Saturday, December 22, 2012

Household Income? Individual Income?

Kinda lengthy, not-too-technical.

Explains the "rich are richer" vs. "not really" analyses pretty well.

Core of the item (but not the only stuff you should read) includes this:

[First, as to the claim that 'median income' is only up 3.2% over the last 30 years:]

....PETHOKOUKIS: 3.2% over 30 years is bupkis.

BURKHAUSER: That’s stagnation. And that’s what they call it: the middle class has stagnated over the last 30 years. And that statement is correct. But what does that statement mean, and how do you put it in the context of how the typical American has done in the last 30 years? Is it true that we haven’t increased at all in the last 30 years in our ability to consume things?

Okay, so let’s–and this is the fun part of the puzzle. Let’s no longer take the tax unit as the unit of analysis. Now let’s look at the household. And you go from a gain of 3.2% over that period to a gain of 15.2%. And that happens because the number of tax units per household has been rising over that 30-year period. There are a lot more people living together and sharing everything except a marriage certificate.


Can IRS and Census (CPS) data--seemingly disparate in results--be reconciled?

...people have argued that you can’t actually use the CPS to look at the tails of the distribution, and therefore, Piketty and Saez, even though their data has problems, those problems are less than the problems in the CPS. The thing that took us 4 years to do was to show people: No, that’s not true. We can actually get very close to the levels and trends that they get in the IRS data using the CPS data

Following that graf is a discussion of transfer-payments, which pump up HHI to around a 29% gain in the 30-year period.

Then this:

...the last change is to talk about this growing share of earnings that comes in non-wage compensation, and also the fact that Medicare and Medicaid have been growing also. So, as an example of how important it is to think about in-kind transfers as well as in-cash transfers, and to think about the value of health insurance for employees as well as their wages, we are able to estimate the employer share of employer-provided health insurance to workers and the insurance value of Medicare and Medicaid to lower-income people who are getting those benefits. And when you do that, it goes from 29.3% to 36.7%. So, we are really talking about a difference from 3.2% in the way Piketty and Saez are thinking about things in tax units, to 36.7% if we simply include the value of health insurance as well as do the other things that we’ve talked about

Well, now.  There's an interesting discussion point, assuming that your typical Leftoid is capable of rational discussion.


Anonymous said...

So if you count that more income-earning people are living together (doubling HHI), and more married couples are two-income households (also doubling HHI) and more kids are working but living at home because of the economy (increasing HHI further), yeah HHI income is rising.

Duh! Seems pretty bogus to me to make any comparison between "tax units" and household incomes.

Dad29 said...

Well, maybe; it depends on your frame of reference.

Until (about) 1975, the 'tax unit' was the Head of Household. All the others in the HH were non-earners.

(There were exceptions to that rule, some very minor, and some not-so-minor in terms of 'income.')

So--if one harks back to the '70's as a benchmark--they were identical.

What the essay does NOT address is whether P&S counted transfer payments and health-insurance contributions as 'income' for purposes of their study; because if they did not, their 3.2% gain is understated by quite a bit.