 1940, when the author, under the direction of the Department of Agricul tural Economics of The University of Br i t i sh Columbia, made personal v i s i t s to every farmer in the Rosedale Di s tr i c t of the Fraser Valley and completed a questionnaire on the basis of information supplied by the head of each rural household in the d i s t r i c t . * The Di s tr i c t of Rosedale was chosen because i t appeared, superf ic ia l ly at least , to be characterized by the prevalence of both part-time and commercial farms. It was therefore fe l t that the area would reveal some of the relationships *The development of this material was delayed u n t i l the discharge of the author from the Armed Forces of Canada. existing between part-time and commercial farms. In addition. Rosedale seemed to offer less homogeneity of race, nativity and cultural characteristics than certain other areas in the Fraser Val ley . For these reasons, i t may be possible that the information received and the conclusions developed are more representative than other particular d i s t r i c t s in the area. However, beyond this consideration, there is l i t t l e just i f icat ion for the supposition that the results of the survey are indicative of the situation that may appear in any other d i s t r i c t , or in the area as a whole. Within the Rosedale Di s tr i c t i t s e l f , the data are considered to be adequate, inasmuch as each farm in the d i s t r i c t was v i s i t ed and records were received from 94 of the total number of 101 farms. Seven farm records were discarded because of incomplete information. Some allowance, of course, must be made for the questionnaire method of survey. There were instanoes in which operators were obviously reluctant to divulge information, especially in respect to income. There were other operators who were quite w i l l i n g to co-operate, but lacked farm records for accurate information. As a compensation, no economy of time or patience was practised with each individual operator, so that information would be as accurate as possible commensurate with the l imitations of the questionnaire method of survey* 4 GENERAL ASPECTS OF THE ECONOMY OF THE AREA Topography Beginning a few miles east of Agassiz , the delta of the Fraser River extends westward for about 75 miles, u n t i l i t reaches the Strait of Georgia. This delta is bounded on the north by the Coast Range and on the east by the Cascades, and is divided throughout i t s length by the Fraser River. The D i s t r i c t of Rosedale, although situated in the upper region of this delta, has a topography that is low and f l a t . Previously, the land was subject to overflow during the freshet stages of the Fraser River, but now a system of canals and pumping units ensures adequate drainage• So i l According to a s o i l survey report of the Fraser Val ley , there are three principal s o i l types represented in the Rosedale D i s t r i c t : namely, Munroe clay loam, peat, and an area of mixed prof i l e . Of these three, the Munroe clay loam covers the greater part of the area. This s o i l is considered to be highly f e r t i l e . 5. la certain smaller areas in Rosedale, the so i l is described as being characterized by a layer of humified peat about an inch or more thick, but cultivation has worked the part ly-decomposed organic material into the s o i l and the result is considered to be beneficial for general cropping. The area with a mixed profile, i s of very l i t t l e relative importance in Rosedale since only a small part is within the boundaries of the d i s t r i o t . This so i l is characterized by a topsoil of th in , gravelly loam, underlaid by talus from the bordering mountain and r iver gravels* CIimate Temperatures in Rosedale are comparatively uniform and are maintained throughout the whole year. Annual precipitation amounts to from 50 to 70 inches, and although the d i s t r i c t i s character-ized by a heavy winter r a i n f a l l and a summer dryness, lack of moisture does not constitute a serious l imit ing factor in crop production. The snowfalls are l ight and usually remain on the ground for only a short time. In general, i t may be said that topography, s o i l and climate in the d i s t r i c t are part icular ly favourable to general farming and cannot be co a side red important l imi t ing factors in agricultural production. Land Ut i l i zat ion An examination of the land ut i l i za t ion in the area under survey revealed that there is a very wide divergence in size of holdings, from one-eighth of an acre to 455 acres. The total area occupied by the 94 units i s 3880 acres, or an average of 40*6 acres per holding. Each operator was asked at the time of the survey to estimate the agricultural u t i l i t y of his farm land. From this information, i t was calculated that 72.4 per cent of a l l the land was considered suitable for crop production and 12.3 per cent suitable only for uncultivated pasture. The remaining 15.3 per. cent was reported to be neither arable nor suitable for uncultivated pasture• The importance of the livestook industry was indicated by results obtained when the average number of each type of l ivestock per farm was calculated. The respective averages per farm were found to be: dairy catt le , 13.7; poultry, 164.2; hogs, 4.8. Workstock per farm averaged 1.5* 7. Nationality Derivation Although over 50 per cent of the family households In the Rosedale d i s t r i c t were Canadian born, the re la t ive ly recent history of the area as a farming community was revealed by the fact that only eight out of the 94 operators were born in the d i s t r i c t in which they now l i v e . There was a predominance of Anglo-Saxon ancestry in the area, but even in such a small survey, i t was interesting to see the small degree of rac ia l homogeneity present. An analysis of the national origin of the population revealed the following results: Canada 48, United Kingdom 25, United States 8, Russia 5, and Germany 2. Each of the following nations were represented by one household: Belgium, Denmark, India, Japan, Norway and Poland. Composition of Families and Households In this survey, the "family" was considered to include parents and sons and daughters at home, together with those members away from home but supported by the family income. The "household", on the other hand, included relat ives , boarders, hired help, and a l l others in addition to the family. 8. There were a great number of different family combinations. In some cases, for example, a farm was operated jo int ly by brothers with their s ister or the wife of one of the brothers acting as the home-maker. There were also some households which included another family related by marriage. The average number of persons per family for the d i s t r i c t was 3.5, while the average size of household was only s l ight ly larger, 3.8 persons. In addition, i t was found that there was l i t t l e social or economic disparity between family and household. For this reason, and for convenience in analysis, the household rather than the family was used as a basis of comparison in later examinations. Ages of Operators It was evident that there has been a strong tendency for the members of the present generation to be attracted away from the farms in the region. This was revealed both by the low average number of children l i v i n g at home, only 1.7 children per family, and the high average age of a l l farm operators, 53.6 years. Of the 94 operators, only four were 30 years of age or less . Those operators over 50 years of age constituted 60 per cent of the group, while 86.3 per cent were over 60 years of age. There were even nine oases in which the operators were over 70 years of age, but in such instances the farming operations were not usually of an extensive nature, unless there were children at home or hired help to assume the responsibi l i ty of a large operation• Education The average number of years spent in school by the women exceeded that of the men by over a year, the average number for the wives being 8.2 years, and for their husbands 6.9 years. Thirteen of the men and four of the women had only four years of school attendance or less , and only one of the men and two of the women had continued their education beyond the equivalent of high school. FARM CLASSIFICATION There are many ways in which farm units may be c lass i f ied , but for the basis of later analysis in this survey, consideration was l imited to four: Part-time and Commercial Farms The classif ication of part-time and commercial farms in this survey was based on the division of time and labour of the operator. Farmers were questioned in respect to the number of hours of labour expended daily on farm maintenance. Those farms requiring less than one-half of the ful l-t ime of an operator were c lass i f ied as part-time farms. The remaining farms requiring more than one-half of the full-time of an operator for their maintenance were termed commercial farms. The results of this c lassif icat ion revealed that there were 29 part-time farms (31.2 per cent) and 65 commercial farms (68.8 per cent). There was no apparent segregation by loca l i ty of part-time and commercial farms within the area. There were, of course, small regions within which there were a few,farms of the same type 11. but there was no location within the area where a large number of one type prevailed to the exclusion of the other type. The part-time farmers had l i t t l e evidence of specialization in their farming enterprise and were more characterized by their subsistence type of farming. This tendency was i l lus trated by a comparison of gross sales of farm products as between part-time and commercial farms. The comparison revealed that the 65 commercial operators received 96.2 per cent of the gross receipts from the sale of farm products, leaving only 3.8 per cent for the remaining 29 part-time operators. Within the group of 65 commercial farms, dairying predominated as a specialized enterprise on 32 farms, 24 farms associated a major dairy enterprise with poultry or hogs, and seven were specialized poultry farms. To complete the total there was one farm special iz ing in fur production and one in hog production. Part-time Farms and Commercial Farms Sub-Classified  With Respect to Outside Labour Part-time farms and commercial farms were further sub-classified in respect to the number of operators who received an income from outside work. Commercial farm operators may have full-t ime employment away from the farm, but their enterprise is s t i l l c lass i f ied as a commercial farm* This i s possible because they operated a farming enterprise that required more than one-half of the full-time of an operator through hired labour or a member of the family. It was found on analysis that 18 of the 29 part-time farmers (62.1 per cent) received an income from outside work, while 14 of the 65 commercial farmers (26.9 per cent) received an income from outside work. Owners and Tenants An analysis of tenure status in the area revealed that 74 of the 94 operators (78.7 per cent) were owners. Some causal relationship may be assumed from the high rate of farm ownership and the personal attitude of the operators themselves with respect to tenure. Only three operators of the 94 stated that they would rather rent, offering as their reason the high rate of taxation. Four other operators main-tained that i t made l i t t l e difference whether a farmer owned or rented a farm. 13, The high rate of farm ownership indicates that there may be a l imited degree of movement up the "agricultural ladder", or the tendency for young people to become farm labourers, for farm labourers to become tenants, and for tenants to become owners. It does not, of course, exclude the functioning of the tenure ladder, but indicates that the opportunity of movement may be l imited. A further indication towards what may be a l imited degree of movement up the tenure ladder i s the low percentage of young men who are operators in the area. The owners, once they have been established, would have a tendency to stay on their farms. In that way, most of the desirable land would be occupied and not made available to a younger generation. And further, because of the size of the farm operations in the area, i t would appear that two-family house-holds are not usually economically possible. There was no appreciable concentration of ownership within the classif ication of part-time and commercial farmers, for an analysis of the s tat i s t ics revealed that 78.4 per cent of the part-time operators were owners, while 79.2 per cent of the commercial farm operators were owners. Bet lacome The fact that there was considerable disparity in net income among both part-time and commercial operators affords a fourth method of c lass i f icat ion for comparative purposes* In later analysis, operators are divided into net income groups with $500 intervals in order to determine the origin of relative prosperity as far as the source of income is concerned* 1 5 . PRIMARY IK COME ANALYSIS Terminology D e f i n i t i o n s of the more important terms used i n income a n a l y s i s are p rov ided below f o r a s s i s t a n c e i n i n t e r p r e t i n g the d a t a . 1 . Gross r e c e i p t s r e f e r s to the r e c e i p t s from the p roduc t i on o f a p a r t i c u l a r year , but a l s o i n c l u d e s , i n a d d i t i o n to the cash s a l e s , the va lue o f goods produced f o r sa le d u r i n g the year and s t i l l h e l d f o r s a l e , and the va lue by which l i v e s t o c k and feed supp ly have been i nc r ea sed w i t h i n the p a r t i c u l a r y e a r . 2 . Opera t ing expenses r e f e r s to the cost o f a l l l a b o u r except tha t o f the opera tor and h i s household , the cos t o f any seed, f eed , r e n t , t a x e s , d e p r e c i a t i o n on machinery and b u i l d i n g s a t 5 per cent of c a p i t a l i z e d v a l u e , and a l l o the r cos t s tha t are a s s ignab le to the fa rming opera t ion r a t h e r than to l i v i n g . I t a l s o i n c l u d e s the net decrease i n l i v e s t o c k and feed supp ly d u r i n g the y e a r . 5 . Farm income r e s u l t s from the deduct ion of o p e r a t i n g expenses from gross r e c e i p t s . This i s the amount the farmer r e c e i v e d f o r h i s l a b o u r and as i n t e r e s t on the investment i n the farm and equipment. 1 6 . 4 . Spendable IDcome r e f e r s to the amount of farm income added to income from labour away from the farm and the income d e r i v e d from a l l o ther sources such as pensions and inves tments . Thus, spendable income i s the t o t a l cash income i n the hands of the opera to r t ha t may be used f o r cash o u t l a y on f a m i l y l i v i n g d u r i n g the y e a r . 5 . P e r q u i s i t e s r e f e r s to the c o n t r i b u t i o n o f the farm i t s e l f towards f a m i l y l i v i n g . T h i s v a l u a t i o n i s c a l c u l a t e d by p l a c i n g a moderate r e n t a l va lue on the home, and adding to t h i s the farm va lue of food and o ther c o n t r i b u t i o n s , such as f u e l , t h a t the farm f u r n i s h e s f o r home consumption. 6 . Net income o f the opera tor i s then v a l u e d by combining spendable income w i t h the c a l c u l a t e d va lue o f p e r q u i s i t e s . In a l l income a n a l y s i s , s t a t i s t i c s r e f e r i n the survey to the calendar year from January 1 to December 3 1 , 1939. Farm Income By an a n a l y s i s o f the gross r e c e i p t s of farm p r o d u c t s , i t was determined tha t the Rosedale d i s t r i c t marketed i t s p roduc ts almost comple te ly through the medium of l i v e s t o c k and l i v e s t o c k p r o d u c t s . The l a t t e r source accounted f o r 96.6 per cent o f the gross r e c e i p t s of farm p r o d u c t s , wh i l e 17. only 3.4 per cent was obtained through the direct sale of crops. Dairying predominated over any other livestock enterprise, accounting for 76.0 per cent of the total gross receipts from livestock products. This analysis is an indication that a number of factors such as topography, s o i l , climate and proximity to a whole milk market, were part icular ly favourable for the production of dairy products. Poultry was next in importance, representing 20.4 per cent. Both hog production and fur-breeding were of relative minor importance, there being only, one farm in each case where the enterprise constituted the major source of in come • The sale of crops in the d i s t r i c t , representing only 3.4 per cent of the total gross receipts from farm products, was more an evidence of the sale of surplus production not required for household consumption or livestock feeding than a development of commercial crop production* Some farmers received a supplementary income from the sale of small f r u i t s , such as raspberries and strawberries, but in no instances were these major enterprises* The sales of grain or hay recorded in the survey usually represented a seasonal 18. surplus not required for feeding to l ivestock, rather than a deliberate surplus. Outside Earnings There were 43 operators out of the total of 94, who reported that inoome was received from work away from the farm. This large number indicates that both part-time and commercial operators have an alternate method of u t i l i z i n g their labour; i . e . , on or off the farm. Employment away from the farm may also be fu l l - t ime, part-time or chance employment, and varies from the professions of engineering and teaching to unskil led labour. Other Income For the purpose of convenience in analysis, a l l other miscellaneous incomes have been grouped in this survey under the term "other income", because i t was found that the individual items were not suff ic ient ly important to warrant single attention. There was l i t t l e s imi lar i ty between the various sources, for they represented both earned and unearned incomes. Thirty-one operators reported income that f e l l into this category of other income. 19. The most important single item in this group was income from property. Undoubtedly, a par t ia l explanation for this fact may be found in the number of large farms that have been broken up into smaller units by the original owner for rental purposes. The next most important items in order of their respective values for income purposes were pension payments, interests and dividends from stocks and bonds, and payments from boarders. An indication of the a b i l i t y of the operators to maintain themselves without government assistance was revealed by the fact that only two households had found i t necessary to apply for and obtain direct r e l i e f during the period of the survey. Perquisites Since perquisites may supply many of a farmer's needs, his spendable income is then made available for other purchases. Therefore, there can be l i t t l e argument that i t is reasonable to add to the farmer's spendable inoome the value of perquisites in order to arrive at the net income. There is some disagreement, however, among agricultural economists, in respect to whether perquisites such as food and fuel should be valued, at an amouot whioh the farmer would have to pay for them, or at an amount based on the remuneration the farmer would obtain for the products i f he chose instead of consuming them, the i alternative of se l l ing . Although each method is subject to cr i t i c i sm, the lat ter i s adopted in this survey as being the more adequate, in view of the fact that the analysis i s concerned with comparative incomes of farmers and not between farmers and urban workers. Detailed estimates on the value of food produced and consumed on each farm have been computed on the basis of average prices paid to farmers in the area for the. calendar year 1939-40 for similar produots. Fuel supplied by the farm has been valued on the same basis. The annual contribution of the home as a dwelling place has been estimated at 10 per cent of the value of the house. This lat ter rate of valuation has been determined on the basis of property tax assessments and prevail ing rental rates in the d i s t r i c t during the time of the survey. Food was found to be the most important item among the perquisites, constituting 62.9 per cent of the total value of perquisites. The value of the home as a dwelling place amounted to 30.9 per cent. The contribution of the farms in the area towards the wood supply was 6.2 per cent of the total value of perquisites. Determination of Farm Income, Spendable Income and Met Income The sources of income that determine farm income, spendable income and net income are arranged in Table I , in their average amounts for the 94 Rosedale operators in the survey. It must be borne in mind that in this study, the average net income of $995 includes both total labour income and the interest return on investment, TABLE I Income Analysis of 94 Rosedale Operators* I* Determination of 1 Farm Income Item Average Twice the Standard Twice the Standard Coefficient of Deviation Error Variation Gross Receipts Operating Expenses 1022 566 ±1997 ±1264 ± 4 1 4 ± 262 98% 112% Farm Income 456 ± 974 ± 202 107% II* Determination of Spendable Income Item Average Twice the Standard Twice the Standard Coefficient of Deviation Error Variation Farm Income Outside Earnings Other Income 456 20? 116 ± 974 ± 706 ± 470 ± 202 ± 1 4 6 ± 98 107% 174% ?P3% Spendable income 775 ± 9 7 5 ± 2©2 62% III* Determination of ] Set Income Item Average Twice the Standard Twice the Standard Coefficient of Deviation Error Variation Spendable Income Perquisites Net income 775 220 ± 975 t 171 - +202 ± 3 6 ' ' ± 212 6 2 % 39% 52% 995 ±1025 23. In each case where an arithmetric average was computed in Table I , the r e l i a b i l i t y of the average was tested for the sample i t s e l f by means of the standard deviation, and for the mean of the population from the sample by the standard error . Both the standard deviation and the standard error were doubled in order to obtain 95 per cent probabi l i ty . In other words, the chances were 95 out of 100 that the net incomes of the 94 operators were within a range of $1025 on either side of the average $995, or between -$30 and $2020. And i t can be said that the chances were 95 out of 100 that the true average net income of a l l operators in an area similar to Rosedale was within a range of $212 on either side of the average $995, or between $783 and $1207. By an analysis of the various sources of income that constituted net income, i t is worthy of note that in this area, 45.8 per cent of the net income was received from farm operations. Perquisites accounted for 22.1 per cent of the net income, outside labour of operators for 20.4 per cent, and other income, such as interest payments and decreased bank balances, for 11.7 per cent of the net income. Farming then may be considered as the major enter-24. prise for the sample as a whole, with the other sources of income considerable in importance, but supplementary in character. An indication of the l imits of the various sources of income may be had from the measure of twice the standard deviation. This may be i l lus trated by considering that the average farm income was found to be $456 and that 95 per cent of the cases would f a l l within ± $ 9 7 4 , or between -$518 and $1430. In other words, farm income had a deviation large enough to permit certain individual operators to achieve a net income from this source alone that would enable them to reach the average net income for the group of $995. The same was true of outside earnings of operators, but to a lesser extent. The average earnings of operators employed away from the farm was found to be $203 ± $ 7 0 6 . Therefore, the deviation from the average was large enough to indicate that certain operators with this sole source of income could almost reach the average net income for the group of $995. The measure of twice the standard deviation, however, indicated that an operator with perquisites alone and no other source of income would f a l l considerably short of the average net income of $995. 25, This was indicated by the average value for perquisites of #220 with a variation of ± $ 1 7 1 , or 95 per cent of the cases would f a l l between #49 and $391. Similarly, other income with an average of $ 1 1 6 ± # 4 7 0 would be inadequate by i t s e l f to reach the average net income of $995. In order to reveal the relative variation between the various averages, the coefficient of variation was computed. . This measure is the standard deviation as a percentage of the arithmetric mean. The coefficient of variation for perquisites was found to be 39 per. cent, while farm income had a v a r i a b i l i t y of 107 per cent, outside earnings 174 per cent, and other income 203 per cent. Therefore, the range in the case of farm income, outside earnings, and other income was s ignif icantly more pronounced than in the case of perquisites. On the basis of the above income analysis, i t i s possible to make a few preliminary deductions. These may be summarized as follows: 1. The major source of income was from farm operations. 2. There was considerable variation from the average in the case of a l l sources of income, but the variation was the more pronounced in respect to 26. the averages of farm income, outside earnings and other income, than in the case of perquisites. 3. Farm income and outside earnings were the only sources of income that individual ly would constitute an amount sufficient to approximate the average net income of .$995. 4. Other income and perquisites would be inadequate individual ly to secure an average net income of $995. From the above information, i t i s now possible to make a preliminary pract ica l application. It may be possible that resources of land, labour and capital in the area were u t i l i z e d at their maximum during the time of the survey. However, i f the intensive or extensive margins of cultivation could be extended through further applications of the factors of production, the analysis would seem to indicate that net income could be further increased by developing farm operations rather than perquisites. Farmers with a re lat ive ly low value for perquisites may f ind i t advantageous to develop this source of income further, but the analysis indicates a l imited range to which this development may be extended. These points are more f u l l y developed in a later analysis, in which the operators are divided into net income groups of $500 intervals . 28., COMPARATIVE IKCOME ANALYSIS ID this sectioD of the study, an analysis i s made of the income stat is t ics in order to reveal the relative prosperity of the several c lass i f icat ions of farm units and to determine, as far as the source of income is concerned, the origin of disparit ies in income. Part-time and Commercial Farms The average incomes of part-time and commercial operators are revealed in Table I I . It was found that part-time farmers as a group depended completely on outside earnings and other income for their spendable income, for their farms were operated at an average net loss of $10. On the other hand, commercial farm operators were very greatly dependent on farm income for their spendable income, for they derived less than one-quarter of their spendable income from outside earnings and other income combined. TABIB II Average Inodme Analysis of Part-time and Commercial Farms It em Part-time. Commercial "T" Value Number of Farms 29 . 6 5 Farm Income Outside Earnings Other Income - 1 0 410 258 6 6 5 1 1 1 52 Very significant Very significant Very significant Spendable Income Perquisites 6 5 8 17? 8 2 8 2 3 8 Not significant Very significant Net Income 8 3 7 1 0 6 6 Significant 30. Table XI also discloses that not only have the commercial farm operators a larger average spendable iacome than part-time operators ($828 as compared with $658), but the commercial farmers increased this amount to a greater degree than the part-time operators by the value of their perquisites. As a resul t , the commercial farmers had an average net income of $1066, compared to the average net income of $837. for part-time farmers. In order to test the, r e l i a b i l i t y of the differences between the two means in this table, the relationships were tested with standard errors, or br i e f l y , the "T" test . In this study, significant differences are those differences which are great enough so that the chances are 95 out of 100 against their occurrence due to chance alone. For very significant differences, the corresponding probabil i ty is 99 per cent. A very significant difference was found in the case of farm income, from which source the commercial farmers had an average income of $665 and the part-time operators -$10. The difference between the outside earnings and other income of part-time farmers, when compared with that of the commercial operators, was also found to be very 31. s ignif icant . In fact , the difference was so significant that part-time farmers were able to compensate themselves for their lack of farm income by their income from outside earnings and other income. This tendency was revealed by the fact that no significant difference was found between the spendable income of part-time and commercial farmers, although the average spendable income of part-time farmers of $658 and commercial farmers of $828 would seem to indicate that a difference does exist . An interesting development now arises in respect to perquisites. A very significant difference was found between the average.value of perquisites for part-time farmers of $179 and that for commercial farmers of $238, which was partly responsible for the fact that a significant difference was found between the average net income for part-time farmers of $837 and that for commercial farmers of $1066. In recapitulation, the foregoing analysis indicates f i r s t of a l l that part-time farmers do not derive a net income from their share of the commercial farm business, but that they are able to f ind compensation for this through outside earnings and other income. As a result , there is no significant 32.-difference between their spendable income as compared to commercial farmers, although a difference is indicated. This tendency, in i t s e l f , is not a matter of great ooncern. It does, however, indicate a rather sharp demarcation in this rural area between two groups, one almost wholly dependent on farm sales, the other equally dependent on income other than farm sales. But what is considered to be of greater concern is the fact that there was a significant difference found between the average net incomes of part-time and commercial farmers. This difference has arisen apparently in part from the indication that commercial farmers had a larger income from perquisites than part-time farmers. It would tentatively appear, then, that the degree of self-sufficiency was dependent more on the status of an operator, either as a commercial or as a part-time farmer, than on the necessity or desire to increase net income. 33. Part-time and Commeroial Farms Sub-Classified  With Respect to Outside Labour In addition to the demarcation between part-time and commercial farms in this rural area, there was also a sub-classification based on whether or not the operators of these part-time and commercial farms were employed full-t ime away from the farm. In effect, there were four groups. F i r s t of a l l , there was the part-time farmer who was fu l l y employed neither in commercial farming, nor in outside labour. Then there was the part-time farmer who was not employed ful l-t ime in commercial farming but had full-time employment away from the farm. The third group and largest was formed by the full-time commercial farm operators. The fourth group was made up of the operators who maintained commercial farms by means of family or hired labour, and were at the same time gainfully employed away from the farm. These four groups are arranged in Table III for comparative purposes. T A B L E l i t Average Income Analysis of Part-time and Commercial Farm  Operators sub-classified with Respect to Outside Work Item Part-time Part-time with Outside Work nrp« v a i u e Com-mercial Commercial with Outside Work W T " Value Number of Farms 11 . 1 8 5 1 14 mm v Farm Income Outside Earnings Other Income - 3 1 N i l 542 2 660 85 . Not significant Very significant 681 13 . 6 5 606 467 .7 Not significant Very significant Hearly significant Spendable Income Perquisites 511 132 . 747 208 Not significant Very significant 759 239 1080 236 Significant Not significant Net Income 643 955 Nearly significant 998 1316 Significant 35. Table III reveals that part-time farmers had an average net income of $643, while part-time farmers with outside work had an average net income of $955. Despite this difference of $312, however, when the "T" test was applied to measure the significance, only a 90 per cent probabil i ty was. obtained. I t has been stated previously that the significant differences in this study are those differences which are great enough so that the chances are 95 out of 100 against their occurrence due.to chance alone, and that for very significant differences, the corresponding probabil ity is 99 per cent. In this instance, since the probabil i ty was found to be 90 per cent, the difference cannot be considered to be s ignif icant, but certainly i t can be considered as revealing a strong indication towards significance. For this reason, the difference was termed "nearly significant". The large degree of v a r i a b i l i t y and/or the l imited size of the sample would account for this l imited degree of significance, so that i t is possible that a larger sample would provide a more significant relationship between the two. Therefore, i t may be said that there was a strong indication that part-36. time farmers with, outside work had an advantage in income over part-time farmers who were not employed away from the farm. The analysis in Table III also reveals the apparent causes for this disparity in income between the two different types of part-time farmers. One group was solely dependent for cash resources on what has been termed in this survey other income, while the other group was equally dependent on earnings away from the farm. But the evidence indicates that the part-time farmers with outside work had a slight advantage in cash income. This s l ight advantage has a cumulative effect when associated with a very significant difference in the value of perquisites. The result is then a 90 per cent probabil ity between the difference in average net income between the two groups* It is not unnatural for one group of part-time farmers to be dependent on outside labour, while another group depends on what is mainly unearned income, but what causes the very significant difference between the two in respect to perquisites? As in the case of part-time and commercial farmers, i t may be that the physical means of providing perquisites accounts for the degree of self-37. sufficiency more than the necessity for increasing net income. Although information is not available on the difference in amount of capitalization beyond buildings and equipment between the two different groups, this factor is considered to be of very l i k e l y importance in explaining the difference in value of perquisites. Turning then to the two types of commercial farmers, i t was found that the commercial farmers with full-time employment away from the farm had a s ignif icantly higher average net income than the s t r i c t l y commercial operators. There was no significant difference in farm income or perquisites between the two, so that the advantage is attributable to earnings from outside labour and to other income. It would appear that from a managerial point of view, i t is possible to have full-time employment away from the farm, and at the same time operate a commercial farm enterprise successfully. On the basis of this information, i t may be said that the analysis indicates that the least privi leged group in respect to income within this c lassif icat ion was the part-time farmer who was not employed full-time away from the farm. The most prosperous group, on the other hand, was the farmer who was employed full-t ime away from the farm and, as wel l , operated a commercial farm business, for the representative farm within this group had an average net income of $1316. Of intermediate prosperity between these two extremes were the part-time farmers with f u l l -time employment away from the farm with an average net income of $955, and the s t r i c t l y commercial farmers with an average net income of $998. When the "T" test was applied to these two averages, no significant difference was found. In other words, their pfosperity was approximately s imilar . Owners and Tenants Through an examination of the data on income of owners and tenants arranged in Table IV, i t is apparent at f i r s t glance that the 74 operator owners had an advantage in income over the 20 operator-tenants. The relationship of advantage on the part of the owners extends consistently through each source of income, with the result that the owners had an average net income of $1040 compared to the average net income of $829 for the tenants. TABLE IV Average Income Analysis of Owners and Tenants Item Owners Tenants «T" Value Number of Farms . 7 4 2 0 mm mm Farm Income 470 407 Not s i g n i f i c a n t Outside Earnings 2 2 2 1 3 3 Not s i g n i f i c a n t Other Income 1 2 2 . 9 1 . Not s i g n i f i c a n t Spendable Income 814 6 3 1 Not s i g n i f i c a n t Perquisites 2 2 6 1 9 8 Not s i g n i f i c a n t Net Income 1040 8 2 9 Nearly s i g n i f i c a n t : However, when the difference between each set of averages was measured for significance by means of the "T" test , the degree of significance found in each case varied to some extent. There was found to be l i t t l e significance in the differences between the various sources of income, but cumulatively these small, differences resulted in a difference in average net income between owners and tenants that revealed a 90 per cent probabi l i ty . In general terms, then, this analysis would seem to indicate, that i f only 95 per cent or 99 per cent probabil i ty were to be considered as significant differences, i t would matter l i t t l e as far as the average net income of an operator was concerned whether he owned his farm or not. However, since there was a 90 per cent probabil i ty between the difference in average net incomes, i t is considered reasonable to make the statement that there was a strong indication in this area that owners had an advantage in income in comparison with the tenants. The question may be asked, "What are the causes for this strong indication towards a significant difference between the average net 4L. • incomes of owners and tenants?" An obvious explanation would be that since part-time farmers have a lower average income than commercial farmers, there could be a higher proportion of part-time farmers among the tenants.' This would lower the average net income of the tenants in the sample compared to that of the owners. But this explanation would not be just i f ied in this survey by reason of the fact that the proportion of part^ time to commercial farmers was approximately the same in the group of owners as among the tenants. In seeking a possible explanation, i t must be borne in mind that the difference in average net income between owners and tenants arose from the cumulative effect of four sources of income. Two of these sources of income, outside earnings and other income, are not related to tenure in any way. Only farm income and perquisites would have a definite relationship to tenure. • Therefore, even the results that revealed a nearly significant difference between the average net incomes of owners.and tenants should be qual i f ied . Beyond indicating these necessary factors of consideration, the author is not prepared to offer any further reasoning from the available data. 48 . It cao only be said that there was no actual significant difference between the average net incomes of owners and tenants, but that there was an indication in favour of an advantage on the part of the owners. It must be remembered, however, that correlation does not show causation. The indication that owners may have a higher average net income does not necessarily mean that they acquire this higher average net income because they are owners. 43. flet Income Groups la this classification", the 94 operators are divided, into $500 interval net income groups, with the intention of determining, in-so-far as the source of income is concerned, the origin of differences in average net incomes "between the groups. In other words, i f an operator has an average net income of over $2000, what source or sources of income are responsible for this relative prosperity? The analysis of variance was used in Table V to test the relationship between each source of income and net income. A very significant relationship was found between net income and farm income, earnings of operator and perquisites. That i s , the probabil i ty was greater than 99 per cent that such differences as were revealed could not occur due to chance alone. But no significant relationship was found between net income and other income. TABLE V Average Income Analysis of $500 Interval Net Income Groups ITEM Less than $500 $500 to $ 9 9 9 $1000 to $1499 $1500 to $ 1 9 9 9 Over $2000 npn Value Number of Farms . 11 .45 2 5 8 5 . .— Farm Income 101 282 611 770 1533 Very s ig -nificant Outside Earnings 22 1 2 0 304 388 550 Very s ig-nificant Other Income 99 1 3 1 56 256 89 Not s ig-nificant Spendable Income 222 533 9 7 1 1414 2 1 7 2 mm mm Perquisites 1 3 1 2 1 3 250 263 257 Very s ig-nificant Net Income 353 746 1 2 2 1 . 1 6 7 7 242? mm mm 45. This analysis would indicate that there was no relationship in this particular area between the amount of an operator's other income and his relative prosperity. Operators evidently increased their average net income by developing farm income, earnings away from the farm or perquisites. But this analysis does not reveal the relative importance of these three factors in contributing towards an operator's prosperity. They are a l l s ignif icantly related to net income, but which one can be developed to the greatest extent? In absolute terms, Table V indicates that in the lowest income group (less than $500) perquisites contribute more towards net income than any other source. In the next income group ($500 to $999) farm income contributes the highest amount, with perquisites secondary in importance. In each of the income groups over $1000, farm income continues to contribute the greatest amount towards net income. Outside earnings, however, take the place of perquisites in secondary importance. In relative terms, farm income and earnings away from the farm become more important as the net income rises.. Perquisites, on the other hand, decrease in relat ive importance as the net income r i s e s . 46. The above analysis of the data in Table V confirms the results revealed in the ear l i er primary income analysis. An operator may materially extend his net income by increasing the value of his perquisites. This is part icular ly true- of the low income groups. The degree to which he may increase his net income from this source i s , however, l imited . The greatest increase in net income is associated with a development of farm income and earnings away from the farm. Summary of Conclusions 1. Farm income may be considered as the major source of income for the sample as a whole, with the other sources of income considerable in importance, but supplementary in character. It would be possible for an operator to approximate the average net income of the area by receipts from farm income alone or outside earnings alone, but the returns from other income or perquisites were so l imited in range that individual ly they would be insufficient to approximate the average net income of the area. 2 . Commercial farmers had.a s ignif icantly higher average net income than part-time farmers, due in part to the higher value of perquisites for the 4 7 . commercial group. This would appear to indicate that the value of perquisites was correlated with the physical means of their production rather than with the desire to raise net income. 3. There is a strong indication that the group most handicapped in respect to average net income was the part-time farmer employed neither full-t ime in commercial agriculture nor away from the farm. The most prosperous group, on the other hand, was the operator who maintained a commercial farm as well as being employed full-t ime away from the farm. Of intermediate prosperity between these two extremes were the part-time farmers with f u l l -time employment away from the farm and the s t r i c t l y commercial farmers. 4 . There is an indication that owners had a higher average net income than tenants, but i t is considered doubtful whether they acquired this higher average net income merely because they were owners. 5. A certain material increase in net income may be accomplished by low income groups through the expansion of the amount of perquisites, but the degree of increase that may be expected i s l imited. The higher net incomes in the survey were a t t r i -butable more to the development of farm income and outside earnings than to the development of perquisites. 48 AN INTERPRETATION OF THE RESULTS Commercial Farms As a general pr inc iple , i t may be said that the history of Canadian agriculture has followed a trend from self-suff ic ient economy of production for use to that of specialized production for sale. This development has been brought about by the concurrent growth of markets for surplus farm products in near-by urban areas and in more distant consuming areas, and by the improvements in transportation and agricultural technology. There are, however, s t i l l agricultural areas in Canada that show evidence of the importance of sel f -suff ic iency. In the esential ly pioneer economy of Prince George and Vanderhoof, i t was found in a survey of 16E part-time and commercial farms that perquisites were of such importance that they may be I considered to be a major enterprise. Average value per farm for the crop year 1945-44 was found to be $475. As a contrast to this survey, in the specialized f ru i t production area of the Okanagan Val ley , perquisites proved to be of subordinate 2 importance to farm income. In this la t ter study, average value of perquisites for 118 f r u i t farms was 49. shown to be $326. A comparable situation in respect to production for sale and specialization was revealed by the income s tat i s t i cs in this present survey of the Rosedale D i s t r i c t , where the value of perquisites of 94 farms averaged $220 per farm. In this survey, as in the Okanagan survey, perquisites were found to be a minor enterprise. The reason for this low average value for perquisites in the Rosedale Dis tr ic t i s a result of farm management practices . Self-sufficiency in food is of two different types: (a) those products which are developed entirely for the use of the household, and (b) those products which are produced primarily for sale, but are incidentally consumed by the house-hold. An i l lus trat ion of the former is the family garden of the commercial milk producer, while an example of the latter i s the family consumption of milk produced by this same operator. The development of farm enterprises in the Rosedale Di s tr i c t indicates the advantages of specialization in whole milk production rather than divers i f ied farming. As a result , self-sufficiency in food in this area has been reduced to those products which were produoed primarily for sale, and those other products which may be produced by 50. u t i l i z i n g surplus family labour not needed for commercial agricultural production. For this reason, there was an apparent level ing-off for the value of perquisites after an amount of approximately $250 was reached. This probably results from a situation in which surplus family labour has been u t i l i z e d to i t s f u l l extent. Further self-sufficiency in food would compete with commercial production for available land, labour and capi ta l , rather than be complementary and supplementary to commercial production. The farmers' decision in this area has been to increase their total net income by further applications of land, labour and capital to production for sale, rather than by developing self-sufficiency in food. Some agricultural" economists in recent years have deprecated this decrease in self-suff ic iency. Wilson claims that "commercialization of agriculture, specialization in agriculture, and lack of self-sufficiency do not correlate very well with high l i v i n g standards. Some of the very lowest rural l i v i n g standards occur in areas of the most highly 5 commercialized and specialized production". But such a philosophy was undoubtedly conditioned to a great extent by a pre-war agricultural problem of chronic surpluses. Farmers were exhorted to become more sel f -suff ic ient in food, not so much because comparative advantage had changed, but because i t seemed to be the only possible solution for surplus production. At the present time, when the world faces a situation of acute food shortages that may prevail for an extended time, i t is necessary to obtain a l l the benefits of comparative advantage and division of labour in agricultural production. Any policy that proposes an increase in self-sufficiency must of necessity be carefully considered in order to ensure that i t does not offset comparative advantage and division of labour. As a general pr inc ip le , i t would seem more reasonable that the main enterprisevon a farm should be reduced and self-sufficiency in food increased whenever the tota l net income is thereby increased. Similarly , the main enterprise should be expanded and self-sufficiency in food reduced, whenever this w i l l increase the total net income. In the Rosedale D i s t r i c t , the low average of perquisites indicates that farmers were able to increase their net -income more by an extension of their farming enterprise than by an extension of self-sufficiency in food. 52. Part-time Farms Part-time farming is looked upon by some agricultural economists and rural sociologists as a third great population movement, following the f i r s t extensive westward movement across the continent, and 4 then the migration of mill ions to the c i t i e s . It is looked upon as a way of l i v i n g that w i l l become increasingly important in the future as a permanent development and not just as a depression phenomenon. Sociologists base their predictions both on recent trends and on the assumption that part-time or subsistence farms are the inevitable solution for maintaining several groups of the population more adequately than at present. Some of these groups may be summarized as follows: 1. Stranded industrial workers permanently displaced from particular industries suoh as coal mining, or ship-building. 2. Workers in decentralized industries. 3. Low wage or part-time urban employed workers. 4. Obsolescent industrial workers. 5. Urban industrial unemployed temporarily destitute during the depression period of a business cycle. 6. Stranded farmers on submarginal lands. 53. With respect to these considerations, what are the indications of success or fa i lure of part-time farming as revealed by this survey? What is the contribution of the part-time homestead towards net income? Is the assumption correct that part-time farms are a panacea for many less privi leged groups in our society? This survey indicates, f i r s t of a l l , that part-time farmers depend entirely on outside earnings or other income for their spendable income, for their farm operation were operated at an average net loss of $10, They have a negligible part of the commercial farm business, for i t was found that the 65 commercial farm operators receive 9 6.S per cent of the gross receipts from the sale of farm products, while the 29 part-time operators received only 3.8 per cent. The average contribution of the part-time homestead towards the net income was found to be #179, of which the value of food alone amounted to an average of $104. It may also be said, then, that the survey indicates that the average part-time farmer does not produce a re la t ive ly large amount of foodstuffs. This indication i s further emphasized by the fact that only 58.6 per cent of the part-time farmers maintained a garden, poultry and dairy cattle, 13,8 per cent a garden with dairy catt le , 10.3 per cent a garden with poultry, 13.8 per cent a garden-only, and 3.5 per cent no means of farm subsistence. It would seem just i f iable to conclude that part-time farmers either have not the time and/ or the inclination to enter into commercial agricultural production in order to supplement their income. Nor do they materially contribute towards their net incomes by the value of their perquisites. The results in this survey would seem to indicate that i t is of primary importance for part-time farmers to have either (a) full-time employment away from the farm, or (b) an income from some other non-farm source. In addition, even those groups in this study who satisfy one or other of these requirements have a s ignif icantly lower average net income than the commercial farmers. For those other groups without a maintainance income, i t is considered questionable whether part-time farming can materially improve their economic s ituation. Part-time farms for these la t ter groups may be p o l i t i c a l l y and social ly desirable, but their economic des irabi l i ty should be considered on the basis of part-time farming as an income supplement. BIBLIOGRAPHY Anderson, W . J . A Preliminary Report of an Economic Survey of Farms in the Prince George and Vanderhoof Areas of B r i t i s h Columbia, Marketing Service, Economics Divis ion, Dominion Department of Agriculture, May, 1945. Campbell, S.A. and S.C. Hudson. Cost and Returns in the Production of Apples in the Okanagan Val ley, B r i t i s h Columbia, Marketing Service, Economics Divis ion, Dominion Department of Agriculture, October, 1945. Kel ley, C . C . and R.H. Spilsbury. Soi l Survey of the Lower Eraser Valley, Dominion Department of Agriculture, Publication 650, Technical Bulletin 20,1939. Taylor, Carl C. Subsistence Homesteads, Journal of Farm Economics, November, 1935. Wilson, M . L . Beyond Economics, Farmers in a Changing World, 1940, Yearbook of Agriculture, United States Department of Agriculture. 

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