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Updated November 30, 2020
Introduction to U.S. Economy: Personal Income
What Is Income?
9% of income, rental income accounts for about 4%, and
Income is a measure of resources accruing to an individual
investment income accounts for about 16%, as shown in
over a period of time. In general, individuals receive
Table 1. Transfers from the government, in the form of
income from their labor, assets, and government transfers.
both money income and in-kind benefits, accounted for
In its broadest terms, income is a measure of the maximum
about 17% of total income in 2019. About 33% of
amount of goods and services an individual can consume in
government transfers are from Social Security, 25% are
a given period without diminishing their net worth (the
from Medicare, 20% are from Medicaid, less than 1% are
difference between their assets and liabilities) at the end of
from unemployment insurance, 4% are in the form of
the period. Income is measured over a period of time. In
veterans’ benefits, and 16% are from other programs.
contrast, net worth is measured at a given point in time.
Table 1. Sources of Personal Income: 2019
Measures of Income
There are two prominent sources of data on personal
Percentage of Total Income
income in the United States: the Bureau of Economic
Employee Compensation
62%
Analysis (BEA) and the Census Bureau. Although both
agencies attempt to measure personal income, their
Wages and Salary
50%
definitions of income and how they collect data differ
Supplements to Wages and Salaries
11%
significantly. The BEA has a broader measure of income
that includes both money income (e.g., wages and salary)
Business Income
9%
and nonmoney income (in-kind benefits such as employer-
Rental Income
4%
sponsored health care, housing, or meals). BEA data are
generally reported at the aggregate level (e.g., economy-
Investment Income
16%
wide, states, regions) but also offer limited information at
the individual level. Additionally, BEA collects income
Government Transfers
17%
figures from both federal agency administrative data and
Social Security
6%
surveys. BEA also provides income data both before and
after tax remittances.
Medicare
4%
Medicaid
3%
In contrast, the Census Bureau’s measure of income
includes only money income. The Census collects income
Unemployment Insurance
<1%
data through surveys at the household level but also reports
Veterans’ Benefits
1%
the data at the individual and family level because of the
recognition that individuals within a household or family
Other
3%
generally share resources and make economic decisions
Source: CRS calculations using data from BEA, GDP and Personal
together. A household generally includes all individuals that
Income.
live at the same address, while a family includes all
Note: Percentages may not add to 100% due to rounding.
individuals living at the same address who are related to
each other by birth, marriage, or adoption. The Census also
Earnings, a subset of income, are often reported alongside
provides data on the distribution of income and poverty
income measures. Earnings generally include only income
levels. Additionally, income measures from the Census
derived from labor. The BEA’s measure of earnings
generally reflect pretax income.
includes wages and salaries, supplements to wages and
Sources of Income
salaries, and business income—about 71% of all personal
income, as shown in Table 1. However, the Census
Income is derived from a wide array of sources, including
includes only wages and salaries, self-employment income,
salaries and wages, business income, rental income,
and business income as earnings.
investment income (interest, dividends, etc.), and
government transfers from a number of programs. Different
Measuring Income over Time
definitions include different sources of income. Table 1
Individual incomes have grown significantly over time in
breaks income down into categories according to the BEA
the United States. According to the BEA, real aggregate
definition.
personal income has increased in inflation-adjusted dollars
from about $990 billion in 1929 to about $18.3 trillion in
In general, the largest share of personal income is employee
2019, an increase of about 3.3% per year on average.
compensation—about 62% of all income in 2019—of
However, average individual income, which accounts for
which about 81% is wages and salaries and 19% is in-kind
population growth, grew by about 2.2% per year on average
transfers to employees. Business income accounts for about
over the same period, as shown in Figure 1.
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Introduction to U.S. Economy: Personal Income
According to Census data, real median family income has
to the pandemic, such as enhanced unemployment benefits
grown in inflation-adjusted terms from about $35,650 in
and economic impact payments. Following the expiration
1953 (the earliest data available) to about $86,011 in 2019,
and exhaustion of such policies, personal income has
an increase of about 1.3% per year on average. Differences
decreased from its second quarter peak and may further
in income growth between Census and BEA figures are due
decrease (more in line with previous recessions) if no
to differences in the level of analysis, the alternative income
further stimulus is enacted.
definitions used, and differences between average and
median (value at the midpoint of a distribution)
Figure 2. Total Personal Income During COVID-19
calculations. As shown in Figure 1, median family income
grew quite rapidly between 1953 and 1969, an average
growth rate of about 3.1% per year. However, between
1970 and 2019 median family income growth has been
about 0.8% per year on average. Median family income
growth has accelerated since 2012, growing by about 3.1%
each year on average. However, this might be caused by
changes implemented to the survey and data collection
challenges during the pandemic.
Figure 1. Income Levels, 1929-2019
Source: CRS calculations based on BEA data.
Notes: Data seasonal y adjusted at annual rates.
Income Distribution
Aggregate growth in income is not necessarily shared
equally. The Census collects data on the distribution of
income by quintile and for the top 5%. As shown in Table
2, 51.9% of income in 2019 went to households in the top
quintile (top 20%), and 3.1% of income went to households
in the bottom quintile (bottom 20%). The top 5% of
households received 23.0% of aggregate income.
Table 2. Income Distribution: 2019
Source: U.S. Department of Commerce, BEA, GDP and Personal
Percentage
Income, and U.S. Department of Commerce, Census Bureau, Historical
Share of
Mean Family
Income Tables: Families.
Aggregate
Income of
Note: Measured in constant 2019 dol ars. Grey bars represent
Income
Percentiles
recessions as defined by the National Bureau of Economic Research.
Lowest quintile
3.1%
$15,286
Determinants of Income Growth
Second quintile
8.3%
$40,652
Economic growth—as measured by gross domestic product
(GDP)—generally results in the growth of aggregate
Middle quintile
14.1%
$63,938
income. In the short term, economic growth (and therefore
Fourth quintile
22.7%
$111,112
income growth) depends largely on the level of aggregate
demand in the economy. As individuals demand more
Highest quintile
51.9%
$254,449
goods and services within the economy over the course of
Of which: top 5 percent
23.0%
$451,122
an expansion, overall output and incomes tend to rise. As
shown in Figure 1, median family income tends to rise and
Source: U.S. Department of Commerce, Census Bureau, Historical
fall with the business cycle.
Income Tables: Households.
In the long term, economic growth depends largely on
The share of income going to the highest quintile of
growth in the economy’s productive capacity. In general,
households has been steadily rising since the Census began
increases in the economy’s productive capacity lead to an
collecting this data in 1967. The share of income going to
increase in aggregate incomes over time. For more detail on
the highest quintile rose by 8.3 percentage points, up from
the connection between economic growth and incomes, see
about 43.6% in 1967 to 51.9% in 2019. The share of
CRS In Focus IF10408, Introduction to the U.S. Economy:
income going to the rest of the income distribution
GDP and Economic Growth.
decreased over the same period.
Income Growth and COVID-19
(Note: This In Focus was originally authored by Jeffrey
Breaking with historical patterns, total personal income
Stupak, former CRS Analyst in Macroeconomic Policy.)
levels have risen during the recession caused by the
Coronavirus Disease 2019 (COVID-19) pandemic, despite
Lida R. Weinstock, Analyst in Macroeconomic Policy
large decreases in aggregate demand and GDP (see Figure
2). This is largely the result of policies enacted in response
IF10501
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Introduction to U.S. Economy: Personal Income
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