A Look at the Economic Well-Being of Farm Households
Hisham
El-Osta
![Photo: Farmhouse on lake](https://webarchive.library.unt.edu/eot2008/20090117222548im_/http://www.ers.usda.gov/AmberWaves/June08/Findings/Photos/findings_ff1.jpg)
Average farm household income has
consistently exceeded that of all U.S. households
for more than a decade. Nonetheless, nearly 12 percent
of farm households were classified as poor in 2004,
based on the official U.S. definition of poverty,
only slightly less than the 12.6 percent of nonfarm
households considered poor in 2004. However, the
income measure used to determine how “poor”
a household is may not capture variations in economic
well-being among farm households as well as it does
among nonfarm households. In particular, a broader
definition of well-being may better account for
annual variation in farm income and the potential
stabilizing effect from the sizeable farm assets
held by many farm households.
Using data from USDA’s 2004
Agricultural Resource Management Survey, ERS researchers
developed a comprehensive measure of economic well-being
that combines pre-tax income with an estimate of
the potential income stream provided by a farm household’s
marketable wealth (i.e., that portion of a household’s
assets that can be easily converted to cash if necessary).
When adjusted for family size, this composite measure
recognizes the role that accumulated wealth can
play in helping households cope with temporary swings
in household income—a phenomenon particularly
common among farm households (see “Income
an Incomplete Measure of Farm Household Well-Being,”
June 2007 issue of Amber Waves). Nearly
22 percent of farm households are classified as
“lower income and lower wealth” based
on composite income levels of less than half of
the farm household median.
ERS examined the characteristics
of these lower income and lower wealth farm households
to determine what differentiates them from their
“higher income and higher wealth” counterparts.
For many farm households, participation in government
farm programs and in off-farm work represents viable
strategies to mitigate the impact on household economic
well-being of agricultural risks resulting from
variations in market prices, pest infestations,
weather, and other factors. Participation in farm
programs and/or in off-farm work reduces the likelihood
of a farm household being categorized as lower income
and lower wealth based on ERS’s composite
measure of household economic well-being. Less than
half of farm households receive farm program payments
in any given year. On average, most farm household
income derives from working off the farm.
ERS also examined whether other
factors affected the economic well-being of farm
households. Findings indicate that the likelihood
of the household being lower income and lower wealth
is reduced when the farm operator has more education,
is White, is married with no children, or is age
45 or older. The importance of education was more
pronounced for farm households located in metro
areas than in nonmetro areas.
![Chart: Education and metro farm location reduce the likelihood of a farm operator household being "lower income and lower wealth"](https://webarchive.library.unt.edu/eot2008/20090117222548im_/http://www.ers.usda.gov/AmberWaves/June08/Findings/Charts/Findings4_fig01.gif)
This
finding is drawn from . . . |
“Determinants
of Poverty Among U.S. Farm Households,”
by Hisham El-Osta and Mitchell Morehart, in
Journal of Agricultural and Applied Economics.
40, 1 (April 2008): 1-20. |
|