May 2nd, 2022 update: 2022 Q1 data added. New daily wealth projection available. Click to hide

Methodology

Complete methodological details are provided in our forthcoming paper “Real-Time Inequality” (download slides here).

Summary

Realtime Inequality provides timely statistics on how economic growth benefits each group. Statistics are updated each quarter when new GDP numbers come out. Our income and wealth statistics distribute all national income and household wealth across groups. Our series adjust for price inflation and are expressed in March 2022 dollars. Just like GDP, our estimates for 2022 are preliminary and will be adjusted as more comprehensive data come out in the coming months.

We start with annual microlevel data adjusted to match national accounts created by Piketty, Saez, and Zucman (2018). We create monthly and quarterly synthetic micro data by first taking moving averages of the corresponding adjacent annual microdata. For the most recent years (2020-2022) when micro data are not yet available, we start from the latest 2019 annual microdata available. We then rescale uniformly each income and wealth component to match monthly and quarterly national accounts and financial accounts aggregate data. Such uniform rescaling works well for non-labor income components (such as corporate profits) because their distribution across income or wealth groups is slow moving relative to their aggregate fluctuations. For example, the share of corporate profits earned by the top 1% evolves slowly but aggregate corporate profits change quickly and hence drive short-run distributional effects.

For labor income which accounts for about three quarters of national income and whose distribution can change quickly, we further use monthly employment series and quarterly detailed wage distributions from the Quarterly Census of Employment and Wages. This allows us to capture distributional effects due to fast changes in employment and wage earnings across industries and counties.

For the COVID period, we impute additional government benefits — such as direct checks, expanded unemployment insurance benefits, or the paycheck protection program — at the microlevel. Because we do not try to estimate longitudinal fluctuations in income for a given individual or household over the year, our monthly and quarterly statistics are directly comparable to annual statistics both in levels and trends by design.

For income, we consider four definitions:

  1. Factor income, which includes all labor and capital income before taxes. It sums to national income.
  2. Pretax income, which is factor income after the operation of retirement, disability, and unemployment benefits (public and private) and the corresponding contributions. It also sums to national income.
  3. Disposable income, which is income after all taxes and including all cash transfers and food stamps. This is income that people can use for personal consumption and savings.
  4. Posttax income, which adds all other government spending: non-cash transfers and collective public expenditures minus the government deficit. It also sums up to national income.

Our wealth definition includes all marketable wealth owned by households. We include all funded pensions (IRAs, 401(k)s, and funded defined benefits pensions) and we net out all debts. We exclude vehicles and unfunded pension promises (social security and other unfunded defined benefits pensions).

Groups — such as the bottom 50% — are always defined based on ranking for the corresponding income or wealth concept.

Resources

Real-Time Inequality: Slides (January 2022)

Download slides here

Real-Time Inequality: Preliminary Draft

Download draft here