Each year the U.S. Census Bureau conducts the American Community Survey (ACS) by surveying 3.5 million households on a wide range of questions including their income, their employment, their ethnicity, their marital status, how large their house or apartment is, and how many cars they own. The ACS is the most reliable source of data on these issues and is widely used by economists, business managers, and government policy makers. The data for 2019 and for the five-year period 2015-2019 were released on December 10. You can learn more about the survey and explore the data on the ACS website.
The ACS provides data on increases in income over time by different ethnic groups. This news article discusses the result that between 2005 and 2019, the incomes of Asian American grew the fastest, followed by the incomes of Hispanics, the incomes of non-Hispanic whites, and the incomes of African Americans.
As we discuss in Chapter 17, there are several complications in accurately measuring changes in the distribution of income over time. First, people will not typically remain in the same place in the income distribution their whole lives. Instead, their incomes are likely to fluctuate, moving them up and down the income distribution. So comparing the distribution of income for the whole population at two points in time can give a misleading idea of how the incomes of particular individuals changed. Measuring income mobility can be difficult, however, because it entails tracking the incomes of individuals over time. Doing that requires specialized studies rather than relying on the more readily available government data we can use to track changes in the incomes of the whole population.
Second, we are more interested in the income people have available to spend rather than the income they earn. Because people pay taxes on the incomes they receive and because many people receive transfer payments from the government, including unemployment insurance payments and Social Security payments, the income distribution is more equal if we measure it after taking into account the taxes people pay and the transfer payments they receive.
Finally, people earn income from a variety of sources in addition to wages and salaries, including dividends they receive from owning stock, capital gains they earn from selling a financial or other asset, and income they earn from owning a business such as a restaurant or dry cleaners. The income people at the top of the income distribution earn from owning a business can be particularly hard to measure because it depends on how the income is reported to the Internal Revenue Service, which depends in turn on changes in laws affecting how businesses are organized and how they pay taxes. Dealing with these measurement issues is particular important in determining how much the share of income earned by the top 1% of the income distribution has changed over time—an issue that has been the subject of much political debate.
Wojciech Kopczuk of Columbia University and Eric Zwick of the University of Chicago address these measurement issues in a new article in the Journal of Economic Perspectives. Even skimming the article makes clear just how difficult the measurement issues are. Click HERE to read the article.
Note that the article is part of a symposium on income and wealth inequality that appears in that issue of the journal. The other articles in the symposium are also worth reading. Articles that appear in the Journal of Economic Perspectives are frequently (but not always!) nontechnical summaries of research that can be read without knowledge of economics beyond the principles course.
Authors Glenn Hubbard and Tony O’Brien discuss the economic impacts of what was discussed in the final Presidental debate on 10/22/20. They discuss wide-ranging topics that were raised in the debate from reopening the economy & schools, decreasing participation of women in the workforce due to COVID, healthcare, environment, and general tax policy. Listen to gain economic context on these important items. Click HERE for the New York Times article discussed during the Podcast:
Just search Hubbard O’Brien Economics on Apple iTunes and subscribe!
Glenn Hubbard and Tony O’Brien continue their podcast series hosting guest – Jonathan Meer, Professor of Economics from Texas A&M University as well as the Director of the Private Enterprise Research Center at Texas A&M. During the conversation, we learn about Jonathan’s teaching over 3,500 students annually in a large online Principles of Microeconomics lecture course. He discusses how his usual online teaching absolutely helped his transition when Texas A&M closed for the semester. He also talks about the state of Higher Education, non-profit giving, as well as some challenges nonprofits face in these uncertain times.
Some notes from this Podcast if you’d like more information:
1. Link to Jonathan Meer’s Youtube video on setting up an online course:
4. Please refer to the Apply the Concept feature from Chapter 2 of Hubbard and O’Brien Economics, 7/E, on the use of market mechanisms to allocate food at the Feeding America charity (for your convenience, we hope to post this shortly so check back).