When someone asks you what your income is, what do you tell them? Probably most of you would respond with the salary you earn from your job, right? Well, your income includes more than just that paycheck you receive every other week.
The most widely cited sources of income data are the Bureau of Economic Analysis’ (BEA) personal income and the Census Bureau’s money income. It is important to understand the differences between these two barometers, which are often used as a way to track how ordinary Americans are faring. The main difference between the two statistics is the way income is measured.
BEA defines income as an individual’s total earnings from wages, interest on investments, and from other sources, such as Social Security payments or unemployment insurance, known as transfer receipts. You can find a listing of what’s included in personal income by looking at the components on BEA’s interactive tables. Check out table 2.1 of the national income and product accounts: Personal Income and Its Disposition. You will see compensation of employees on line two. That includes wages and salaries and benefits paid by employers, such as pension/insurance funds, as well as social insurance. Any income earned from rental property is noted on line 12. Lines 13 through 15 break down the income people receive on assets, such as interest or dividend income. The last piece is on line 16, income from personal transfer receipts. This includes anything from Social Security, Medicare/Medicaid, and unemployment insurance to Veterans’ benefits and more.
One factor BEA does not include in its personal income measure is income earned abroad, such as income earned from leasing out an apartment in Paris or salary earned while working for a foreign company abroad. Personal income, like gross domestic product, is intended to capture domestic economic activity. Thus, only domestic sources of income are included.
The Census Bureau collects income data on several major surveys. These surveys ask for a household’s income and include up to 50 sources of income. While a highly valuable tool and a data set that BEA makes use of in several ways, such surveys also suffer from the challenge of people having to recall what they earned and where it came from. Many people, for example, associate income only with their salary or wages, so that is all they report.
BEA produces personal income data on a monthly, quarterly, and annual basis at the national, state, metropolitan, and county levels. The Census Bureau’s money income is calculated annually with several different surveys.