Change of Standard of Expenditure
In all the tables so far given the index numbers are intended to measure the change in cost of an unchanged and unmodified standard, except that in Denmark there has been a slight change in the relative quantities of butter and other fatty substances. In a few countries, however, the actual change in expenditure (100∑qp÷∑QP in the notation described above, instead of 100∑Qp÷∑QP, the formula for unchanged standard), and in Amsterdam the index number, has also been calculated by using quantities currently bought instead of the original standard (100∑qp÷∑qP).
For the United Kingdom the Cost of Living Committee of 1918 (Cd.8980) compared the expenditure of a standard artisan family in 1914 and the summer of 1918, and found the increase to be 74% to June 1918 and 80% to Sept. 1918, when the increase on the standard budget was 100 and 110%; the difference was partly due to the methods of treating clothing; for food alone in June 1918 the increase in expenditure was 90% and in the cost of the standard budget 108%. The Ministry of Food also made a computation of the change in the cost of the average quantities of some principal foods consumed in the United Kingdom from time to time, yielding the comparison shown in Table XI:—
Table XI.
| Expenditure on Principal Foods[1] |
Index Number for Standard Budget | |
| July 1914 | 100 | 100 |
| Feb. 1918 | 144 | 208 |
| June 1918 | 181[2] | 208 |
| Sept. 1918 | 197 | 216 |
| March 1919 | 181 | 220 |
| Jan. 1920 | 215 | 236 |
The differences point to important modifications of diet under rationing and control of prices; the Cost of Living Committee found that the nutritive value had fallen very little.
In Switzerland an estimate was made by Dr. Jenny (Journal de Statistique et Revue économique suisse, 1918 fascicule i., pp. 76 seq.) of what he calls the “nominal” and the “effective” increase of cost. The nominal increase, viz. that of an unchanged standard of food, was 92% between 1912 and March 1917; the effective increase, viz. the increase of expenditure when allowance was made for the known or estimated diminution in the consumption of bread, meat and the increase in that of potatoes, was only 56.5%.
In Milan the cost of the food actually consumed has been estimated from time to time, and added to the cost of housing, fuel, clothing, etc., these being taken as an unchanged standard after July 1918. Some of the results are shown in Table XII.
Table XII.
Index Numbers Based on:
| Actual Expenditure |
Cost of pre-war Standard | |||||||||||||||||
|
100 | 100 | ||||||||||||||||
| 162 | — | |||||||||||||||||
| 205 | 286 | |||||||||||||||||
| 259 | 351 | |||||||||||||||||
| 265 | 280 | |||||||||||||||||
| 287 | 352 | |||||||||||||||||
| 376 | 441 | |||||||||||||||||
| 441 | 534 |
In Holland (Amsterdam) a more elaborate method is used, for not only has the expenditure been ascertained at frequent intervals (unfortunately of only a very small number of families) but it has been computed (see Table XIII) what the quantities actually bought would have cost at pre-war prices.
Table XIII.
Index Numbers.
| Actual expenditure on food, rent, clothing, etc., at selected dates |
Cost of actual quantities at pre-war prices |
Cost of pre-war budget at current prices | |||||||||||||||||||||||||||
|
100 | 100 | 100 | ||||||||||||||||||||||||||
| 113 | 128 | 132 | |||||||||||||||||||||||||||
| — | 138 | 142 | |||||||||||||||||||||||||||
| 120 | 146 | 165 | |||||||||||||||||||||||||||
| 135 | 166 | 183 | |||||||||||||||||||||||||||
| 128 | 161½ | 177 | |||||||||||||||||||||||||||
| 136 | 166 | 184 | |||||||||||||||||||||||||||
| 152 | 180 | 195 | |||||||||||||||||||||||||||
| 164 | 183 | 193 | |||||||||||||||||||||||||||
| 173 | 200 | 205 | |||||||||||||||||||||||||||
| 195 | 214 | 214 | |||||||||||||||||||||||||||
| 194 | 215 | 217 | |||||||||||||||||||||||||||
| — | 222 | 223 | |||||||||||||||||||||||||||
Table XIII may be thus explained. Expenditure in 1914 was 5.78 fl. (∑QP) weekly, in Dec. 1919 10.00 fl. (∑qp), an increase of 73% (first column). If the same quantities had been bought in 1919 as in 1914 they would have cost 11.85 fl. (∑Qp), an increase of 105% (third column); but if the 1919 quantities had been bought in 1914 they would have cost 5.00 fl. (∑qP), and the ratio of the actual cost to this is 2, which multiplied by 100 gives the number in the second column. Thus the third column gives the index number 100∑Qp÷∑QP, the usual type, and the second gives 100∑qp÷∑qP (where q is changed at each date). It is argued above that the true measure of the cost of living lies between the numbers in the second and third columns. It can be seen that considerable modifications of diet took place between 1914 and 1918-9, but that either they had been reversed or that their effect on cost was nil by 1920.[3]
(A similar computation of the budgets in 1914 and 1918 in the United Kingdom gives 100∑qp÷∑QP = 185, 100∑qp÷∑qP = 202 and 100∑Qp÷∑QP = 212, for food only, numbers corresponding in order to the three columns just discussed.)
In Sweden an elaborate investigation (involving about 600 household budgets each kept for three periods of four weeks) was made in 1916, 1917, 1918. Besides calculating actual expenditure (∑qp) and the cost of a standard budget (∑Qp) the food value in calories is computed (see Table XIV).
Table XIV.
Index Numbers.
| July | Actual expenditure on food |
Cost of pre-war budget at current prices |
Calories in food consumed |
Cost of 10,000 calories |
| 1914 | 100 | 100 | 100 | 100 |
| 1916 | 124 | 130 | 102 | 121 |
| 1917 | 155 | 173 | 90 | 172 |
| 1918 | 233 | 267 | 86 | 271 |
Expenditure thus increased less than the cost of a standard budget, but whereas in 1916 the nutritive value of the diet had increased, owing to some change from meat to cereals which afford more nourishment for the same price, in 1917 and 1918 the dietary was inferior owing to actual dearth and the cost of equal nourishment rose as rapidly as the food index number on the ordinary basis.
In Egypt it was estimated by its statistical department that the cost of living measured by the standard reached in March 1920 was for clerks 138% and for artisans 149% greater than that of the same standard in 1914 (∑qp : ∑qP). For food, fuel and soap only the increases for artisans and labourers on the same basis were to March, July, Aug., Sept., Oct., and Nov. 1920 respectively 180, 181, 180, 180, 185 and 193% in Cairo; in parts of Egypt there was a fall in Nov. 1920.
Reactions of Prices and Wages
Prior to the war there was in the United Kingdom no direct reaction of retail prices on wages, for wage rates were deter-
- ↑ The figures in this column are those stated in the Labour Gazette for two months later, but it is known that the computation was in arrear of the facts, at least at the earlier dates.
- ↑ 190 if all the foods of the standard budget were included.
- ↑ The double estimate is now given up and the index number is now computed on the standard of March 1920.
