9

The Brookings study also shows that most of the saving is done by families and individuals in the high-income levels. Table 23 reveals that 16.2 million families (59 percent of the families) with incomes up to $2,000, saved about $250,000,000; 8.9 million families (32 percent), with incomes from $2,000 to $5,000, saved approximately 3.8 billion dollars; 2 million families (7 percent), with incomes from $5,000 to $20,000, saved approximately 4.5 billion dollars; and the 219,000 families with incomes over $20,000 saved more than 8 billion dollars.

TABLE 23.-Aggregate savings of families, by income groups, 1929

1 Includes families which suffered losses in excess of current income. "These people are not those who are usually at the bottom of the scale; they would normally be found scattered through the various income groups." (p. 93.)

Source: M. Leven, H. G. Moulton, and Clark Warburton, America's Capacity to Consume, Brookings Institution. Washington, 1934, p. 93.

The study also shows that 2.3 percent of all families-those with incomes over $10,000-contributed two-thirds of the entire savings of all families, while the 59 percent earning less than $2,000 contributed only 1.6 percent of total savings. Approximately 60,000 families with incomes over $50,000 per year saved almost as much as the 25 million families (91 percent of the total) who had incomes under $5,000.

Table 24 shows the amount and percentage of income saved for farm and nonfarm families, by income groups. In both groups an increasing percentage is saved at each successive income level. Although on the whole farm families saved more than nonfarm families in the same groups, farm families, which represented 21 percent of the total number of families, contributed less than 10 percent of the total monetary savings.10

Leven and associates, op. cit., pp. 92-93. This also was a study based on sample data, but the sample was smaller than in the National Resources Committee report. The Brookings study defines savings to include all life and health insurance premiums, all income used in purchasing securities, homes, and real estate, and all increases in bank deposits.

10 Ibid., p. 94.

TABLE 24.-Savings of farm and nonfarm families, 1929

Source: M. Leven, H. G. Moulton, and Clark Warburton, America's Capacity to Consume, Brookings Institution, Washington, 1934, p. 95.

Concentration of savings in the high-income levels is strikingly shown in table 25, which divides the population as a whole into 10 equal numerical groups, each of which contains 2.75 million families. The upper 10 percent of the families, including those with incomes above $4,600, accounted for about 86 percent of the total saving. The second group, with incomes from $3,100 to $4,600, saved 12 percent of the total, while the 80 percent of the population with the lowest incomes saved the remaining 2 percent of the total.11

TABLE 25.-Aggregate savings of families, by income groups, 1929
[Aggregates are in billions of dollars]

! Each income class consists of 2.75 million families.

2 The class under $600 has been broken into 2 parts to show the families with negative incomes separately. Such families number 120,000 of the 2.75 million families with incomes under $600. 3 Negative income.

Source: M. Leven, H. G. Moulton, and Clark Warburton, America's Capacity to Consume, Brooking Institution, Washington, 1934, p. 96.

11 Ibid., p. 95. Mordecai Ezekiel has estimated annual savings of income taxpayers for the years 1918-35, in "Annual Estimate of Savings by Individuals," Review of Economic Statistics, vol. 19. 1937, pp. 178-191.

A study of the savings of wage earners and clerical workers in 42 cities of the United States shows again what a comparatively small amount of saving is done by the low-income groups.12 The average income of the families studied was $1,524, and the average savings, $11. Those with incomes of from $500 to $600 had an average deficit of $80, and not until the income level $1,500 to $1,800 was reached was there a positive saving, which averaged $19. Families in the highest income level studied, $3,000 and over, had an average positive saving of $231. Institutional Processes of Saving.

Further indication of the concentration of ownership of savings in the United States can be obtained by studying the available information on the processes of saving. D. H. Davenport testified before the T. N. E. C. in 1938 that the total savings of individuals which had accumulated in various formal savings institutions were approximately $70,000,000,000. About $60,000,000,000 of this sum was accumulated by four processes: Savings through life insurance companies, time deposits and savings accounts of commercial banks, deposits in mutual savings banks and in building and loan associations. The remainder was accounted for by governmental pensions and trust funds (including social security payments), by postal savings, and by baby bonds. The individuals who comprised this thrift group had 44,000,000 savings accounts and 124,000,000 life insurance policies. Over 6,000,000 of them owned shares in building and loan associations.13 Nevertheless, the unknown amount of duplication involved means that the actual owners of savings are probably much fewer than the figures indicate.

Life insurance. The most important of these institutional processes of saving is life insurance. The largest reservoir of accumulated savings is held by life insurance companies.14 At the present time approximately 366 legal reserve life insurance companies own assets in excess of $28,000,000,000 15 and have an annual income totaling over $5,000,000,000, "an amount slightly less than the receipts of the United States Government and equal to about 8 percent of our national income in 1938." 16 Over 64,000,000 policyholders owning 124,000,000 different policies valued at approximately $111,000,000,000 contribute to the annual premium income of these companies.17

In spite of lack of information on the holdings of insurance policies by individuals at various income levels and on the distribution of insurance policies by size of policy, it is clear that the ownership of policies as well as the benefits received from life insurance are unevenly distributed among the policyholders.

Life insurance may be sold to individuals in the form of "ordinary" or "industrial" policies, or it may be sold to a group of persons,

12 Savings in this study represented net_changes in the differences between assets and liabilities, that is, changes in net worth. Faith M. Williams, and Alice H. Hanson, "Savings of Wage Earners and Clerical Workers," Monthly Labor Review, July 1940, pp. 119-139.

13 Hearings before the Temporary National Economic Committee, part 9, Savings and Investment, pp. 3734-3736, 3773, 4052. 14 In 1938, almost half the total assets of formal savings institutions were owned by life insurance companies. See Statistical Abstract of the United States, 1939, pp. 254, 264,

269, and 293.

15 Legal reserve life insurance companies have written about 95 percent of all life insurance in force in the United States. The remaining 5 percent is written by fraternal orders and assessment associations. See Temporary National Economic Committee Monograph No. 28. Study of Legal Reserve Life Insurance Companies, p. 5.

16 Ibid., p. 6.

17 See ibid., p. 5.

There is no indication, however, of the location of these 64,000,000 policyholders, either as to income level or family interrelationship.

customarily employees of a single employer. Ordinary policies are usually issued in units of $1,000 or more, and industrial policies, which are primarily for persons in the low-income brackets, are for smaller face amounts. At the end of 1938, of the 124,000,000 policies outstanding, approximately 88,000,000 were industrial policies held by some 50,000,000 people. These policies represented $21,000,000,000 of insurance in force. Ordinary policies, including group policies, on the other hand, numbered 36,000,000 and were valued at $90.000,000,000.18

There is no estimate available of the number of people holding ordinary policies. However, some of the holders of industrial policies also own ordinary policies. Hence, the number of people owning ordinary life insurance is probably greater than the 14,000,000 derived by subtracting 50,000,000 industrial policyholders from the estimated total of 64,000,000. Even allowing for such duplications, over 80 percent of the total insurance in force is held in units of $1,000 and over by a relatively small proportion of the individuals owning insurance policies.19 On the other hand, the holders of industrial insurance policies, who constitute the large majority of the number of individuals insured, own less than 20 percent of the amount of insurance in force.

Although insurance policies are probably not used extensively by the extremely wealthy as a means of saving, since they have outlets which yield more profitable returns, the moderately wealthy undoubtedly own considerably more insurance than do the people in the lowincome levels. This is true both because they carry larger policies and because many of them own more than one policy.

The Prudential Life Insurance Co. studied a sample group of deceased policyholders (2,499 married men and 215 single men) who had held insurance in the Prudential and other companies in amounts ranging in the aggregate from $5,000 to $40,000 per individual. These data are classified in table 26, according to the approximate annual income of the policyholder prior to death.

TABLE 26.-Amount of insurance carried by a selected group of policyholders classified according to approximate annual income prior to death

Source: Mary Dublin, The Amount of Life Insurance in the United States, Miscellaneous Contributions on the Costs of Medical Care, No. 11, 1932.

18 Statistical Abstract of the United States, 1939, p. 293, and Temporary National Economic Committee Monograph No. 28, pp. 177-178, 250-253.

19 In fact, it has been estimated that the great bulk of the cash-surrender value of all outstanding life insurance policies is held by 1 or 2 million policyholders." (Testimony of R. H. Jackson in hearings before the Senate Finance Committee on the Revenue Act of 1935, 74th Cong., 1st sess., 1935, p. 180.)

Only 8.3 percent of these individuals were in the under $1,500 income level, and they carried only 5.8 percent of the amount of insurance carried by the group. Although the largest number of individuals in the group were in the $2,500-$3,500 income level, 11.2 percent were in the class receiving over $10,000, and carried 17.4 percent of the insurance of the group.

Other institutional processes of saving.-In 1930, according to D. H. Davenport, total savings deposits in the mutual savings banks and in savings departments of commercial banks amounted to $29,000,000,000, but no one knows how many million people contributed to this fund. The report of the Comptroller of the Currency gives the number of depositors for that year as 52,000,000, but there were many duplications where depositors had more than one account. Davenport said that, "In general, the very wealthy did not make extensive use of savings deposits. Wealthy people had other opportunities for investment and were not satisfied by the small interest rates paid on savings accounts.' The number of deposits, he said, indicated that savings accounts are primarily used by the middle class.20

However, some idea of the extent of concentration in the ownership of savings and time deposits can be gained from a study of insured deposits made by the Federal Deposit Insurance Corporation for 1938.21 The analysis was based on the distribution of deposits by size of account, and no survey was made of the number of depositors actually owning accounts. The degree of concentration in ownership is probably understated, therefore, to the extent that individuals with large amounts to deposit own more than one account.2

22

In September 1938, 90 percent of the deposits in insured mutual savings banks were covered by the $5,000 maximum coverage of the present law. This does not mean that 90 percent of the total deposits were in accounts of less than $5,000, since the first $5,000 is covered for all accounts; but it does show that most of the accounts in insured mutual savings banks were under $5,000.23 Information is not available, unfortunately, as to the size distribution of accounts under $5,000. An analysis of savings and time deposits made in insured commercial banks reveals that in September 1938, 98.9 percent of the savings accounts-those under $5,000-held 71.4 percent of the deposits. Accounts over $25,000 represented one-tenth of 1 percent of the number of accounts, but 8.1 percent of the deposits.24

A much greater concentration of ownership is seen in the demand deposits of commercial banks, although this is undoubtedly due to the great preponderance of business accounts. Nevertheless, there are some individual accounts which are very large. For example, accounts of individuals with balances over $100,000, as reported by the 98 largest member banks of the Federal Reserve System, amounted to $280,000,000 on December 31, 1933, and $430,000,000 on December 31, 1935.25

20 Ibid., Part 9, pp. 3771-3772. Information as to the concentration of assets in geographic areas and in certain large banks is given on pp. 3758-3765. 21 F. D. I. C., Annual Report, 1938, pp. 79-100.

A sample study conducted by the F. D. I. C. showed that the number of depositors in a bank was about 10 percent less than the number of accounts, but this fact gives no indication of the number of depositors who have accounts in different banks. Information from the F. D. I. C.

23 Ninety-eight percent of total deposits would be insured if there were a maximum coverage of $10,000, and 99 percent with a maximum coverage of $25,000. F. D. I. C., Annual Report, 1938, p. 99.

24 Unpublished data released by the Federal Deposit Insurance Corporation.

25 Haskel Wald, "Deposits by Classes of Depositors, 1937," Federal Reserve Bulletin, May 1940, p. 402.