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1 1 (November 30, 2020)

handle is hein.crs/govdcqz0001 and id is 1 raw text is: \ Q Introduction to U.S. Economy: PersonalIncome WhA1t isN kncome? Income is a measure ofresources accruing to an individual over a period of time. In general, individuals receive income from their labor, as sets, and government transfers. In its broadest terms, income is a measure of the maximum amount of goods and services an individualcan consume in a given period without diminishing theirnet worth (the difference between their as sets and liabilities) at the end of the period. Income is measured over aperiod of time. In contrast, net worth is measured at a given point in time. Me~asLures oft kncome 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 personalincome, their definitions of income and how they collectdatadiffer significantly. The BEA has a broader measure of income that includes both money income (e.g., wages and salary) and nonmoneyincome (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 fromboth federal agency administrative data and surveys. BEA also provides income data bothbefore and aftertaxremittances. 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 ahousehold or family generally share resources and make economic decisions together. A household generally includes all individuals that live at the s ame 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 ofincome and poverty levels. Additionally, income measures fromthe Census generally reflect pretaxincome. Income is derived froma wide array of sources, including salaries and wages, business income, rentalincome, investment income (interest, dividends, etc.), and government transfers froma number ofprograms. 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-about 62% of all income in 2019-of which about 81% is wages and salaries and 19% is in-kind transfers to employees. Business income accounts for about 9% ofincome,rentalincome accounts for about4%,and investment income accounts for about 16%, as shown in Table 1. Transfers fromthe government, in the formof both moneyincome and in-kind benefits, accounted for about 17% oftotalincome in 2019. About 33% of government transfers are fromSocial Security, 25% are from Medicare, 20% are from Medicaid, les s than 1% are from unemployment insurance, 4% are in the form of veterans' benefits, and 16% are from otherprograms. Table I. Sources of Personal Income: 201 9 Percentage of Total Income 62% Employee Compensation Wages and Salary Supplements to Wages and Salaries Business Income Rental Income Investment Income Government Transfers 50% 11% 9% 4% 16% 17% 6% 4% 3% <1% Social Security Medicare Medicaid Unemployment Insurance Veterans' Benefits 1% 3% Other Source: CRS calculations using datafrom 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 fromlabor. The BEA's measure ofearnings includes wages and salaries, supplements to wages and s alaries, and business income-about 71% of all personal income, as shown in Table 1. However, the Census includes only wages and salaries, self-employment income, and busimess income as earnings. M~leasuring en* m cnter Tim Individual incomes have grown significantly over time in the United States. According to the BEA, real aggregate personal income has increased in inflation-adjusted dollars from about $990billion in 1929 to about $18.3 trillion in 2019, an increase of about 3.3% per year on average. However, average individual income, which accounts for population growth, grew by about 2.2% per year on average over the s ame period, as shown in Figure 1. Updated November 30,2020

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