4? BULLETIN 874, U. S. DEPARTMENT OF AGRICULTURE, 
and the probable effect of this relationship on the possibility of farmers: 
acquiring ownership. or 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 1918, 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. Asaresult 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 54 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 
4 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 mcome 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 earnmg power, 
some may question the practice of deducting 5 per cent for the use of 
capital, including land value. 
For some years theré has been a tendency, not only in Iowa but in 
certain other farming regions of the United States, to capitalize 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. 
