Creating an Integrated System of Data and Statistics on Household Income, Consumption, and Wealth: Time to Build (2024)

Consensus Study Report

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This activity was supported by a contract between the National Academy of Sciences and The California Community Foundation, The William and Flora Hewlett Foundation (No. 2021-006760-GRA), National Academy of Sciences W. K. Kellogg Foundation Fund, Omidyar Network Services LLC, and the Alfred P. Sloan Foundation (No. G-2022-19394). Support of the work of the Committee on National Statistics is provided by a consortium of federal agencies through a grant from the National Science Foundation (No. 1560294) and several individual contracts. Any opinions, findings, conclusions, or recommendations expressed in this publication do not necessarily reflect the views of any organization or agency that provided support for the project.

International Standard Book Number-13: 978-0-309-71231-6
International Standard Book Number-10: 0-309-71231-9
Digital Object Identifier: https://doi.org/10.17226/27333
Library of Congress Control Number: 2024940804

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Suggested citation: National Academies of Sciences, Engineering, and Medicine. 2024. Creating an Integrated System of Data and Statistics on Household Income, Consumption, and Wealth: Time to Build. Washington, DC: National Academies Press. https://doi.org/10.17226/27333.

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COMMITTEE ON AN INTEGRATED SYSTEM OF U.S. HOUSEHOLD INCOME, WEALTH, AND CONSUMPTION DATA AND STATISTICS TO INFORM POLICY AND RESEARCH

TIMOTHY M. SMEEDING (Chair), Lee Rainwater Distinguished Professor of Public Affairs & Economics, University of Wisconsin-Madison

KATHARINE G. ABRAHAM, Distinguished University Professor of Economics and Survey Methodology, University of Maryland

WILLIAM A. DARITY, JR., Samuel DuBois Cook Distinguished Professor of Public Policy, Duke University

KAREN DYNAN, Professor of the Practice, Economics Department and Kennedy School of Government, Harvard University

JACOB W. FABER, Associate Professor of Sociology and Public Service, New York University

ROBERT E. HALL, Robert and Carole McNeil Joint Senior Fellow, Hoover Institution, and Professor of Economics, Stanford University

STEPHEN P. JENKINS, Professor of Economic and Social Policy, London School of Economics

DAMON JONES, Associate Professor, Harris School of Public Policy, University of Chicago

AMY B. O’HARA, Research Professor, McCourt School of Public Policy, Georgetown University

LUIGI PISTAFERRI, Professor of Economics, Stanford University

JOHN SABELHAUS, Non-Resident Senior Fellow, Brookings Institution

YAJUAN SI, Research Associate Professor, Institute for Social Research, University of Michigan

AMIR SUFI, Bruce Lindsay Distinguished Service Professor of Economics and Public Policy, University of Chicago

GABRIEL ZUCMAN, Professor of Economics, Paris School of Economics, and Associate Professor of Economics, University of California, Berkeley

JORRIT ZWIJNENBURG, Head of Section, Organisation for Economic Co-operation and Development

Study Staff

DAVID S. JOHNSON, Study Director

CONSTANCE F. CITRO, Senior Scholar

ALEX HENDERSON, Senior Program Assistant

CHRISTOPHER MACKIE, Senior Program Officer

Consultants

RACHEL CARPENTER, Indiana University

HELEN LEVY, University of Michigan

KOSALI SIMON, Indiana University

COMMITTEE ON NATIONAL STATISTICS

KATHARINE G. ABRAHAM, Department of Economics, University of Maryland, College Park

MICK P. COUPER, Institute for Social Research, University of Michigan

WILLIAM A. DARITY, JR., Sanford School of Public Policy, Duke University

DIANA FARRELL, JPMorgan Chase Institute

ROBERT GOERGE, Chapin Hall at the University of Chicago

ERICA L. GROSHEN, School of Industrial and Labor Relations, Cornell University

DANIEL E. HO, Stanford Law School, Stanford University

HILARY HOYNES, Goldman School of Public Policy, University of California, Berkeley

H.V. JAGADISH, Department of Electrical Engineering and Computer Science, University of Michigan

DANIEL KIFER, Department of Computer Science and Engineering, The Pennsylvania State University

SHARON LOHR, School of Mathematical and Statistical Sciences, Arizona State University (emerita)

NELA RICHARDSON, ADP Research Institute

C. MATTHEW SNIPP, School of the Humanities and Sciences, Stanford University

ELIZABETH A. STUART, Department of Mental Health, Johns Hopkins Bloomberg School of Public Health

MELISSA CHIU, Director

CONSTANCE F. CITRO, Senior Scholar

BRIAN HARRIS-KOJETIN, Senior Scholar

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Reviewers

This Consensus Study Report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise. The purpose of this independent review is to provide candid and critical comments that will assist the National Academies of Sciences, Engineering, and Medicine in making each published report as sound as possible and to ensure that it meets the institutional standards for quality, objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process.

We thank the following individuals for their review of this report:

Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations of this report nor did they see the final draft before its release. The review of this report was overseen by ARTHUR KENNICKELL, Federal Reserve System, retired and The Stone Center, CUNY, and KATHLEEN MULLAN HARRIS, University of North Carolina. They were responsible for making certain that an independent examination of this report was carried out in accordance with the standards of the National Academies and that all review comments were carefully considered. Responsibility for the final content rests entirely with the authoring committee and the National Academies.

Acknowledgments

This report, Creating an Integrated System of Data and Statistics on Household Income, Consumption, and Wealth: Time to Build, is the result of contributions from many colleagues, whom we thank for sharing their time and expertise. Much of the work on improving data and statistics on income, consumption, and wealth has been conducted and developed within the federal statistical system and with collaborations with academic researchers. We were lucky enough to be part of this improvement process. As such, we would like to thank the Russell Sage Foundation and the Washington Center for Equitable Growth for their sponsorship of our initial research (with other collaborators) into assembling data on income, consumption, and wealth for the same individuals. On behalf of the panel, we are extremely grateful to the various foundations for funding and making this report a reality—Spiegel Family Fund (with help from California Community Foundation), The Alfred P. Sloan Foundation, William and Flora Hewlett Foundation, Omidyar Network, and National Academy of Sciences W. K. Kellogg Foundation Fund.

The panel benefitted greatly from the multiple presentations provided during the seven virtual public meetings held on May 16, July 12, September 20, October 4, and October 25, 2022, and on January 30 and February 27, 2023. The panel had an excellent initial public meeting where three distinguished National Academies members presented their views on the importance of the panel’s work: Raj Chetty, Harvard University, Angus Deaton, Princeton University, and Emmanuel Saez, University of California, Berkeley. The panel was also grateful to hear from the federal agencies about their important and critical work they are already pursuing to

improve the measures of income, consumption, and wealth. These included Dennis Fixler and Marina Gindelsky, Bureau of Economic Analysis; Jonathan Rothbaum, Census Bureau; Thesia Garner and Adam Safir, Bureau of Labor Statistics; Jesse Bricker and Alice Volz, Federal Reserve Board; Bilal Habib, Congressional Budget Office; and Victoria Bryant, Statistics of Income Division, Internal Revenue Service.

At the following meeting, the panel heard about the new measures of income using Internal Revenue Service (IRS) data from Jeff Larrimore, Federal Reserve Board; Jacob Mortenson and David Splinter, Joint Committee on Taxation; Barry Johnson, Statistics of Income Division; the Comprehensive Income Dataset from Bruce Meyer, University of Chicago; the National Experimental Wellbeing Statistics from Jonathan Rothbaum, Census Bureau. It also heard about new efforts to estimate wealth from Eric Zwick, University of Chicago, and the construction of a method of accessing IRS data from Robert McClelland, Urban Institute. At one meeting, the panel heard about the innovative efforts at international statistical organizations, including presentations by Amanda Sinclair, Statistics Canada; Veli-Matti Tormalehto, Statistics Finland; Andrea Neri, Bank of Italy; and Arjan Bruil and Johan van Rooijen, Statistics Netherlands; and updates from Carla Kidd, Office of National Statistics, United Kingdom, and Meghan Stephens, The Treasury in New Zealand.

The panel also heard about novel uses of commercial data from Brian Bucks, Consumer Financial Protection Bureau; John Friedman, Brown University; Stephen Hansen, Imperial College; Matthew Shapiro, University of Michigan; and Chris Wheat, JPMorgan Chase Institute. The panel learned about efforts and challenges to create and use blended data from Mary Ann Bates, California Cradle to Career; Ron Borzekowski, Yale University; David Brown, Census Bureau; Abie Flaxman, University of Washington; Able Kho, Northwestern University; and Jerry Reiter, Duke University. Finally, the panel discussed the treatment of retirement income with Bill Gale, Brookings Institution; Olivia Mitchell, University of Pennsylvania; Jim Poterba, Massachusetts Institute of Technology and National Bureau of Economic Research; and Laura Quinby, Boston College. The panel also benefited from three experts who wrote commissioned papers on the treatment of health insurance: Helen Levy, University of Michigan; and Kosali Simon and Rachel Carpenter, Indiana University. We also thank the numerous audience members during these public meetings for their informative questions and discussions, and comments via Zoom chat.

The panel could not have conducted its work without the capable staff at the National Academies of Sciences, Engineering, and Medicine: Melissa Chiu, director of the Committee on National Statistics, provided invaluable support throughout the panel’s activities. Connie Citro and Christopher Mackie, with their extensive experience working with panels and drafting

reports, provided insightful comments that improved the report. Alex Henderson ensured the smooth operation of the workshop and other panel activities and assisted with report production. Kirsten Sampson-Snyder and Bea Porter organized the review process; and Marc DeFrancis’s thorough editing improved the readability and accessibility of the report. We thank all of them for their contributions and assistance.

Finally, we thank our colleagues on the panel. We appreciate your diligence and expertise in examining the difficult issues raised in this study. Your shared wisdom and generosity of time brought innovative ideas to the discussions and produced this report. It was a great pleasure to work with you all. Thank you.

Timothy M. Smeeding, Chair
David S. Johnson, Study Director
Panel on an Integrated System of Household Income, Consumption, and Wealth Data and Statistics to Inform Policy and Research

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Contents

Acronyms and Abbreviations

Summary

1 Introduction and Overview

HOW (AND WHY) CURRENT MEASURES ARE CONFUSING

THE WHO, WHAT, WHERE, WHEN, WHY, AND HOW OF MEASURING ICW DISTRIBUTIONS

What: The Choice of Income, Consumption, and Wealth Concepts

Who: Whose Resource?

When: Adjusting Resources Over Time

Where: How Are Measures Adjusted for Differences in Geographic Location?

How: Which Dataset and Summary Statistic?

Why: The Purpose of the Measure

IMPORTANT RESEARCH QUESTIONS USING ICW

Measuring Disparities in Economic Wellbeing

Improving Other Policy-Relevant Measures and Analyses

Retirement Security and Wealth Transfers

U.S. AND INTERNATIONAL INITIATIVES TO IMPROVE ICW DATA AND STATISTICS

THE GOALS OF THIS REPORT

ANNEX 1-1: MEASURING AND INTERPRETING INEQUALITY STATISTICS

ANNEX 1-2: ECONOMIC WELLBEING AND THE NATIONAL INCOME AND PRODUCT ACCOUNTS

2 Definitions and Conceptual Issues

BASIC NOTIONS

Household and Other Units

Basic Definitions

THE RELATIONSHIP OF INCOME, CONSUMPTION AND WEALTH TO ECONOMIC WELLBEING

Income

Nonhuman Wealth

Consumption

INCOME, CONSUMPTION, SAVING, AND WEALTH LINKAGES

Sources and Uses of Cash in the Household

Discrepancies

Conclusions About Definitions and Identities

DEFINITIONAL DIVERSITY IN PRODUCTION OF ICW DATA AND STATISTICS—AN INTRODUCTION TO MICRODATA ON HOUSEHOLDS AND INDIVIDUALS

Income

Consumption and Consumption Expenditures

Wealth

ANNEX TO CHAPTER 2: DIFFICULT DEFINITIONAL AREAS IN ICW MEASUREMENT

3 Statistics for Policy and Public Understanding

BACKGROUND

ESTABLISHED ESTIMATES AND RECOMMENDATIONS FOR IMPROVEMENTS

Established Series on Household Expenditures, Income, and Wealth

Other Statistical Estimates of Expenditures, Income, and Wealth

Joint Distributions of Household Income, Consumption, and Wealth

FEATURES OF NEW AND IMPROVED ESTABLISHED STATISTICS

Unit of Analysis

Inflation Adjustment Methods

Timeliness and Frequency

DETAILED ESTIMATES FOR COMPONENTS, GROUPS, AND GEOGRAPHY

Component Detail

Classification by Economic Levels and Distributional Measures

Geographic Detail

Demographic Detail

Race and Ethnicity

SUMMARY

4 Data Requirements and Criteria

AN IDEAL DATASET

DATA QUALITY FRAMEWORKS

RELEVANCE AND OTHER QUALITY ATTRIBUTES

Surveys

Administrative Records

Commercial Data Sources

ACCURACY AND RELIABILITY

Survey Errors from Nonresponse and Misreporting

Errors in Administrative Records

Data Linkage Errors

INTEGRATION PROJECTS: THE UNITED STATES

INTEGRATED DATA INFRASTRUCTURES: OTHER COUNTRIES

The Nordic Countries

The Netherlands

New Zealand

The United Kingdom

Lessons Learned

5 Data Solutions, Methods, and Options

STRATEGIES FOR MEASURING INCOME, CONSUMPTION, AND WEALTH

Direct Measurement

Combining Data Sources

Capitalization and Imputation

Alignment to Aggregates

WHAT COULD BE ACCOMPLISHED WITH AVAILABLE DATA?

Population and Characteristics

Incomes, Taxes, and Transfers

Household Balance Sheet Components

Consumption and Expenditure

WHAT COULD BE ACCOMPLISHED USING PUBLICLY ACCESSIBLE DATA?

WHAT COULD BE ACCOMPLISHED USING A NEW PANEL WITH ADMINISTRATIVE DATA LINKAGES?

HOW CAN DISTRIBUTIONAL ICW DATA BE MADE MORE TIMELY?

WHAT CAN BE DONE IN TERMS OF SMALL AREA DATASETS?

MEASURING THE HARD-TO-MEASURE INCOME COMPONENTS

Retirement Flows

Employer-Provided and Public Health Insurance

Unrealized Capital Gains

Imputed Rent on Owner-Occupied Housing

6 Governance, Legal, and Privacy Issues

POTENTIAL DATA SOURCES: LEGAL AND PRIVACY ISSUES

DATA LINKAGES: GOVERNANCE AND PRIVACY ISSUES

Protecting Privacy of Linked Data

ACCESS TO ICW PRODUCTS FOR DATA USERS

DATA ACCESS REALITIES

LEARNING FROM INTERNATIONAL PEERS

ROADMAP FOR MAKING PROGRESS ON ICW DATA AND PRODUCTS

Appendix A: List of Conclusions and Recommendations

Appendix B: Committee Biographies

References

Boxes, Figures, and Tables

BOXES

1-1 Early Efforts to Measure Income, Consumption, and Wealth

1-2 Intragenerational and Intergenerational Mobility: The Importance of Wealth Accumulation and the Capacity to Transfer Wealth Across and Within Generations

2-1 The Role of Time Use in Economic Wellbeing

3-1 Defining Established Statistics

3-2 Accommodating Programs that Use Estimates of Money Income for Eligibility

3-3 Alternative Definitions of Racial Categories and Use of Skin Tone

4-1 Introduction to the Person Identification Validation System and Its Protected Identification Keys (PIKs)

4-2A Continuing Projects on Estimating U.S. Household/Family Income Distributions

4-2B World Inequality Database (WID) Project to Estimate Adult National Income and Wealth Cross-Nationally

4-2C One-Time Data Integration Projects on Income, Consumption, and Wealth

5-1 Measuring Transfers Across and Within Generations

5-2 Who Is Included in the Tax Data?

5-3 Creating a Coordinating Entity

5-4 Case Study: The Understanding America Study (UAS)

6-1 The Five Safes

6-2 Other Variables That May Be Useful for ICW Data Infrastructure

FIGURES

1-1 Trends in personal income and household income, 1979–2022

1-2 Trends in inequality using various income measures, Gini index, 1979–2022

1-3 Percent share of income for the top 1% using various measures, 1979–2022

1-4 Inequality using income, consumption, and wealth, Gini indexes, 1968–2017

1-A Sample distribution of income

1-B Sample Lorenz curve, income shares by ventile group

2A-1 Composition of income, population age 55 and beyond

2A-2 Equivalized private and final income, by quintile

2A-3 Income at various percentiles, with and without health insurance benefits

3-1 Percentage share of personal, household, and disposable income by household decile group, 2021

3-2A Median and mean wealth, 2022, by age

3-2B Mean wealth by race/ethnicity, 1989–2019

4-1 Unit response rates to selected household surveys conducted by the U.S. Census Bureau, 1984–2019

5-1A Data infrastructure for ICW using Master Address File as a base (or spine)

5-1B Data infrastructure for ICW using IRS data as a base (or spine)

6-1 The three phases for the implementation of ICW data and statistics

TABLES

2-1A Established Definitions of Income

2-1B Established Definitions of Consumption

2-1C Established Definitions of Wealth

3-1 Major Features of Established and Experimental U.S. Statistical Series on Household Consumption, Expenditures, Income, and Wealth

3-2 Examples of Units of Analysis Applied to Living Situations

3-3 Demographic Characteristics Published by Statistical Agencies for Estimates of Household Expenditures, Income, and Wealth

4-1 Quality Assessment of Relevant Surveys for an Integrated Household Income, Consumption, and Wealth Dataset

4-2 Quality Assessment of Selected Relevant Administrative Records for an Integrated Household Income, Consumption, and Wealth Dataset

4-3 Income Components (and Taxes) in Federal Individual Income Tax and Supplemental Nutrition Assistance Program (SNAP) Administrative Records

4-4 Available or Potentially Available (to the Census Bureau) Administrative Data for Money Income, In-Kind Benefits, and Taxes

4-5 Error Components of Multiple Data Sources and Linked Datasets

4-6 Integrated Income, Consumption, and Wealth Dataset Projects (USA)

4-1A Quality Assessment of Relevant Surveys for an Integrated Household ICW Dataset: Income Components (and Taxes)

4-1B Quality Assessment of Relevant Surveys for an Integrated Household ICW Dataset: Consumption and Expenditures

4-1C Quality Assessment of Relevant Surveys for an Integrated Household ICW Dataset: Assets and Debts

5-1 Measures of Retirement Flows in Macro- and Microdata

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Acronyms and Abbreviations

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