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1 1 (November 14, 2019)

handle is hein.crs/govbbpv0001 and id is 1 raw text is: -' .r~ ......... 10 gm 0 ILI Updated November 14, 2019 Introduction to U.S. Economy: Personal Income What is income? Income is a measure of resources accruing to an individual over a period of time. In general, individuals receive income from their labor, assets, and government transfers. In its broadest terms, income is a measure of the maximum amount of goods and services an individual can consume in a given period without diminishing their net worth (the difference between their assets and liabilities) at the end of the period. Income is considered a flow variable because it is measured over a period of time; in contrast, net worth, a stock variable, is measured at a given point in time. Measures ofin There are two prominent sources of data on personal income in the United States, the Bureau of Economic Analysis (BEA) and the Census Bureau. Although both agencies attempt to measure personal income, their definitions of income and how they collect data differ significantly. The BEA has a broader measure of income that includes both money income (e.g., wages and salary) and nonmoney income (in-kind benefits such as employer- sponsored health care, housing, or meals). BEA data are generally reported at the aggregate level (e.g., economy- wide, states, regions), but also offer limited information at the individual level. Additionally, BEA collects income figures from both federal agency administrative data and surveys. BEA also provides income data both before and after tax remittances. Income data from BEA are available at http://www.bea.gov/iTable/index-nipa.cfm. In contrast to BEA, the Census Bureau's measure of income includes only money income; nonmoney income is not included. The Census collects income data through surveys at the household level, but also reports the data at the individual and family level. Income is often reported at the household or family level because of the recognition that individuals within a household or family generally share resources and make economic decisions together. A household generally include all individuals that live at the same address, while a family includes all individuals living at the same address who are related to each other by birth, marriage, or adoption. The Census also offers data on the distribution of income and poverty levels. Additionally, income measures from the Census generally reflect pretax income. Income data from the Census Bureau are available at http://www.census.gov/topics/income-poverty/ income.html. Sources of income Income is derived from a wide array of sources, including salaries and wages, business income, rental income, investment income (interest, dividends, etc.), and government transfers from a number of programs. Different definitions include different sources of income; Table 1 breaks income down into categories according to the BEA definition. Table I. Sources of Personal Income: 2018 Percentage of Total Income Employee Compensation Wages and Salary Supplements to Wages and Salaries Business Income Rental Income Investment Income Government Transfers 61% 50% I11% 9% 4% 16% 17% Social Security Medicare Medicaid Unemployment Insurance Veterans' Benefits Other Source: CRS calculations using data from U.S. Department of Commerce, BEA, GDP and Personal Income, https://www.bea.gov/datal income-saving/personal-income. Note: Percentages may not add to 100% due to rounding. In general, the largest share of personal income is employee compensation-about 61% of all income in 2018-of which about 81% is wages and salaries and 19% is in-kind transfers to employees. Business income accounts for about 9% of income, rental income accounts for about 4%, and investment income accounts for about 16%, as shown in Table 1. Transfers from the government, in the form of both money income and in-kind benefits, accounted for about 17% of total income in 2018. About 31% of government transfers are from Social Security, 23% are from Medicare, 19% are from Medicaid, less than 1% are from unemployment insurance, 3% are in the form of veterans' benefits, and 16% are from other programs. Earnings, a subset of income, are often reported alongside income measures. Earnings generally only include income derived from labor. The BEA's measure of earnings includes wages and salaries, supplements to wages and salaries, and business income, about 70% of all personal income as shown in Table 1. However, the Census only includes wages and salaries, and self-employment/business income as earnings. 5% 4% 3% 1% 3% <1%

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