CRS Updates Report on Household Income Distribution

Although not itself a subject of legislation, the shape of the U.S. income distribution is a factor in a number of policy areas of congressional interest, including taxes, welfare, Social Security, and the minimum wage. The Bureau of the Census conducts an annual survey from which it derives estimates of the distribution of income in the United States. This report presents summary estimates of the distribution of household income for 2007. It will be updated periodically. For more information on the distribution of income including changes over time, see CRS Report RL32639, Inequality in the Distribution of Income: Trends and International Comparisons, by Brian W. Cashell.

Contents

The Distribution of Household Income

Tables

Table 1. Distribution of Household Income, 2007

Table 2. Distribution of Household Income, 2007

Table 3. Distribution of Household Income, by Definition of Income, 2005

Contacts

Author Contact Information

The Distribution of Household Income

The Bureau of the Census conducts an annual survey from which it derives estimates of the distribution of household income. The Census Bureau's `official' measure of income is based on the concept of money income and includes earnings, Social Security, interest, dividends, and other forms of social insurance. It excludes the value of non-money benefits such as food stamps and housing subsidies. It does not include capital gains, and it is pre-tax income.¹

Table 1 shows the distribution of income in 2007, by quintile, using this official measure of household income. Each quintile represents 20% of the total number of households. In 2007, there were 116,783,000 households, so each quintile represents 23,356,600 households. The top 5% (the top 5,835,150 households) are also shown independently, because they alone account for a significant share of household income.

The Census Bureau publishes these estimates by quintile to provide a concise snapshot of the overall distribution of income. It should be noted that there is no official definition of "middle class," but one approach that has been used is to group together the three middle quintiles. In 2007, that included those households with incomes between $20,291 and $100,000. The concept of middle class, however, remains entirely subjective.²

            Table 1. Distribution of Household Income, 2007

Money income is the measure on which official estimates of poverty are based, and it is the source for the most publicized income measures such as median household income. Market income can be compared with post-social insurance income to assess the effect of non-means-tested transfers like Social Security on the distribution. Comparing post-social insurance income with disposable income shows the effect of means-tested transfers on inequality. Finally, comparing market income with disposable income is a way to see the effect of transfers and taxes on the distribution.

 Table 3. Distribution of Household Income, by Definition of Income, 2005

² See CRS Report RS22627, Who Are the "Middle Class"?, by Brian W. Cashell.

³ Work related expenses includes items such as child care, union dues, permit and license fees, and commuting costs.

⁴ The full report on alternative income estimates is available on the Census Bureau's website at http://www.census.gov/hhes/www/poverty/effect2005/tables.html.