There are five functional income categories that get tracked by the U.S. government. Those categories include wages and salaries, rents, interest, profits, and proprietors’ income. By far, the largest category is wages and salaries, which firms pay their workers to obtain labor. Proprietors’ income refers to income received by small-business owners, farmers, doctors, and lawyers. Additionally, it is a combination of wages and profit, where the wages compensate the provision labor resources and profits compensate entrepreneurship. Many economists who look at proprietor’s income in detail believe that a large majority of this income is implicitly composed of wages and salaries rather than profit.

Each year, the U.S. Census Bureau presents a report on income, earnings, and inequality estimates in the U.S. The data used to generate these reports comes from the Current Population Survey Annual Social and Economic Supplements (CPS ASEC), and the income estimates are based primarily on money income that is pre-taxed. In the latest report, 2024 median household income was not found to be statistically different from the 2023 estimate. In 2024, median household income was $83,730 and it was $82,690 in 2023. Also reported is the Gini index, which is used to measure income inequality. Income inequality was not found to be significantly different between 2023 and 2024. Unfortunately, the female-to-male earnings ratio fell in 2024 to 80.9 percent down from 82.7 percent in 2023. Median earning for men increased 3.7 percent but did not change much for women between 2023 and 2024. 

Discussion Questions:

  1. What could possibly explain the increase in median earnings for men between 2023 and 2024? Could this be an example of gender bias? Discuss.
  2. Were you surprised by the amount of median household income in the U.S. in 2024? In your opinion, should it be higher? Explain.