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Originally published Vol. 2,
Issue 1 (February 2004)—updated May 2007
Assessing Farm Household Well-Being—
Beyond Farmers and Farm Income
Jeffrey Hopkins, Ashok
Mishra, and Mitch
Morehart
Since its inception in the 1930s, farm policy
has focused on achieving economic parity between
farm families and other households. Although programs
supporting farmers’ incomes have been used
for decades, the modern-day farm household also
earns income off the farm and through investments.
A comparison of how off-farm income
and wealth affect well-being of both farm and nonfarm
households provides an interesting perspective on
the relevance of seeking parity for today’s
farmers. Data from USDA’s Agricultural Resource
Management Survey and the Federal Reserve’s
Survey of Consumer Finances allow comparison of
America’s 2 million farm households with two
separate nonfarm populations that, depending on
their economic focus, have much in common with farm
households: 12 million self-employed nonfarm households
(sole proprietor businesses other than a farm) and
94 million other nonfarm households (those who worked
for someone else, were retired, or otherwise did
not work) in 2004.
Arranging the households in each
of the three groups from lowest to highest income
and wealth and comparing the resulting distributions
yields useful insights. In particular, the median
of each group—where half of the households
have higher income or net worth (wealth) and half
have lower income or net worth—is a logical
starting point for comparison. Self-employed nonfarm
households had the highest median income ($55,000),
followed by farm households ($53,000) and other
nonfarm households ($42,000). The same ordering
of incomes holds throughout the distribution—except
at the lowest levels, where the order changes because
farm households are more likely than nonfarm households
to experience negative incomes. In 2003, negative
incomes were reported for 5 percent of farm households.
In contrast, far fewer nonfarm households, including
self-employed households, had negative incomes.
Nonfarm households similarly lag
farm households and nonfarm self-employed households
when wealth distributions are compared. For example,
the median net worth of farm households ($457,000)
and of self-employed nonfarm households ($231,000)
exceeded that of other nonfarm households ($90,000).
However, the ranking of farm households and self-employed
nonfarm households switched, with farm household
net worth tending to exceed that of self-employed
nonfarm households for all points along the distribution
above the small number of farm households with negative
net worth.
In effect, farm households are
a diverse group. Although there are similarities
to nonfarm households, any comparison is sensitive
to whether income or wealth levels are used, as
well as whether we compare farm households to nonfarm
self-employed or the general population. As a result,
the relevance and performance of farm policies that
change the income and wealth distribution may be
rated differently depending on the group, and the
indicator, that is used for comparison purposes.
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