August 26, 2022 update: Added 2022-Q2 data.   Click to hide

Methodology

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

Summary

Realtime Inequality provides timely and high-frequency estimates of the distribution of income and wealth in the United States. Our statistics distribute the totality of national income and household wealth across socio-economic groups and are updated each quarter when new macroeconomic numbers are published. This makes it possible to estimate economic growth by socio-economic groups consistent with quarterly releases of macroeconomic growth, and to track the distributional impacts of government policies during and in the aftermath of recessions in real time. Our series adjust for price inflation and are expressed in July 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 consider four definitions of income:

  1. Factor income, which includes all labor and capital income before taxes. Factor income sums to national income, the most comprehensive and harmonized notion of income.
  2. Pretax income, which is factor income minus contributions to pensions, disability, and unemployment insurance, plus pension, disability, and unemployment benefits. Pretax income also sums to national income.
  3. Disposable income, which is income net of all taxes and including all cash government transfers and food stamps. This is income that people can use for personal consumption and saving.
  4. Posttax income, which starting from disposable income adds all non-cash government transfers and collective public expenditures and subtracts the government deficit. Posttax income adds up to national income.

Our definition of wealth includes all financial and non-financial assets owned by households, net of all debts. Assets include all funded pensions (IRAs, 401(k)s, and funded defined benefits pensions). Vehicles and unfunded pensions (such as promises of future Social Security benefits and other unfunded defined benefits pensions) are excluded.

We consider three different populations:

  1. Adult individuals (aged 20 and above), with income equally split among married spouses.
  2. Working-age adults (aged 20 to 64), with income equally split among married spouses.
  3. Households (as defined by the tax code)), i.e., either a single person aged 20 or above or a married couple, in both cases with children dependents if any.

Our methodology to estimate the distribution of income in real time combines the information contained in high-frequency public data sources—including monthly household and employment surveys, quarterly censuses of employment and wages, and monthly and quarterly national accounts statistics—in a unified framework.

The result of this combination is a set of harmonized monthly micro-files in which an observation is a synthetic adult (obtained by statistically matching public micro-data) and variables include income, wealth, and their components. These variables add up to their respective national accounts totals and their distributions are consistent with those observed in the raw input data. The micro-files are available here.

Our work only uses public data. All our programs and raw data are available here. We thank in advance users for their comments and suggestions to help us improve this work.

Resources

Real-Time Inequality: Slides

Download slides here

Real-Time Inequality: Full Paper

Download draft here