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American Agriculturist, December 15, 1923 
How Much Money Do 
Farmers Make? 
H OW do you figure the profit or loss on 
your farm? What income does the 
average farmer make? What income should 
we expect to make on a farm in order to feel 
that we are farming successfully? 
Before we can answer the last two questions 
we need to agree upon a uniform way of figur¬ 
ing farmers’ profits or losses. In the past 
fifteen years the term labor income has come 
into general use as a means of expressing 
farmers’ profits. 
What is Labor Income? 
This is the way to compute your labor 
income. First, list all your farm sales for the 
year and add them together. This will include 
the sales of milk, eggs, crops, animals, etc. 
Suppose that your total sales for 1922 were 
$4,000.00. Now list all your farm expenses 
for the year. Include expenses for labor, 
fertilizer, feed, taxes, repairs on machinery, 
threshing, silo filling, and all other business 
expenses. Do not include personal expenses 
such as groceries, clothing and fuel. Suppose 
that these cash farm expenses amount to 
$2,500.00. Then the difference between the 
receipts and expenses is $4,000.00 minus 
$2,509.00 or $1,500.00. This may be called 
the farm income. 
This $1,500.00 income has been earned 
by two things, the labor of the farmer and his 
family and the farmer’s capital. Every farmer 
is a combination of capitalist and laborer. The 
average New York State farmer has a capital 
investment of nearly $10,000.00. If your 
property was worth $10,000.00 then this 
capital alone without any help from you should 
earn 6 per cent, interest or $600.00 of the 
$1,500.00 farm income. Subtracting this 
$600.00 from>$1,500.00, the remaining $900.00 
was earned by the labor which you did and the 
labor of your family on the farm. 
How Labor Income is Figured 
Average farm capital. $10,000.00 
Total receipts for year. 4,000.00 
Total expenses for year. 2,500.00 
Difference between receipts and expenses or 
farm income. 
Interest on capital at 6 per cent. 
Subtracting interest from farm income gives 
income received for your labor and any 
farm work done by members of your family 
Estimated value of farm work done by mem¬ 
bers of family. 150.00 
Labor income of farmer alone. $ 750.00 
1,500.00 
600.00 
900.00 
This explanation covers just the high spots 
of the method of figuring labor income. Many 
other adjustments must be made. The capital 
should be figured for the beginning and the 
end of the year. A gain in capital is treated 
as a receipt. A loss in capital is treated as an 
expense. 
If the farmer has family labor which helps 
with the farm work but does not receive regular 
wages the value of this labor is estimated and 
subtracted in order to get the labor income of 
the farmer alone. 
In this method of figuring, no attempt is 
made to place a value on the living which a 
farrtier obtains from the farm. In addition to 
labor income the farmer receives house rent, 
milk, eggs; vegetables, and various other 
things from the farm. There is no easy way of 
making a comparison between labor income of 
farmers and city incomes. In order to make 
such a comparison one must know which city 
is being compared; what occupation in that 
city the particular farmer would follow, the 
size of the farmer’s family and various other 
factors. Labor income is chiefly used to make 
comparisons between the incomes of farmers, 
in order to find out how successful is the 
farmer’s business and why some farm businesses 
pay better than others. 
How Large a Labor Income Does the 
Average Farmer Make? 
The State College of Agriculture at Cornell 
has financial records on about 8,000 farms. 
Before the war the average New York State 
farmer made from $400.00 to $600.00 labor 
income varying somewhat with different 
regions of the State. 
In 1907 the farmers in several townships of 
Tompkins County made an average labor 
income of $423.00. In 1909 the farmers of 
several townships in Livingston County 
averaged $666.00. In 1910 the farmers of 
several townships in Jefferson County averaged 
$609.00. In the very severe depression follow¬ 
ing the war farmers in many cases made a 
minus labor income or failed to make interest 
and received nothing for their labor. 
In one of the best dairy sections of Chenango 
County the farmers in 1921 made a labor 
income of-—$178.00. If you consider that their 
capital should have earned 6 per cent, then 
these farmers worked the whole year for 
nothing and lacked $178.00 of making interest 
on their capital. 
Fortunately the prices of New York State 
(Continued on page 417) 
