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1 1 (December 29, 2022)

handle is hein.crs/govejzf0001 and id is 1 raw text is: Congressional Research Service hr rming Ih legislaive debate sice 1914 Introduction to U.S. Economy: Personal Income Updated December 29, 2022 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 measured over a period of time. In contrast, net worth is measured at a given point in time. Measures of Income 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 (e.g., employer-sponsored health care, housing, and 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. In contrast, the Census Bureau's measure of income includes only money income. The Census collects income data through surveys at the household level but also reports the data at the individual and family level because of the recognition that individuals within a household or family generally share resources and make economic decisions together. A household generally includes 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 provides data on the distribution of income and poverty levels. Additionally, income measures from the Census generally reflect pretax income. 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. In general, the largest share of personal income is employee compensation (59% of total income in 2021, as shown in Table 1), comprised of wages and salary (46%) and supplements to wages and salaries (i.e., employer paid benefits: 11%). Business, rental, and investment income collectively accounts for about 26% of total income. Transfers from the government, in the form of both money income and in-kind benefits, accounted for about 22% of total income in 2021. Table 1. Sources of Personal Income: 2021 Percentage of Total Income 59% Employee Compensation Wages and Salary Supplements to Wages and Salaries Business Income 48% 11% 8% Rental Income Investment Income Government Transfers 3% 15% 22% Social Security Medicare Medicaid Unemployment Insurance Veterans' Benefits Other 5% 4% 3% 2% 1% 6% Source: CRS calculations using data from BEA, GDP and Personal Income. Note: Percentages may not add to 100% due to rounding. Earnings, a subset of income, are often reported alongside income measures. Earnings generally include only income derived from labor. The BEA' s measure of earnings includes wages and salaries, supplements to wages and salaries, and business income, while the Census includes only wages and salaries, self-employment income, and business income as earnings. Measuring Income over Time Incomes have grown significantly over time in the United States, although the rate of growth varies depending on measurement used. According to the BEA, real (i.e., inflation-adjusted) average individual income grew from $8,705 to $64,100 from 1929 to 2021, which equates to about 2.2% per year growth on average, as shown in Figure 1. According to Census data, real median family income has grown from about $33,513 in 1953 (the earliest data available in this dataset) to about $88,590 in 2021, an increase of about 1.4% per year on average. (BEA increases in individual income in this period would be from $14,814 to $64,100, or about 2.2% a year.) Differences in income growth between Census and BEA figures are due to differences in the unit of analysis (i.e., households can have

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