Econ data analysis project
saizo0816
WealthIncomeandPovertySpr191.pptxWealth
Income & Poverty
4/30/2019
1
Chapter 6 6-‹#›
Statistics for Business and Economics, 8/e Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Wealth, Income, & Poverty
Wealth Data
Sources
FED: Survey of Consumer Finances
IRS: Estate Tax Data
Forbes: List of Wealthiest Individuals
Typically calculated as “Net Worth”
Tax data is narrower than survey data and uses individual rather than household collection.
Definition of “Wealth”
May include stocks, bonds, home equity, pensions, defined contribution plans, social security, etc..
Broader the definition, the less inequitable the wealth distribution.
Definition may depend on type of research being conducted.
For evaluations of the general population, a broader measure (total wealth) is appropriate.
For evaluations of business influence, a narrower measure (e.g. stocks and bonds) is appropriate.
“Financial Wealth” is more skewed than “Total Wealth”
2016 Total Wealth: mean was $792,000 vs. median $189,000
2016 Financial Wealth: mean was $340,000 vs. median $24,000
Why? Total wealth includes the value of home equity.
Wealth, Income, & Poverty
Income Data
Current Population Survey indicates that in 2016 the top 5% of households made over $225,251 and the top 20% over $121,018.
A 2011 survey suggested that half of Americans believe $150,000 annual income or 1 million in net worth would make them “Rich”.
Higher income segments that live in affluent areas may not feel “Rich”.
Income Mobility
Relative vs. Absolute measures
U.S exhibits low relative mobility, why?
Heterogeneous demographics limiting upward mobility of the poor. (e.g. raising children in single-parent households).
Wider income distribution requiring a greater absolute dollar raise to elevate one to a higher percentile.
Wealth, Income, & Poverty
Income Growth
Data collected by the Census
BEA--FRED: Real GDP Growth Per Capita
Per Capita income indicates improvement over time.
BLS--FRED: Full-Time Median Real Earnings
Real earnings, in contrast, have barely changed.
Income indicators typically omit fringe benefits.
Census--FRED: Real Median Household Income
Census--FRED: Real Median Family Income
Excludes non-family households, distorting “typical” incomes of households.
Does not account for decline in average family size (3.0 in 1973 to 2.5 in 2010) suggesting family members may be better off with fewer members for a particular income.
Wealth, Income, & Poverty
Poverty
Census--Current Population Survey
Poverty Line: developed in the1960s as an absolute standard (adjusted only for inflation).
Based on this metric, poverty fell in the 1960s and has generally leveled off since.
Poverty line understates poverty?
In 1965 it was half the median disposable income, by 2009 it was one-quarter.
If a one-half standard was maintained, the poverty rate would have increased since 1965.
Poverty line overstates poverty?
Excludes non-cash government programs (e.g. food stamps, school meals, housing subsidies, and medical care).
When adjusted, poverty rate drops by one-third.
Ignores wealth (particularly problematic when analyzing senior citizen poverty).
Alternative measure: Supplemental Poverty Measure (post 2011)
Includes in-kind benefits and deducts taxes, child support paid, alimony, and work expenses.
