Summary

The rise in inequality among U.S. households and in economic disparities across socio-economic groups has been at the forefront of academic research, public policy debates, and even everyday discussions at least since the Great Recession. Many federal agencies provide data and statistics on inequality and related aspects of households’ income, consumption, and wealth (ICW)—including the Census Bureau, Bureau of Labor Statistics (BLS), Bureau of Economic Analysis (BEA), the Statistics of Income division at the Internal Revenue Service (IRS), the Division of Research and Statistics of the Federal Reserve Board, and the Congressional Budget Office. However, because the information provided by these agencies is often produced using different concepts, underlying data, and methods, the resulting estimates of poverty, inequality, mean and median household income, consumption, and wealth, as well as other statistics, do not always tell a consistent or easily interpretable story. For example, some measures of income include the value of Medicare, Medicaid, and employer-provided health insurance, while others do not; similarly, some estimates of income treat contributions to employer-provided pension plans as current income, while others treat distributions from such plans as income to retirees.

Measures also differ in their accuracy, timeliness, and relevance so that it is difficult to address such questions as the effects of the Great Recession on household finances or of the COVID-19 pandemic and the ensuing relief efforts on household income and consumption. The presence of multiple, sometimes conflicting statistics at best muddies the waters of policy debates and, at worst, enable advocates with different policy perspectives to

cherry-pick their preferred set of estimates. Achieving an integrated system of relevant, high-quality, and transparent household ICW data and statistics should go far to reduce disagreement about who has how much, and from what sources. Further, such data are essential to advance research on the nation’s economic wellbeing and to ensure that policies are well targeted to achieve society’s goals.

It is only through the sustained efforts of federal statistical agencies, in collaboration with the chief statistician in the U.S. Office of Management and Budget and other agencies (see StatsPolicy.gov), that progress has been and can continue to be made in improving statistics and data on household income, consumption, and wealth. Without data integration, it is impossible to understand where households fall in the joint distributions of ICW, to answer important questions about how policy affects household economic wellbeing in the United States, and to determine how the United States compares to other countries.

Reflecting broad interest in ICW topics, funding from several foundations enabled the Committee on National Statistics at the National Academies of Sciences, Engineering, and Medicine to establish this panel on an Integrated System of Household Income, Wealth, and Consumption Data and Statistics to Inform Policy and Research. The panel’s charge was to (a) review the major household ICW statistics currently produced by U.S. statistical agencies and (b) provide guidance for modernizing the information to better inform policy and research, such as understanding trends in inequality and mobility.¹ In fulfilling this charge, the panel builds on the call issued in recent Committee on National Statistics reports for the nation to develop a 21st century data infrastructure (see National Academies of Sciences, Engineering, and Medicine, 2023a,b,c, 2024).² The panel also builds on the Foundations of Evidence-based Policymaking Act of 2018, which directs federal statistical agencies to produce relevant and timely data and to improve access to and coordination of data across the system for purposes of evidence-building in policy.

The goal of this report is to provide recommendations for developing an improved 21st century data system for measuring the extent to which economic prosperity is shared by households throughout the population and for understanding how the distribution of resources is affected by government policy and economic events. This report provides guidance on developing consistent definitions of household income, consumption, and wealth; analyzes and compares relevant data sources and currently

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¹ The full text of the charge (Statement of Task) to the panel is reproduced in Chapter 1. Note also that this Summary includes a subset of the conclusions and recommendations presented in the full report.

² References in the Summary appear in the Chapter 1 Reference List.

produced estimates; recommends steps to improve the quality, integration, and comprehensiveness of the underlying data to support the production of standard statistics to inform the public and policy makers; and recommends ways to facilitate access to the data required to support research on a wide array of relevant topics.

DEFINITIONS

When people think about income, they typically have in mind earnings from a job (wages), and perhaps interest income earned on savings accounts. But to what extent do they think about employer-sponsored benefits? How is a household’s real consumption related to its spending? And what is the overlap between high levels of income and high levels of wealth? The answers to these questions largely depend on the measures that are available. For most households, measures may be found in checking account balances, credit card statements, mortgage payments, statements listing stock, mutual fund, or 401(k) holdings, and other financial statements. All of these are related to the budget identity, which states that an individual’s or household’s consumption is equal to their income less their saving (or plus their borrowing or additional debt), which depends on wealth.

Conclusion 2-1: Conceptual definitions of household income, consumption, and wealth are most useful when they are constructed to satisfy the budget identity, C = I – S. The components of income (I) and saving (S) should be consistent with a sources-and-uses framework for consumption (C). Such a framework accounts for all the value coming in and going out of the household (via savings and transfers), with the residual being the amount consumed. A fundamental principle in specifying an integrated data system is that decisions about what to count as income have direct implications for what to count as consumption and wealth.

Given these relationships, useful definitions of ICW need to be consistent with each other to satisfy the budget identity. Further, the appropriate definitions depend on the research use or the policy evaluation for which the measures are intended. For example, a change in a measure of wealth often reflects capital gains, while many measures of income (and thus saving) do not, unless they are adjusted to include that component. In addition, receipt of government-provided in-kind benefits or the service flows associated with asset ownership may be important for the measurement of both consumption and income.

Conclusion 2-3: Multiple definitions of household income, consumption, and wealth (ICW) are needed to examine different policy and research questions ranging from the impacts of fiscal policies to distributional analyses. To aid users of ICW statistics in selecting appropriate measurement constructs, each definition requires specification of accompanying purpose(s) and a transparent guide to its construction.

The recent “Beyond GDP” efforts undertaken by the United Nations System Chief Executives Board for Coordination reflect international movements to develop measures of economic wellbeing that are broader than the standard per-capita gross domestic product (GDP). These international efforts have focused on creating measures of progress that are consistent with the national aggregates but that “go beyond GDP to consider income, wealth and consumption and must offer granular data on distributions to assess inequalities” (see United Nations, 2023, p. 8).

The Stiglitz-Sen-Fitoussi Commission (Stiglitz et al., 2009, p. 33), charted by the French president Nicholas Sarkozy to examine the limits of GDP as a measure of economic wellbeing, also called for improved distributional measures, stating that “[…] the most pertinent measures of the distribution of material living standards are probably based on jointly considering the income, consumption, and wealth position of households or individuals.” The Organisation for Economic Co-operation and Development (OECD) has followed up on this recommendation by forming international expert groups to consider how to accomplish these goals in a way that is consistent with the System of National Accounts. The panel agrees with this international effort to look beyond GDP by developing measures of the distribution of household ICW consistent with the national aggregates (see also Annex 1-2 to Chapter 1).

Conclusion 2-4: Definitions embedded in systems of national accounts provide a well-established starting point for the variety of income, consumption, and wealth concepts envisioned for the dataset recommended in this report. These definitions include an income measure comparable to the national accounts, a measure of adjusted disposable income comparable to the Organisation for Economic Co-operation and Development measure (including retirement distributions and in-kind transfers), a measure of consumption similar to personal consumption expenditures, and a measure of wealth consistent with the financial accounts, which is similar to the definition used in the regular publication for the Survey of Consumer Finances but which also adds the value of defined benefit pension wealth.

Constructing standardized definitions of ICW involves many complicated methodological decisions. For example, wealth may be defined to include or to exclude increases to the value of stocks or property without any direct action by households to realize those values; consumption may, for some purposes, include the use value of one’s owned home; and income and consumption may be received in-kind, such as in the form of employer health benefits, Medicare, or Medicaid. These conceptually complicated components create multiple options when defining, estimating, and measuring these items.

Conclusion 2-6: Just as there are tailored definitions of income, consumption, and wealth to serve various research and policy purposes, the construction of conceptually complicated components, such as retirement income, health insurance benefits, capital gains, corporate profits, and the value of homeownership, will also entail tailored definitions.

NEW AND IMPROVED STATISTICS

The title of the authoring panel of this report deliberately includes the words “data and statistics” on household ICW to “inform policy and research.” In this context, statistics are established estimates of household income, expenditures, and wealth produced by federal agencies for general public use. Such statistics serve an important purpose as evidentiary estimates that can be tracked over time and across population groups and that provide a common basis for understanding levels and changes in economic wellbeing. Researchers, meanwhile, can construct alternative definitions and household groupings from microdata available to them in secure ways or focus on specific variables or subjects in the underlying data. Statistical agencies can, in turn, learn from their own and others’ research when it may be desirable to modify the established definition(s) or produce additional estimates for context. Federal agencies have been working together and to a limited extent with international efforts (such as the distribution of national accounts project at OECD) to provide consistent estimates on the distributions of ICW.

Conclusion 3-1: The initiatives by the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau, the Congressional Budget Office, and the Division of Research and Statistics of the Federal Reserve Board to develop new and improved estimates of the distribution of household income, consumption, expenditures, and wealth are laudable. An example is the Census Bureau’s National Experimental Wellbeing Statistics initiative to improve its household income

estimates. These initiatives deserve support to become established series as soon as practicable.

Even with these improvements, the economic statistics agencies still typically work in silos to improve their separate measures of household ICW. Recognizing that the work must be done in phases and that reaching the end goal will take time, the panel calls for more integrated efforts to produce estimates that are consistent across agency boundaries.

Recommendation 3-1: In the next 3 to 5 years, statistical agencies should build on their current initiatives to publish improved statistics of household income, consumption, expenditures, and wealth. Specifically:

• The Bureau of Economic Analysis (BEA), the Bureau of Labor Statistics (BLS), and the Census Bureau should move as quickly as possible, consistent with time and resources needed to assess quality, to compile distributional estimates for household personal income (PI), personal consumption expenditures, BLS comprehensive consumption, and income based on the Census Bureau’s National Experimental Wellbeing Statistics (NEWS). These statistics should be published at least annually and within 1 year of the time the underlying data are collected.
• BEA should make its distributional household PI estimates more useful by adding estimates for (a) disposable (after-tax) PI that excludes nonprofit institutions serving households (NPISH); (b) disposable PI (excluding NPISH) that adds retirement distributions and excludes retirement contributions (as in the System of National Accounts definition); and (c) adjusted disposable income (similar to Organisation for Economic Co-operation and Development measure of adjusted disposable income).
• The Census Bureau’s household income estimates should include pre- and post-tax-and-transfer series, where transfers include in-kind benefits. NEWS should follow suit. The Census Bureau should publish money income estimates in appendixes to its reports for use by relevant programs.
• BLS, in cooperation with other economic statistics agencies, should expand and accelerate its program to publish annual estimates of household consumption that are definitionally consistent with previous recommendations.

Even with the changes specified in Recommendation 3-1, differences will remain among ICW definitions that, for one reason or another, are too difficult to reconcile or not appropriate to eliminate. Consequently, it is important for the relevant statistical agencies to develop a collaborative program to regularly document definitional differences and their impact on

distributional statistics. The panel envisions a major report every three or so years, with annual updates, jointly produced by BEA, BLS, Federal Reserve Board, Statistics of Income program with the IRS, and the Census Bureau, and in collaboration with the Congressional Budget Office. This new report would describe the various definitions for household consumption, expenditures, income, and wealth and the differences in definitions across agencies and internationally. The report would also highlight the empirical consequences of these and other differences (e.g., different estimation methods, different data sources). Similarly, other agencies that produce estimates of household ICW need to document how their definitions differ from those of the relevant statistical agencies and take steps to bring their definitions into alignment to the extent possible.

Recommendation 3-2: Relevant statistical agencies (e.g., Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Statistics of Income division of the Internal Revenue Service, Federal Reserve Board) should collaboratively publish a major report every three years that compares levels and trends among the household income, consumption, expenditure, and wealth statistical series using the improved measures as specified in Recommendation 3-1. In addition, their annual reports should compare their results to those prepared in the annual reports from other agencies and, to the extent possible, identify the factors, including differences in definitions, that contribute to differences in estimates.

A key reason for producing an integrated set of statistics on household ICW is to understand distributions for the entire population—for example, the share of total wealth, including debt, held by households grouped into lower and higher levels across the spectrum. Another key reason is to understand how the different outcomes are jointly distributed—for example, the share of consumption generated by households at the top of the wealth distribution versus households at the top of the income distribution. These aims can usefully be accomplished by arranging households in order of their total income, consumption, or wealth and then allocating them into deciles (tenths); breakdowns by quintiles (fifths) may conceal large inequalities within the quintiles. Within-group inequality may be particularly evident for both the top and the bottom income and wealth deciles. Such patterns call for more granular breakdowns for these groups, where possible, along with more detail on sociodemographic groups, such as race and ethnicity.

Conclusion 3-6: To summarize levels and trends in household economic wellbeing, agencies that publish improved estimates of household income, consumption, expenditures, and wealth need to display them

with categories that illuminate the entire distribution. At a minimum, it would be useful to provide levels for decile groups (tenths), as well as for the top 5% and 1% and the bottom 5% of households. The relevant statistical agencies could also collaborate on publishing a comparable set of inequality measures along with distributional breakdowns by socio-demographic groups.

While these new standard estimates will provide consistent measures of the changes in household ICW levels, trends, and distributions, a major issue is how these measures capture the disparities across population groups and geographically across the United States. The panel followed guidance proposed for the revised System of National Accounts 2025 on the measurement of disparities and the importance of evaluating the disparities across population groups.

Race and ethnic disparities are large for income and extremely large for wealth. Data by race and ethnicity for all three components of economic wellbeing are essential in evaluating public policies that may differentially impact various groups. For example, the very considerable disparities in nonfinancial and financial wealth have implications for differences in both consumption volatility and the relative retirement security of different race and ethnicity groups. Research also shows that the distributions of ICW and, in turn, economic wellbeing depend on where people live.

The capacity to produce demographic and geographic detail in statistical estimates relies on the availability of information from microdata sources at both the individual and household level. Estimates for specific household groups may be of much interest to users, but if these estimates rest on a very limited number of observations and/or on a large number of assumptions, their publication may not be useful or appropriate. Agencies need to give priority to developing accurate subnational estimates.

Recommendation 3-3: To provide additional geographic detail for new and improved estimates of household income, consumption, and wealth, relevant statistical agencies should conduct research and development and move toward implementation, where appropriate, as follows:

• The Census Bureau should conduct research to produce subnational estimates (e.g., states, counties, cities) for the recommended standard household income definitions (e.g., using the American Community Survey in conjunction with the Current Population Survey and National Experimental Wellbeing Statistics data).
• The Bureau of Economic Analysis should expand its research producing state-level distributions for personal income and extend

• these estimates to metropolitan areas and counties for the recommended household income definitions.
• Other agencies should conduct research on subnational estimates for consumption and wealth (e.g., using alternative data or modeling techniques).

DATA QUALITY

Efforts by the Federal Committee on Statistical Methodology, OECD, EUROSTAT, and others have produced frameworks for the evaluation of data quality that include not only measures of accuracy and relevance but also such dimensions as comparability and accessibility. To produce ICW measures, an integrated system combines multiple data sources, so it needs careful examination of data quality during the process. The current datasets available to produce new and improved ICW estimates and integrated ICW data include household survey data (e.g., the Annual Social and Economic Supplement of the Current Population Survey, Consumer Expenditure Survey, Survey of Consumer Finances, and American Community Survey), administrative data (e.g., tax and benefit receipt records), and commercial data (e.g., bank account records, or data on credit card spending records). The various types of data each have comparative advantages (and disadvantages) in terms of quality, and it is important that data quality be evaluated regularly.

Recommendation 4-2: Statistical agencies should develop estimates of error when producing estimates for households of income, consumption, and wealth using integrated multiple data sources. The estimates of error should account for linkage errors in addition to other errors such as those arising from sampling, lack of coverage, and misreporting. Agencies should regularly publish measures of the different kinds of error, and both agencies and data users should document the methods used to account for them.

Recommendation 4-3: Statistical agencies that produce estimates for households about income, consumption, and wealth should regularly consult with expert groups and agency advisory committees and evaluate their datasets (whether based on a single data source or multiple sources) to assess whether the datasets and the estimates derived from them meet quality criteria, namely relevance, accuracy, timeliness and punctuality, accessibility and clarity, and comparability and coherence.

DATA SOLUTIONS

Producing integrated statistics will involve choosing among input data sources. Further, because of a limited ability to directly link data inputs as well as other shortcomings of inputs, producing integrated statistics will require decisions about models and methods for combining, imputing, or simulating one or more measures (e.g., wealth or consumption) given some observed measure from a base data source (e.g., income). The choice of data sources and methods depends heavily on the characteristics of the ICW measures that are to be produced from an integrated data system, including whether a single file of comprehensive unit record data (microdata) or a set of summary variables from a variety of linked data-sets is needed.

The potential “data solutions” allowing the production of integrated ICW statistics involve blending together various datasets to obtain all three measures—income, consumption, and wealth—for the same households. Given the complexity of the task and the ongoing evolution of available data inputs, multiple trade-offs need to be weighed (such as quality vs. cost, or access vs. privacy). This report outlines broad strategies that will shape the possible data solutions, including directly measuring of the population characteristics and ICW variables of interest; combining data sources using exact linkage or statistical matching; using inference and imputation to solve for missing components; aligning constructed measures to match macro control totals; and using the budget identity to achieve consistency between the measures of ICW.

Crafting specific comprehensive data solutions to produce an integrated ICW dataset will require a high level of coordination and cooperation among relevant agencies. The panel recommends that a coordinating entity be established to oversee the process.

Recommendation 5-1: The chief statistician and the National Secure Data Service should work together to create a coordinating entity to solve administrative, legal, and technical challenges to integrate data from multiple federal entities (e.g., Bureau of Economic Analysis, Census Bureau, Bureau of Labor Statistics, Statistics of Income division at the Internal Revenue Service) as well as private businesses that collect microdata on individual and household income, consumption, and wealth (ICW). In the near term, the coordinating entity will codify agreements and protocols that enable data acquisition, integration, exchange, and access and support the publication of privacy-protected statistics.

Recommendation 5-2: In the near term, the coordinating entity, working with the relevant agencies, should expand on current efforts and coordinate new pilot studies to blend multiple datasets that have the

key components of ICW; develop and refine modeling methods appropriate for estimating ICW (including an income capitalization option); perform statistical matching to combine information from multiple data sources; fill missing population groups using synthetic records; and impute missing information using relationships estimated in ancillary datasets.

While the panel’s preferred integrated ICW dataset is one built by a coordinating entity that has unfettered access to all existing government and private-sector data sources, the panel realizes this full vision may only be possible in the longer term. In the interim, much can be done with data that are already in the public domain. A public-domain-based integrated ICW dataset would presumably be less costly and could be created more quickly than one that includes private-sector sources. It also could be released to the public without concerns about confidentiality. In addition, it could serve as a “bridge” project for a coordinating entity as it awaits funding and navigates legal hurdles associated with creating an ICW dataset based on more comprehensive and sensitive information. The tradeoff, of course, is that the content and therefore the value of the end-product would be more limited.

Recommendation 5-4: In the initial phase of work, the coordinating entity, in collaboration with the relevant statistical agencies, should explore statistical matching and other methods to combine relevant publicly accessible datasets (e.g., Survey of Consumer Finances, Annual Social and Economic Supplement of the Current Population Survey, Consumer Expenditure Survey, American Community Survey, Survey of Income and Program Participation) to serve as a bridge to a comprehensive integrated dataset. The work undertaken in the initial phase should also include documenting questionnaire concepts and shortcomings across these datasets to ensure coherence and summarizing the best question wording to capture income, consumption, and wealth as described in the Conceptual Framework.

The time that it takes to collect and process raw information is a significant impediment to providing needed ICW data and estimates. Given the desire for more timely distributional data, just as the National Income and Product Accounts provide estimates of GDP and its components before all of the inputs used to produce the final estimates have become available, the panel envisions methods for producing early ICW estimates as an important part of any data solution. Incomplete or alternative but timely input data can be used to predict distributions of household ICW.

Recommendation 5-6: Relevant statistical agencies should investigate updating their data collection methods, blending other available data, and using modeling procedures to improve the timeliness of data on household income, consumption, and wealth—for example, using techniques developed for the Realtime Inequality project at the University of California, Berkeley (and the aggregate methods used in the Distributional Financial Accounts).

Finally, measures of economic and social mobility are important for helping researchers uncover how ICW change over an individual’s lifetime, how they are transferred across generations, and what that implies for lifetime and intergenerational inequality. These mobility measures require longitudinal data not only at the individual level but also for multiple generations. More research is needed to determine how best to use survey questions and administrative data to measure interhousehold transfers from both the donor’s and recipient’s perspective and how to link the ICW integrated data system to longitudinal data that provide a multigenerational perspective.

DATA PRIVACY AND ACCESS

The path toward developing a new data infrastructure will be led by researchers and agency staff. This new infrastructure will support improved statistics on the household distributions of ICW that are released by the agencies. The combination of integrated data and improved statistics will inform the public, media, and policy makers. Researchers, the public, agencies, the Office of Management and Budget, and Congress (both as a data user and as a body that can help to ensure agency cooperation) all have roles to play as the work the panel envisions proceeds. The relevant statistical agencies have already begun collaborations to improve data access and data use. These collaborations should be increased and accelerated.

The panel expects that providing the most complete possible answers to the full range of questions of policy interest related to ICW distributions ultimately will require that all relevant agencies and researchers have access under secure conditions to the integrated micro database of household ICW information. Relying on a data infrastructure involving multiple datasets and data owners requires new mechanisms to link and access the data. These mechanisms also will require new methods of disclosure avoidance. Finally, collaboration across agencies will require cooperation and, possibly, new overarching management and coordination mechanisms. The privacy concerns are heightened because of the integration of many sources of sensitive financial and demographic information, over time, for the same

individuals. Addressing these privacy concerns requires developing a risk-utility framework for the access of the new integrated data.

Recommendation 6-1: In the initial phase of building the proposed income, consumption, and wealth (ICW) data infrastructure, the coordinating entity, in collaboration with relevant statistical agencies, should jointly develop a risk-utility framework and a combination of traditional disclosure limitation strategies and privacy-enhancing technologies to support the agencies’ publication of summary statistics of household ICW.

Recommendation 6-2: The coordinating entity, in collaboration with relevant statistical agencies, should propose options for a National Secure Data Service pilot to be created through which approved researchers would be allowed to access linked microdata consistent with standard definitions of income, consumption, and wealth through the National Secure Data Service.

Most of the blended data likely to be included in the new data infrastructure originates from the Census Bureau and the IRS, and each maintains its own access procedures. These agencies must cooperate to allow more datasets and variables to be linked together. In particular, the Census Bureau and the IRS will need to evaluate the variables available to researchers creating blended data to ensure that the resulting estimates are meaningful.

One common theme emerging from the public presentations made to the panel was that cooperation between data owners, data producers, federal agencies, and researchers is critical. The OECD presenters and all the national statistical office participants stressed the need to have all statistical agencies and datasets available under one umbrella organization. Because the U.S. system is so fragmented, the panel believes that obtaining cooperation on creating the new standard estimates and the new integrated data requires oversight.

Recommendation 6-3: The Office of Management and Budget chief statistician, in collaboration with the Interagency Council on Statistical Policy, should establish an income, consumption, and wealth technical steering committee that includes academic researchers, leadership from statistical agencies, and government researchers. The steering committee’s functions could include determining value propositions and risks; making recommendations about improvements to estimation methods; ensuring that the relevant statistical agencies cooperate to implement the panel’s recommended production of statistics; coordinating the

release and communication of the new estimates; and working with the coordinating entity to develop an acquisition and collaboration system for sharing survey, commercial, and administrative data.

The intense focus by policy makers, researchers, and the public on changes in the economic wellbeing of households in different parts of the income distribution highlights the value of a fully integrated system of ICW data. This report lays critical groundwork for ways to create such a system and proposes a possible roadmap for implementing the recommendations. This roadmap first involves working with the coordinating entity and steering committee to finalize appropriate definitions, produce preliminary estimates, and evaluate methods for creating the underlying database. Next, agencies will focus on expanding work to blend key survey and administrative data sources to enhance the accuracy, detail, and timeliness of ICW statistics. Finally, the longer-term plan involves the challenging tasks of establishing secure modes for researchers to access the blended, linked dataset, expanding the data elements to include greater demographic and geographic detail, and creating greater capacity in the underlying data to support longitudinal analyses. Such a system is necessary to provide consistent, accurate, relevant, and timely statistics on household ICW, both for population groups and for geographic areas, that will support research on household economic wellbeing and on relevant policy initiatives.