42 BULLETIN 874, U. S. DEPARTMENT OF AGRICULTURE. 



and the probable effect of this relationship on the possibility of farmers 

 acquiring ownersjiip- For the relative increase in farms operated by 

 owners is an immediate, but not necessarily an ultimate, result of 

 the ''boom" and the accompanying increase in land values. 



By every method of analysis employed it is shown that relative to 

 farm earnings, even under the favorable conditions of 191S r the 

 increase of land values was excessive. In the Tama district, where 

 both good prices and excellent crops combined to produce unusually 

 high farm earnings, farm income of all farms increased 65 per cent 

 from 1913 to 1918, while land values increased 82 per cent to August, 

 1919. As a result of high prices for farm products farm labor incomes 

 were relatively higher in 1918 than in 1913, even if allowance be 

 made for the change in the purchasing power of the dollar, whether 

 the calculation be made by charging 5 per cent or 5 J per cent for use 

 of the capital. However, when farm labor incomes are calculated on 

 the basis of 1919 land values, a marked change occurs. When capital 

 is charged 5 per cent, the payment for the farmer's labor, enterprise, 

 and risk declines from $306 in 1913 to $222 in 1919. On the basis of a 

 5 h per cent charge for capital, the average farm labor income for 1919 

 in the Tama district is $213 less than nothing. When allowance is 

 made for the decline in purchasing power of the dollar, the decline in 

 labor incomes is further intensified. 



Thus it appears that high prices of the war period increased farm 

 labor incomes in considerably greater proportion than the decline in 

 the purchasing power of the dollar, but the advance in land values 

 more than absorbed all the gain, forcing labor incomes, even measured 

 in dollars, far below what they were in 1913. Furthermore, the 

 result of increased land values is to increase the percentage of farmers 

 making minus labor incomes from 15.6 on the basis of land values in 

 1918 to 42.2 on the basis of land values in August, 1919. 



If these are the results under the favorable conditions of good 

 crops and high prices, what may be anticipated when the crops are 

 poor and prices lower? The effect of poor crops is shown by the 

 statistics of income for the Warren district, but the effect of a general 

 fall in the level of prices will be far more serious, for it will not apply 

 merely to an occasional year: 



While the 'comparison of labor incomes for the several periods serves 

 to show that land values increased more rapidly than earning power, 

 some may question the practice of deducting 5 per cent for the use of 

 capital, including land value. 



For some years there has been a tendency, not only in Iowa but in 

 certain other farming regions of the United States, to cai3italize land 

 at a lower rate than 5 per cent — that is, to value it so high that it will 

 not yield, over a period of years either to owner operator or to 

 landlord, as much as 5 per cent on the value. 



