Earlier this week I looked at Median Household Incomes. In this post, I will take a look at the different measures of Income.
The IRS publishes the Total Income filed on Individual Tax Returns every year in August for 2 years prior (In August of 2007, they released the info for 2005). The IRS shows income as it is realized (income received and capital gains realized). This method suffers from underreported income.
The Bureau of Labor Statistics reports the average wages for Production and Non-Supervisory Workers. This is reported monthly with data for the previous month.
Median and Mean Household income is reported annually by the U.S. Census Bureau for the previous year (in 2007 they released 2006 info). This is conducted by survey and according the Census Bureau “for many different reasons there is a tendency in household surveys for respondents to underreport their income.”
The Department of Commerce releases Personal Income statistics quarterly with a one month delay. This is part of their National Income and Product Accounts (NIPA) data. Personal Income differs from other measures as Personal income includes the following as income: imputed income, accruals, and other income that is not taxable. For example, NIPA imputes fringe beneifits as income (employee health insurance, contributions to employee pension plans, etc.). This federal reserve paper talks about this issue in more detail. Per the Paper, “the Economic Benefits Research Institute estimates that health care as a share of total compensation rose from 3.3 percent in 1975 to 8.5 percent in 2005.” Per this estimate, Personal Income grew by 5.2% from 1975 to 2005 from imputation of the value of health care benefits even though the recipient’s paychecks would not have increased.
The first component of the chart on the right shows the total income reported on Individual Tax Returns adjusted for inflation. Income has grown by 23.2% from 1972 to 2005. Income has not recovered from impact of the 2001 recession. The second component of the chart on the right is the Average Hourly Wages for Production and Non-Supervisory Workers. Amazingly, income is down 9.9% from 1972 to 2007. Hourly wages have increased slightly since the 2001 recession.
Looking at income by gender explains how Hourly wages have declined since 1972 and yet total income has increased during the same timeframe. The chart on the right shows the median incomes for Males and Females working Full Time. Male income has declined by 3.3% from 1973 to 2005 when adjusted for inflation. Female income has grown by 34.7% during the same timeframe.
Female compensation as a percentage of Male compensation has grown from 57.8% in 1967 to 78.8% in 2005. At the same time, more and more women have entered the workforce. In 1967, Females comprised 28.9% of the Full Time Workforce; this figure grew to 41.3% in 2005. Increases in Household income and Tax Return Income were achieved by the gains in female compensation and by the increase of women in the workforce.
The next chart show the disparity between the gains in Mean and Median Household Income and Tax Return Income and the gains in Personal Income (NIPA). As mentioned above, NIPA includes imputed income.
This last chart shows the disparity between the gains from 2000 to now. I have not been able to get a handle on the reasons for the large disparity between NIPA and the other measures of income. NIPA growth appears to be overstated. If NIPA growth is overstated, then GDP growth which is compiled from the same data and methods by the Department of Commerce would also be overstated. Interesting…
Thursday, March 13, 2008
A look at the Different Measures of Income
Labels: Personal Income
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