Whose Real Income? Whose Cost of Living? What Prices?

The rise in income inequality in the latter half of the eighteenth century was probably the second of two great widenings of intra-national income inequality in the early modern era, the earlier one coming between 1500 and the 1640s (or 1650).

To see the likelihood of these two great widenings, we need to start with differences in consumption styles and how they interacted with the remarkable swings in relative prices between 1500 and the 1820s.

The fact that the rich and the poor consume very different things means that movements in relative prices can affect them very differently. The same may be true of rich versus poor nations. Historians of the sixteenth through eighteenth centuries have misinterpreted differences in early modern living standards by overlooking the effects of income—class contrasts in lifestyles on real-income differences between regions and on inequality trends within nations.

A first step towards giving this point its due is taken in Table 6.2's overview of class differences in expenditure patterns. Note how much more familiar are the working-class contexts at the top of each panel than the middle- and upper-class contexts that follow In expenditure studies, as in studies of income and prices, scholars have fixed their attention on the working class and the poor. We are accustomed to historical household budgets that are spent mostly on food. Even as late as the eve of World War I, Britain's cost of living was still tracked by an index giving 60% weight to food, when food was actually just 27% of consumer expenditures (Bowley 1921: 67; Feinstein 1972: T61). The food share of working-class budgets has always exceeded the national average, which in turn exceeded food's share of consumption by the middle- and upper-income groups, who spend more on servants, clothing, and miscellaneous luxuries. That income-class contrast gave rise to Engel's law in the nineteenth century.⁶

Engel's law works over time and across nations as well.

The contrasts in what people consumed mean that any comparisons in real purchasing power depend on which prices are used. The choice matters greatly. The early modern world had greater spatial and temporal variations in relative prices than any seen in the twentieth century, at least until the two oil shocks of 1973 and later. Yet the received price history of the early modern era uses a biased set of prices, following a few series out of proportion to their shares of expenditures. Specifically, that history has these biases

Table 6.2 Selected household Percentage shares of total expenditure, 1500—1832

Panel B.

Workers and the poor

Notes and sources-. Here 0.0 is believed to be zero, and—implies the sum is either excluded or implicit in some other category. All estimates appear to exclude tax payments.

PanelA. England-Wales

The 1675—6 expenditures of Sarah Fell, widow of Swarthmore Hall, are based on the summary in Wetherill (1988: 128—36). We have adjusted Wetherill's summary of Fell's expenditures to exclude farm and livestock production, and to include the equivalent rental cost of occupied housing. The rental value of housing should have been more than she paid in rent, since she owned her main residence.

Rachael Pengelly of Finchley, 1694—9: We start again from Wetherill (1988: 123—8, 133), preferring the period of rapid turnover in the composition of Rachael's household up through 1699, instead of the period of apparently incomplete records (1700—9). We make the same adjustments as in Sarah Fell's case, but accept the sizeable rent payments as the full value of the occupied housing. Her annual household expenditures of £89 were more than twice the national average per family in 1688 (£39.18).

Gregory King's own household accounts for himself, wife, clerk, servant maid, and boy, London 1695, are from Laslett (1973: introduction and p. 250). Like Laslett, we trusted King's detail by person rather than his faulty addition to get totals. We added £24.51 rent, based on his London residence and Esquire status (Laslett 1973: 201, 246). We get a non-tax expenditure of £174.575 for him. We interpret the maid's pay as only her stated wage of £15, not this plus her £13.375 part of the household's itemised expenses.

The weights for the bottom 40%, middle-income, top 20%, top 10%, and top 5% income groups' average consumption patterns, start from Gregory King's notebooks, with extensions by R. Stone (1988). They have been modified further here, first by separating bread from other farinaceous, then by adding rents and servant pay, and by deducting an estimate of fuel and light expenditures from the all-other category. Then, the overall grains category was divided into 2/7 bread and 5/7 other grains, a division suggested by the Davies (1795) and Eden (1797) samples of 1787—96. This division applies to all indices shown in this table. The total expenditures used in the underlying estimates here are the King-Stone expenditure sums for each income class plus our separate estimate of rents and servant pay. These differ from the total expenditures in King's famous social table, with the Lindert-Williamson revisions, largely because King's expenditure detail differed from the total expenditures in his main table.

The domestic service expenditures in England-Wales in 1688 are estimated as described in the working paper version of this chapter, see Hoffman et al. (2000: Appendix A, Part C).

Following the established convention, all these consumer price index estimates exclude taxes and savings. The total for all food and drink includes expenditures not detailed here, especially for fruits and vegetables and spices.

Panel B. France

Urban artisan (and family), c. 1700 is from Morineau (1985: 236).

Rural worker 1763=colon aunisien 1763, from Morineau (1985: 214—7).

Urban worker, Abbeville, 1764, from Morineau (1985: 218—19). Since budget leaves family with a surplus but no expenditures for clothing, the present calculations assume that half of the surplus is saved and the rest spent on clothing.

Duc de Saulx-Tavanes 1788: The calculations, (i) add 12 times January 1784 expenditures for speciality foods to a 5000 livre annual budget for basic foods (Forster 1971: 121), and (ii) assume that basic food is broken down as for top 5% in England.

Rural noble 1410, (i)=Guillaume de Murol, noble in Auvergne, from Charbonnier (1980: Vol. 1, 128—33). The accounts give food expense only; the present calculation assumes a 35% total food expenditure share.

Rural noble 1410, (ii) is the same as with (i), but assuming 13.3% total food expenditure.

Paris bourgeois family shares are from Singer-Kerel (1961).

Panel C. The Netherlands

The total for food and drink includes expenditures for potatoes, peas, and other vegetables not listed separately.

The ‘other’ category includes soap and ‘other (industrial)’.

The source is van Zanden (2000).

Panel D. Other nations

The Antwerp mason's family-of-five expenditures are the Scholliers estimates cited in Abel (1973: 199). Clothingincludes miscellaneous (divers) expenditures. The total for food and drink includes dried beans, but no drink. Abel (1973: 342) also supplied the estimates for the Berlin mason's family of five, for which clothing again includes miscellaneous, and the total for food and drink includes 11.5% for other products of vegetable origin.

The source for the Palatinate is Phelps Brown and Hopkins (1959: 28) and that for 16th-century Spain is Hamilton (1934: 276).

The source for Milan 1801 is De Maddalena (1974: 253—4, 330).

There are two good reasons for our biased choices. One reason is that we care more about some categories in the first group, particularly life-sustaining staples and the traded goods over which nations went to war. The other reason is that the prices listed on the left are more available. The price series that are most available for constant product definitions over many decades are those for standardized staples in wholesale trade. Yet the more elusive prices listed on the right must get a larger share of our attention if our historical numbers are to reflect the realities of early modern inequality.

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