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1 1 (November 14, 2016)

handle is hein.crs/govearl0001 and id is 1 raw text is: Congressional Research Service Inforrming the legislative debate since 1914 November 14, 2016 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 as it is measured over a period of time, in comparison to net worth, a stock variable, which 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 which includes both money income (e.g., wages and salary) and non-money income (in-kind benefits such as employer- sponsored health care, housing, or meals). BEA data is generally reported at the aggregate level (e.g., economy- wide, states, regions), but also offers limited information at the individual level. Additionally, BEA collects income figures from both administrative data from federal agencies and surveys. BEA also provides income data both before and after remittance of taxes. Income data from BEA is 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, while non-money 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. The reason income is often reported at the household or family level is the recognition that individuals within a household or family generally share resources and make economic decisions together. Households 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 offers data on the distribution of income and poverty levels. Additionally, income measures from the Census generally reflect pre-tax income. Income data from the Census Bureau is 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 incomes; Table 1 breaks income down into categories according to the BEA definition. https://crsreport Table 1. Sources of Personal Income: 2015 Percent of Total Income Employee Compensation Wages and Salary Supplements to Wages and Salaries Business Income 58% 47% 11% 8% Rental Income Investment Income Government Transfers 14% 16% Social Security Medicare Medicaid Unemployment Insurance Veterans' Benefits 3% <1% 1% Other Source: CRS calculations using data from U.S. Department of Commerce, BEA, GDP and Personal Income, at http://www.bea.gov/ iTable/indexn ipa.cfm. Note: Percentages may not add to 100% due to rounding. In general, the largest share of personal income is employee compensation, about 58% of all income in 2015. Wages and salaries account for about 81% of employee compensation and 19% is in the form of in-kind transfers to employees. Business income accounts for about 8% of income, rental income accounts for about 4%, and investment income accounts for about 14% of income as shown in Table 1. Transfers from the government, in the form of both money income and in-kind benefits, accounted for about 16% of total income in 2015. Approximately one-third of government transfers are from Social Security, 24% is from Medicare, 21% is from Medicaid, less than 1% is from unemployment insurance, 3% is in the form of veterans' benefits, and 18% is 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 salary, supplements to wages and salaries, and business income, about 66% of all personal income as shown in Table 1. However, the Census only includes wages and salaries, and self-employment/business income as earnings. Measuring Income over Time Individual incomes have grown significantly over time in the United States. According to the BEA, real aggregate .congress.gov 4% 5% 4% 3%

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