Friday, January 22, 2010

Technical note

My economic analyses, such are they are, are frequently framed in terms of "household income".
There are two reasons for this.

First, using household income avoids the complications inherent in personal (per capita) income: full-time vs part-time employment, age of income-earner, etc. - go ahead, visit the Census Bureau's site! - It's not at all clear how best to use the data.

Second - possibly more relevant: for most of us our perceived standard of living is more closely connected to our household income. If single, we alone are the household - what we see is what we get. If married with both partners working, our standard of living reflects two paychecks; if only one of us earns, we see only one paycheck - but that one supports us both (and our kids), as a household. Kids in high school with part-time jobs? No problem - our overall perceived standard of living includes the kids' $$$, too.

For these two reasons - convenience and perceived standard of living - I will always opt for "household income" as the relevant metric.

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