Fighting Inflation, Urban and Rural Strategies

Sheila Fitzgerald Krein
Extension Specialist- Family Economics
Department of Family and Consumer Economics, Cooperative Extension Service,
University of Illinois-Urbana

Kathyrn D. Rettig
Assistant Professor,
Department of Family and Consumer Economics,
School of Human Resources and Family Studies,
University of Illinois-Urbana.

High levels of inflation and unemployment in the last decade have created severe demands on families' resources. Within this changing economic climate, families have adopted certain strategies to help them manage their resources.¹ Gross, Crandall, and Knoll have identified four general categories of resource management strategies: (1) increase supply of resources, (2) convert or create resources, (3) change the amount of resources used, and (4) make use of alternative resources.²

One of the goals of Extension educators is to help families improve their resource management by providing them with necessary tools and skills. However, Extension educators need to know what adjustment strategies people in various target audiences are already using to maintain effective resource management programs. This study investigated management strategies being used by Illinois families in response to rising prices and determined whether these strategies and their implementation differed among metropolitan, urban, and rural families.³

Methodology

The Paxton area (population 6,000), Springfield (population 99,600), and the city of Chicago (population 3,005,100) were selected as the rural, urban, and metropolitan sampling areas, respectively. Families were selected randomly from telephone directories and were eligible to participate in the survey if they'd been husband-wife households with at least 1 of the 2 employed from 1978 to 1980. Telephone interviews were conducted with wives from December, 1980, through May, 1981. The sample included 201 representative respondents from the Paxton area, 200 from Springfield, and 201 from Chicago for a total of 602 respondents.

Chi-square statistical analyses were used to determine if specific management strategies were independent of area of residence.

Findings

Nearly three-fourths of the families in this study believed their incomes weren't keeping up with increased prices of good and services. This view was most pronounced in rural families where 79% indicated their incomes weren't keeping up, compared to 73% of metropolitan families and 65% of urban families.

Families reported using all four general resource management strategies. Some differences and similarities were evident among metropolitan, urban, and rural families.

Increase Supply of Resources

A major way to increase resources is to increase money income. Many families in this study increased money income by having two or more earners. The national labor force participation rate for married women at the time of this study was 51%⁴, while the rate for this sample was 57%. Metropolitan and urban wives had higher participation rates than rural wives (59%, 60%, and 53%, respectively).

Another method of increasing money income is to work overtime (which may not result in higher incomes for farmers or salaried workers). Husbands in this sample worked an average of 42.6 hours per week during a time when the national average was 35.7⁵. Metropolitan, urban, and rural husbands worked an average of 41.1, 43.9, and 42.7 hours per week, respectively.

Convert or Create Resources

Resources can be created by producing goods an vices at home. Metropolitan and rural families were more likely to use home production of goods and services as a way of coping with inflation (Table 1). Respondents were asked if they did more of something now (1980) than they did 2 years ago (1978). Some famiIies may have already increased home production before 1978 in response to rising prices. Nearly three-fifths of all families did more of their own car repairs. Metropolitan families were more likely to do more of their own home repairs and to cook at home more. Rural families were more likely to increase home production of clothing.

Change Amount of Resources used

Most families reduced expenditures in response to rising prices; yet fewer urban families reported using this strategy. Metropolitan families were more likely to cut back on clothing and to run their air conditioners less, whereas rural families reported driving less.

Families use capital investments to increase long-term efficiency in resource use. Families in this sample reported making the same kinds of capital investments regardless of residential location. About one-third of all families bought a more fuel efficient car and about one-half retrofitted homes to conserve energy.

Comprehensive planning can also help families better allocate available resources for current as well as future needs. Nearly 70% of families surveyed tried to use a budget; however, 40% reported having to use savings to pay bills. Planning for shopping was common; over 90% read supermarket ads, compared prices, and bought items on sale. Rural families were more likely to use coupons.

One in six metropolitan families reported difficulties in making credit payments and also were more likely to reduce their use of credit. Rural families were most likely to pay their bills in full and to report changes in plans due to rising prices.

Make Use of Alternative Resources

Families can substitute less expensive goods and services for more costly ones or accept reduced service. Again, family-coping strategies varied with area of residence. Rural families were less able than urban or metropolitan families to substitute self-service for full-service gasoline stations or public for private transportation. Rural families also made more use of no-frills stores and house or generic brands. Metropolitan families were more likely to find substitutes for expensive restaurants and vacations.

Implications for Extension

A variety of strategies were used to manage changing economic conditions. Similar management strategies are used by metropolitan, urban, and rural families. Yet differences exist in how these strategies are carried out. Extension agents need to identify applications of these strategies that are best suited to their communities.

Some strategies such as increasing money income and home production place an additional strain on a family's time and human energy resources. Time and money resources are interdependent- if the wife works outside the home, she'll increase after-tax money income, but will have less time for home production that yields non-money income. Extension agents can help families analyze the trade-offs between market work and home production for all family members. Everyone needs to be aware of both shortand long-range economic consequences of labor market decisions. 4-H can help prepare youth in making schooling and training decisions appropriate to their career and lifestyle plans.

Extension agents also need to help families identify alternative resources to use. For example, families didn't report renting (rather than owning) seldom-used equipment nor did they mention bartering, cooperatives, and exchanges. Agents and volunteers can help areas organize resource networks for these alternatives. These alternatives to buying may be an especially appropriate resource management strategy for 4-H groups, the unemployed, and older audiences who typically have more time than money. These alternatives encourage an active and useful lifestyle, tap wasted talents and resources, and build friendships and
trust.

These findings have implications for program delivery. Agents need to consider scheduling more activities at night or over the lunch hour to reach working families. In urban and metropolitan areas, where nearly three out of five wives work, home study and correspondence courses could enable clientele to stay at home and still participate in programs.

These results may also be useful as a program planning tool because they indicate what families are and aren't doing in managing their resources. Agents could generate situational statements for use with program planning committees or use this study as a stepping stone for a needs assessment in their counties.

It's important to keep in mind that the families in this study comprised a more stable portion of the population. Both spouses were present and had experienced no unemployment in 1978-81. Some of these families still had difficulty making credit payments and used savings to pay bills. Single-parent families, unemployed families, and families with minimal savings will have an even greater need for help in managing their time and money resources.

Footnotes

1. David Caplovitz, Making Ends Meet: How Families Cope with Inflation and Recession (Beverly Hills, California: Sage Publications, 1979); Jeanne M. Hogarth, Sheila Fitzgerald Krein, and Kathryn D. Rettig, "Inflation in Illinois: How Families Cope," Family and Consumption Economics Paper 116 (Urbana: University of Illinois, Cooperative Extension Service, 1982); and Daniel Yankelovich and Bernard Lefkowitz, "American Ambivalence and the Psychology of Growth," National Forum (Summer, 1982), pp. 12-15.
2. Irma Gross, Elizabeth Crandall, and Marjorie Knoll, Management for Modem Families (Englewood Cliffs, New Jersey: Prentice Hall, 1980).
3. Veree K. Ethridge, "How Inflation Affects Families"(Urbana: Illinois Agricultural Experiment Station, 1980).
4. U.S., Department of Labor, Bureau of Labor Statistics, Employment and Earnings (Washington, D.C.: U.S. Government Printing Office, 1981).
   
5. Ibid.