TRENDS IN FAMILY INCOME: 1970-1986 

The Congress of the United States 

Congressional Budget Office 

For sale by the Buperintendent of Documents, U.S. Government Rinting Oflim 

Waahingon, DC 20402 

PREFACE 

In response to separate requests from the Senate Budget Committee 

and the House Select Committee on Children, Youth, and Families, 

this study examines what has happened to the incomes of different 

types of families since 1970. In addition, the analysis discusses economic and demographic factors that have influenced the trends in 

family incomes. 

Roberton C. Williams of CBO's Human Resources and Community 

Development Division wrote the report under the direction of Nancy 

M. Gordon, Martin D. Levine, and Ralph E. Smith. Many people provided comments on earlier drafts, including Michael Carozza, John 

Coder, Sheldon Danziger, G. William Hoagland, Marvin Kosters, 

Frank Levy, Maureen McLaughlin, Carla Pedone, Wendell Primus, 

and Ann Rosewater. Roald Euller wrote the programs that generated 

the data on family incomes. Paul L. Houts edited the manuscript, 

Norma A. Leake and Ronald Moore typed portions of various drafts, 

and Kathryn Quattrone prepared the paper for publication. 

In accordance with the Congressional Budget Office's mandate to 

provide objective and impartial analysis, this paper contains no recommendations. 

James L. Blum 

Acting Director 

February 1988 

CONTENTS 

SUMMARY 

MEASURING FAMILY INCOME 

Issues in Measuring Family 

Income 3 

FAMILY INCOME IN 1986 

Income by Family Type 16 

Income by Age of Family Head 18 

Family Income by Number 

ofworkers 19 

Sources of Income 21 

INCOME TRENDS: 1970-1986 

Income Trends by Family Type 27 

Income Trends by Age of 

FamilyHead 36 

Income Trends by Number 

ofworkers 39 

Trends in Sources of Income 39 

FACTORS AFFECTING FAMILY 

INCOME 

Macroeconomic Conditions 45 

Government Policies and Cash 

Transfer Programs 48 

Demographic Characteristics 53 

Number of Workers per Family 57 

xiii 

1 
vi TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

APPENDIXES 

Demographic and Income 

Data, 1970-1986 65 

Income, Price Indexes, and 

Poverty Thresholds 101 

Poverty Statistics for 

Families, 1970-1986 107 

Limitations of the Current 

Population Survey 11 1 

Income Distributions by 

Family Type 11 3 
CONTENTS 

TABLES 

1. Family Size Equivalence Scales Implicit 

in Official Poverty Thresholds 

Distribution of Family Income by Source, 

by Family Type and Income Level, 1986 

Number of Families and Percentage 

Distribution, by Family Type, 1970-1986 

Number of Families by Age of Family Head 

and Family Type, 1970-1986 

Distribution of Families by Age of Family 

Head and Family Type, 1970-1986 

Median and Percentiles of Adjusted Family 

Income, by Family Type, 1970-1986 

Median and Percentiles of Adjusted Family 

Income, Relative to 1970, by Family Type, 

1970-1986 

Percentage of Families with Adjusted Family 

Income Below the Median Income and the 

20th Percentile Income for All Families, by 

Family Type, 1970-1986 

Distribution of Family Income by Source, 

Families in the Bottom Income Quintile, 

by Family Type, 1970-1986 

Distribution of Family Income by Source, 

Families in the Middle Three Income Quintiles, 

by Family Type, 1970-1986 

Adjusted Family Income by Age of Family 

Head, 1970-1986 

Adjusted Family Income, Relative to 1970 

Level, by Age of Family Head, 1970-1986 
viii TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Distribution of All Families by Number of 

Full-Time, Full-Year Workers, by Family 

Type, 1970-1986 

Distribution of Families in the Bottom Income 

Quintile by Number of Full-Time, Full-Year 

Workers, by Family Type, 1970-1986 

Distribution of Families in the Middle Three 

Income Quintiles by Number of Full-Time, 

Full-Year Workers, by Family Type, 

1970-1986 

Distribution of Families in the Top Income 

Quintile by Number of Full-Time, Full-Year 

Workers, by Family Type, 1970-1986 

Average Number of Full-Time, Full-Year 

Workers, by Family Type, 1970-1986 

Median Adjusted Family Income by Number 

of Workers, by Family Type, 1970-1986 

Median Adjusted Family Income, Relative 

to 1970 Level, by Number of Workers, 

by Family Type, 1970-1986 

Median and Percentiles of Adjusted 

Family Income by Age of Family Head 

and Family Type, 1970-1986 

Median and Percentiles of Adjusted Family 

Income, Relative to 1970 Level, by Age of 

Family Head and Family Type, 1970-1986 

Median Family Income, 1947-1986 

Comparison of Alternative Price 

Indexes, 1967-1986 
CONTENTS ix 

B-3. Adjusted Poverty Thresholds, Weighted 

Average by Family Size, 1967-1986 

B-4. Official Poverty Thresholds, Weighted 

Average by Family Size, 1967-1986 

C-1. Distribution of Families by Percentage 

of Adjusted Poverty Thresholds, by 

Family Type, 1970-1986 

C-2. Adjusted Poverty Rates by Family 

Type, 1970-1986 

FIGURES 

S-1. Median Family Income and Median Adjusted 

Family Income, Relative to 1970 Values, 

All Families, 1970- 1986 

S-2. Distribution of Families by Family 

Type, 1986 

S-3. Trends in Median Adjusted Family Income, 

by Family Type, 1970-1986 

S-4. Trends in Median Adjusted Family Income, 

Relative to 1970 Median Adjusted Family 

Income, Selected Family Types, 1970-1986 

1. Trend in Real Median Family Income, 

1947- 1986 

2. Median Family Income Using Alternative 

Adjustments for Price Change and 

Family Size, 1970-1986 

3. Median Family Income by Family Size 

Using Alternative Adjustments for 

Family Size, 1984 

xiv 

xv 

xviii 

xix 

2 
x TRENDS IN FAMILY INCOME: 1910-1986 February 1988 

4. Comparison of Alternative Price Deflators 

Relative to the Consumer Price Index, 

1967-1986 

5. Noncash Benefits as a Percentage of 

Personal Income, 1970-1985 

6. Distribution of Families by Family 

Type, 1986 

7. Median Adjusted Family Income 

by Family Type, 1986 

8. Median Adjusted Family Income 

by Age of Family Head, 1986 

9. Median Adjusted Family Income 

by Number of Family Members Working 

Full-Time, Full-Year, 1986 

10. Distribution of Families by Number of 

Members Working Full-Time, Full-Year, 

by Income Level, 1986 

Distribution of Family Income by Source, 

by Family Income Level, 1986 

Median Adjusted Family Income by 

Family Type, 1970-1986 

Median Adjusted Family Income, 

Relative to 1970 Value, by Family 

Type, 1970-1986 

Adjusted Poverty Rates by Family 

Type, 1970-1986 

Percentiles of Adjusted Family Income, 

Relative to 1970 Value, by Family 

Type, 1970-1986 
CONTENTS xi 

Percentiles of Adjusted Family Income, 

Relative to 1970 Value, by Type of Family 

With Children, 1970-1986 

Median Adjusted Family Income by Age 

of Family Head, 1970-1986 

Median Adjusted Family Income, Relative 

to 1970 Level, by Age of Family Head, 

1970-1986 

Distribution of Family Income by Source, 

by Income Level, 1970- 1986 

Distribution of Family Income by Source, 

by Income Level, Married Couples and 

Single Mothers With Children, 1970-1986 

Distribution of Family Income by Source, 

by Income Level, Nonelderly Childless 

Families and Unrelated Individuals, 1970-1986 

Distribution of Family Income by Source, 

by Income Level, Elderly Childless 

Families and Unrelated Individuals, 1970-1986 

Median Adjusted Family Income and Percentage 

of Labor Force with Jobs, 1970-1986 

Percentage Growth Since 1970 in Average 

Real Social Security Benefits, Total and 

Amount Resulting from Statutory and 

Automatic Increases, All Retirees, 1970-1986 

Distribution of Families by Family 

Type, 1970-1986 

Distribution of All Families by Age 

of Head, Selected Years, 1970-1986 
xii TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

27. Labor Force Participation Rates of Males, 

Females, and All People, 1970-1986 58 

28. Distribution of Families by Number of FullTime, Full-Year Workers, by Family Type, 

1970-1986 59 

29. Distribution of Families in the Bottom 

Income Quintile by Number of Full-Time, 

Full-Year Workers, by Family Type, 1970-1986 60 

E-1. Income Distribution of Families With 

Children, by Family Type, 1986 

E-2. Income Distribution of Nonelderly 

Families Without Children, 

by Family Type, 1986 

E-3. Income Distribution of Elderly Families 

Without Children, by Family Type, 1986 116 

E-4. Income Distribution of Married Couples 

With Children and Single Mothers 

With Children, 1970 and 1986 117 

E-5. Income Distribution of Nonelderly 

Families Without Children, 1970 and 1986 118 

E-6. Income Distribution of Elderly 

Families Without Children, by 

Family Type, 1970 and 1986 
SUMMARY 

The commonly expressed view of trends in family income holds that 

median income has grown little if at all since 1970, a sharp change 

from the rapid income gains of the 1950s and 1960s. This perception 

inaccurately represents what has happened to family well-being over 

the period; indeed, it ignores four important factors: 

o It fails to account for reduced living costs resulting from 

declining average family size; 

o It uses an inflation index that has overstated the increase in 

living costs; 

o It understates income by omitting items received in kind, 

such as employer-provided health insurance, Medicare, and 

food stamps; and 

o It overstates income available for consumption by using a 

pretax measure. 

A lack of data on individual families precludes consideration of either 

in-kind income or taxes, but the analysis in this report adjusts for 

family size and uses a price index that is a better indicator of inflation. 

The resulting measure--termed "adjusted family income" (AF1)--indicated a 20 percent increase during the 16-year period from 1970 

through 1986, in contrast to a 4 percent drop in the unadjusted income 

measure (see Summary Figure 1). Nearly one-third of the difference 

was the result of the revised inflation indicator and over two-thirds 

stemmed from aGustrnents in family size. 

Median AFI increased for each major family type, although some 

groups fared better than others. (Summary Figure 2 shows the distribution of families among major types in 1986.) Among the elderly, 

income rose by half, from about twice the poverty thresholds to over 

three times the poverty thresholds for those in families, and from just 

above the poverty level to more than one and one-half times the 
xiv TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

poverty thresholds for unrelated individuals. At the other extreme, 

single mothers with children experienced only a slight growth in income: their median income rose and fell, but was just above the poverty thresholds over the period as a whole. 

Although each major family type saw its AFI grow, families 

headed by people under age 25, and families with children and no fulltime, full-year workers had median AFIs that were between 10 percent and 20 percent lower in 1986 than the AFIs of their counterparts 

16 years earlier. Furthermore, the uneven growth in AFI among income levels generally resulted in greater inequality in 1986 than in 

1970, particularly among families with children. 

Summary Figure 1. 

Median Family Income and Median Adjusted Family Income, 

Relative to 1970 Values, All Families, 1970-1986 

lndexof Family Income Measure 

,,, (1970 = 100) 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

NOTE: Unrelated individualsare considered to be one-person families. 
SUMMARY xv 

Using the AFI measure takes account of changes in prices and 

family composition but excludes the effects of taxes and noncash income. If incomes were measured net of income and payroll taxes, 

growth in income would probably appear to have been less during the 

1970s, more rapid during the 1980s, and somewhat less over the entire 

period than what is reported in this study. In contrast, including 

in-kind income, such as health insurance and food stamps, would probably make growth in income look somewhat greater for the 16 years, 

with the gains being concentrated in the first 10 years. The net effect 

of both omissions cannot be estimated. 

Summary Figure 2. 

Distribution of Families by Family Type, 1986 

(As a percentage of all families) 

Nonelderly 

Childless 

Families 

Individuals 

Familles 

With 

Children 

35% 

SOURCE: Congressional Budget Office tabulationsof March 1987 Current Population Survey data. 
xvi TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

These income trends for groups of families imply nothing about 

changes in the incomes of individual families. Because families move 

among classifications over time, the families that make up a specific 

group in one year will generally not be the same families that make up 

that group in a later year. As a result, the aggregate findings cannot 

be used to infer what happened to the incomes of particular families. 

MEASURING FAMlLY INCOME 

Trends in family income are commonly tracked by looking at real 

median family cash income over time, but this approach has four significant shortcomings. 

o Family Size. Because of changes in family size and composition, the trend in median family income is an inaccurate 

indicator of what has happened to family well-being. A 

better measure adjusts income to account for the fact that 

larger families need more resources in total but less per person than do smaller families. 

o Inflation. Using the Consumer Price Index (CPI) to correct 

for inflation overstated the increase in living costs until the 

index was modified in 1983. Alternative indexes better reflect cost changes. 

o In-Kind Income. Only cash income is generally included in 

measures of well-being; income received in kind has been 

ignored. Yet, noncash benefits have accounted for a growing 

share of total income over the last two decades, and their 

omission overstates losses or understates gains in family 

income. 

o Taxes. Although after-tax income more accurately measures a family's purchasing power, pretax income is generally used as the indicator. Because income and payroll taxes 

rose as a share of income through the 1970s before dipping 

slightly in more recent years, using pretax income misstates 

changes in family well-being. 
SUMMARY xvii 

This study deals with the first two of these problems by using 

adjusted family income. AFI equals family pretax cash income reported on the Current Population Survey (CPS), divided by the appropriate poverty threshold to adjust for family size and inflated with an 

alternative price index, the CPI-XI, to correct for price changes. Measuring income as a percentage of poverty thresholds takes account of 

variations in the resources needed for families of different sizes to 

achieve the same standard of living, while the CPI-X1 is a better indicator of changing living costs than the CPI. Unfortunately, because of 

limitations in family-level data, it is not possible to correct for the last 

two problems. 

TRENDS IN FAMILY INCOME 

In 1970, the median incomes of elderly unrelated individuals and 

single mothers with children were just above their adjusted poverty 

lines--that is, poverty lines inflated with the CPI-Xl rather than the 

CPI. At the other extreme, nonelderly childless families had a median 

income more than four times their adjusted poverty threshold (see 

Summary Figure 3). Median incomes of other family types clustered 

around two and one-half times their adjusted poverty levels. 

By 1986, different rates of income growth had broadened the 

range: the median income of single mothers was still only slightly 

above their adjusted poverty lines, while that of elderly unrelated 

individuals had climbed about 50 percent to more than one and onehalf times their adjusted poverty thresholds and that of nonelderly 

childless families had grown about 20 percent to nearly five times 

their adjusted poverty levels. For the elderly, whose median AFI 

grew fastest, the upward trend was fairly steady throughout the 16- 

year period (see Summary Figure 4). Other groups were more subject 

to economic tides that caused incomes to fall in recessions in the mid1970s and the early 1980s and rise during intervening upswings, including the current recovery that began in 1983. 
xviii TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Particular trends highlight these shifts in income during the 

1970-1986 period: 

Income Inequality 

o AFI fell sharply for low-income, single-mother families with 

children. While AFI rose at every income level for married 

couples with children and childless families, for low-income, 

single mothers with children it rose by one-sixth between 

1970 and 1977 and then fell one-fourth over the next nine 

years, for an overall drop of 13 percent. As a result, in 1986, 

one-fifth of all families composed of a single mother and her 

children had less than half the income needed to live at the 

poverty level. 

Summary Figure 3. 

Trends in Median Adjusted Family Income, by Family Type, 

1970-1 986 

500 

Median Adjusted Family Income 

Nonelderly Childless Families 

I Married Couples with Children Elderly Childless Families I 

I _ ..... .- .... ..... 300 - ........I.. ..-.-. .._...... _.. .... _ .... -.-- - - .....a- -. .*.-.-. 

-.- .-.-.-. -.-.-.- 

200 - Elderly Unrelated Individuals 

I 

Nonelderly Unrelated Individuals 

- 

I Single Mothers with Children I 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 
SUMMARY six 

o Income growth sharply reduced poverty among the elderly, 

but the poverty rates of other groups experienced little 

change. The fraction of elderly unrelated individuals with 

incomes below the adjusted poverty line fell by more than 

half from 46 percent in 1970 to 20 percent in 1986, while that 

of elderly childless families was cut from 14 percent to 4 

percent. In contrast, the adjusted poverty rate of single 

mothers with children fluctuated around 45 percent 

throughout the period. 

Summary Figure 4. 

Trends in Median Adjusted Family Income, Relative to 1970 

Median Adjusted Family Income, Selected Family Types, 

1970-1986 

Index of Median Adjusted Family Income 

-(I970 = 100) 

- - 

Elderly Unrelated 

lndlvlduals 

- 

Elderly 

Childless Famllles - 

- 

Nonelderly Unrelated Single Mothers 

lndlvlduals with Chlldren 

I I I I I I I I I I I I I I I 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 
xx TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

o Income inequality increased for families with children and 

for nonelderly childless families over the entire 16-year 

period. Furthermore, for all major family types, inequality 

grew between 1979 and 1986. While high- and low- income 

families had roughly comparable gains in income during 

most of the 1970s, the incomes of low-income families rose 

only slightly or fell between 1979 and 1986, while incomes of 

wealthier families rose sharply. The greater inequality was 

especially pronounced for single mothers with children. 

Age of Family Head 

o Median AFI grew fastest for the elderly, but fell sharply for 

the youngest families. The median adjusted income of families headed by people age 65 and over grew by more than 50 

percent. In contrast, the median adjusted income of families 

headed by people under age 25 dropped nearly 20 percent, 

with the entire decline coming since 1979. 

o Young, low-income families with children suffered marked 

income losses between 1970 and 1986. As a result, two-fifths 

of all young families with children had incomes at or below 

half of the poverty level in 1986. 

o Income inequality increased for all age groups except the 

elderly. Among the youngest families, for example, the 20th 

percentile AFI fell by more than one-third, compared with 

an 18 percent drop in the median AFI and a 5 percent dip in 

the 80th percentile. On the other hand, adjusted incomes 

became slightly more equal among the elderly over the full 

16-year period, but even for that group, inequality increased 

between 1980 and 1986. 

o Median AFI increased--by between 12 percent and 37 percent--for all family types with at least one full-time, fullyear worker. On the other hand, the median adjusted in- 
SUMMARY xxi 

comes of families with children and no such workers fell by 

more than 10 percent. 

Sources of Income 

o Private income other than earnings and non-means-tested 

transfers such as Social Security became more important as 

income sources for middle-income families, while earnings 

made up a smaller share of their total income. In contrast, 

income sources changed only slightly for low-income families as a group. 

o Means-tested transfers such as Aid to Families with Dependent Children (AFDC) became a greater income source 

for low-income families with children, while less of their 

income came from earnings. On the other hand, middleincome, single mothers with children received an increasing 

fraction of their income from earnings over the period. 

o Income of the elderly continued to be dominated by nonmeans-tested transfers, primarily Social Security. The 

share of these transfers rose slightly, earnings declined, and 

other private income increased among elderly family units 

with middle incomes. 

FACTORS AFFECTING FAMILY INCOME 

Many factors affect family income, but four appear to have been 

particularly important in recent years. Macroeconomic conditions 

have perhaps the greatest influence, through the effects of the business cycle on earnings and property income and through the inverse 

relationship between transfer payments and economic conditions. 

Government policies directly affect transfer payments and indirectly 

influence other income sources through their impact on the general 

economy as well as on people's behavior. Demographic characteristics 

of the population help determine family income levels, in part through 

the effects on family composition and in part through the age 

distribution of workers. Finally, labor market behavior--specifically 
xxii TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

the number of earners in each family--has a major impact on total 

family earnings. 

Some specific factors were particularly important in determining 

income trends between 1970 and 1986: 

Macroeconomics 

o Much of the fluctuation in adjusted family income resulted 

from macroeconomic conditions. The significant drops in 

median AFI in the mid-1970s and early 1980s correspond 

closely to periods of sharply rising unemployment. Overall, 

however, both income and the unemployment rate moved 

upward over the 16-year period. 

Government Transfers 

o Changes in government transfer policies strongly influenced 

income changes for affected groups. For example, much of 

the rapid growth in income for the elderly resulted from policies that increased Social Security payments. 

Demographics 

o Demographic shifts in family composition caused the median 

income for all families to be lower than it would otherwise 

have been. Unrelated individuals under age 65 and single 

mothers with children became relatively more common over 

the 16-year period. Their generally lower incomes pulled 

down the median income of all families, independent of the 

income changes of individual types of families. 

o Median family incomes were lower than they otherwise 

would have been because families were generally younger. 

As the baby-boom generation left their parents' homes, the 

average age of family heads declined. Median family incomes were depressed, both because incomes are lower at the 
SUMMARY xxiii 

beginning of careers and because earnings were held down 

by the number of new workers entering the labor force. 

o Among nonelderly families, an increase in the average number of full-time, full-year workers appears to have been the 

principal reason that incomes rose. For example, the fraction of married couples with children that had two such 

workers climbed from 14 percent in 1970 to 26 percent in 

1986. This rise offset the fact that earnings did not keep 

pace with inflation for some workers. At the same time, 

among low-income families, the average number of workers 

did not increase, and they experienced less growth in income 

than other families. 

In combination, these factors led to the trend of rising family 

incomes since 1970. While families as a whole were markedly better 

off in 1986 than they had been 16 years earlier, however, some types of 

families, particularly low-income, single mothers with children and 

families with heads under age 25, became worse off during the period. 

These income patterns resulted in greater inequality of incomes 

among families in 1986 than in 1970. 

CHAPTER I 

MEASURING FAMILY INCOME 

Trends in family income over the past two decades have been the topic 

of many discussions. A commonly expressed view is that while family 

incomes rose rapidly and consistently in real terms from shortly after 

World War II until the early 1970s, little or no real growth has taken 

place since that time. This assertion is based on the trend in Bureau of 

the Census estimates of median family income, adjusted for inflation 

by the Consumer Price Index (CPI) (see Figure 1).1/ From this trend, 

some analysts have drawn pessimistic inferences about the lack of 

economic growth, the worsening of jobs, and the failure of government 

policies. 

In fact, however, the basic conclusion about family incomes is misleading for a number of reasons. First, it does not account for differences in family size that have important effects on the adequacy of 

incomes. Second, the adjustment for inflation that was used overstates the actual erosion of the purchasing power of the dollar. Furthermore, the income measure employed includes only cash income, 

and thus ignores the significant and rapidly growing part of full 

income that is in kind--such as food stamps or health insurance. 

Finally, the use of pretax income omits the changing effects of direct 

taxes. Lack of appropriate family-level data precludes correcting 

these last two shortcomings of the conventional measure of family income, but income can be adjusted to account for family size and 

1. Unlike income measures used elsewhere in this paper, median family income shown in Figure 1 

includes only families as defined by the Bureau of the Census--that is, only groups of two or more 

related people living together. It excludes unrelated individuals--those people not living with 

relatives. Including the latter group would make the trend since 1970 look worse, ascan be seen by 

comparing Figures 1 and 2. 

Real median family income increased at a 3.1 percent average annual rate between 1949 and 1973, 

declining in only 3 of the 24 years. Between 1973 and 1986, however, the measure has moved up 

and down irregularly with declines in 6 of the 13 years. During this latter period, real median 

family income fell by more than 10 percent by 1982, before regaining virtually the entire loss 

during the last four years. See Appendix Table B-1. 
a TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

inflation. Once those adjustments are made, a quite different conclusion about family income becomes apparent: median family income 

have continued to grow since 1970, albeit more slowly than in earlier 

years and at widely differing rates for different groups. At the same 

time, the group of families with children that is at the bottom of the 

income distribution is markedly worse off now than the corresponding 

group was 16 years earlier. 

This paper analyzes what has happened to family incomes since 

1970, comparing the experiences of different types of families. The 

adjusted family income measure used in the analysis corrects both for 

family size and for inflation, but does not take account of either 

in-kind income or taxes. While much of the discussion is descriptive, 

possible explanations for the observed trends in income are suggested. 

Figure 1. 

Trend in Real Median Family Income, 1947-1986 

Median Familv lncome in Thousandsof 1986 Dollars 

SOURCES: Bureau of the Census, Money lncome of Households, Families, and Persons in the 

United States: 1984, Current Population Reports, Series P-60, No. 151 (April 

1986). p. 29; Money lncome and Poverty Status of Families and Persons in the 

Unitedstates: 1986, Series P-60. No. 157 (July 1987), pp. 11 and 38. 
CHAPTER I MEASURING FAMILY INCOME 3 

ISSUES IN MEASURING FAMILY INCOME 

Family income trends are most commonly tracked by looking at real 

median family cash income over time, but using this measure to assess 

income trends poses a number of problems. First, median family income is not the appropriate statistic to use in evaluating well-being 

when family size and composition have changed as they have over the 

last two decades. Other measures, specifically those that take into 

account the reduced needs of smaller families, are better for this purpose. Second, incomes have generally been adjusted for inflation with 

the CPI. Because technical flaws in this particular price index made it 

rise more rapidly than other indicators of inflation since 1970, its use 

makes the growth in real incomes look lower than it actually was. 

Third, measures of well-being have included only cash income; income received in kind has been ignored. Yet, noncash benefits have 

provided a growing share of total income over the last two decades, 

and omitting them overstates losses or understates gains in family 

incomes. Finally, even though after-tax income more accurately measures a family's purchasing power, pretax income is generally used as 

the indicator. Because of both "bracket creep" and rising payroll 

taxes, the share of income going for taxes rose between the mid-1960s 

and the early 1980s, before dipping slightly in more recent years. 

Thus, the well-being of most families rose less quickly than changes in 

their pretax incomes indicate for the bulk of this period, with the 

reverse occurring since 1981. 

Unfortunately, appropriate family-level data on taxes and in-kind 

income do not exist for the entire period covered by this analysis. 

Therefore, as an income measure, this study uses family cash income 

before taxes, measured as a percentage of the relevant poverty threshold; this measure is termed adjusted family income (AFI)./ To take 

account of price inflation, the analysis has indexed poverty thresholds 

since 1967 by using the CPI-X1 as an alternative to the Consumer 

2. The data on family incomes are from the Current Population Survey (CPS). While this is the best 

available source for income data, its shortcomings limit the accuracy of the analysis. Most 

significantly, survey respondents--particularly the elderly--fail to report their full incomes, so the 

data underestimate their true well-being. At the same time, the degree of income 

underreporting--after imputations by the Bureau of the Census--has changed little over time, so 

this problem may have only a small impact on the analysis of income trends. See Appendix D for 

further discussion of the CPS. 
4 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Price Index. Such thresholds are therefore referred to as "adjusted 

poverty thresholds." 

The trend in median adjusted family income for all families and 

unrelated individuals is quite different from the trend in the unadjusted measure, as shown in Figure 2. While the median income of all 

units--inflated using the CPI and not adjusted for family size--declined 

by about 4 percent between 1970 and 1986, the median AFI grew by 

roughly 20 percent. In 1986, just under one-third of the difference 

stemmed from the revised inflation indicator--the CPI-XI--and more 

than two-thirds from adjustments for family size. Nearly all of the difference between the two trends occurred before 1981. 

Figure 2. 

Median Family Income Using Alternative Adjustments for 

Price Change and Family Size, 1970-1986 

lndexof Median Family Income 

(1 970 = 100) 

Inflated Using CPI-XI 

- and Adjusted 

for Family Size 7- 

// 

/ 

- / /*' - / I---. '. // 

/ 

/ =.. / 0 

*/' 

- ----0 - 0 

, Inflated Using 

- 

- .' '. 

Inflated '. . - Using CPI . O.,.O. 

-.-.-.-./ - 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971- 

1987. 
CHAPTER I MEASURING FAMILY INCOME 5 

Adjustments for Family Size 

Median income--the income of the middle family or individual in a 

ranking by income of all families or individuals--is usually preferred 

over mean--or average--income as an indicator of family well-being 

because it gives less weight to very large or very small incomes. In 

general, mean income is significantly higher than median income. 

Both measures fail, however, to take account of differences in family 

needs arising from differences in family size. This failure matters 

both when one compares groups with differing family size and when 

one looks at income over time for groups with changing family size. 

Analysts can use two basic approaches to adjust incomes to take 

account of differing family needs. First, incomes can be measured on a 

per- capita rather than a family basis. This approach will remove all 

differences based on family size, including the economies of scale that 

come from people living together and sharing living costs. In particular, using per-capita income to adjust for differences in needs assumes implicitly that it costs twice as much for two people living 

together to maintain the same level of well-being as for one person 

living alone. Because economies of scale exist, this approach understates the well-being of larger families relative to that of smaller 

families, thus overcompensating for differences in family size. 

The second approach uses an equivalence scale to make incomes 

comparable for families of different sizes. The purpose of such an 

equivalence scale is to take account directly of the differing needs of 

families of different sizes; while needs rise with family size, the increase in needs caused by an additional member is less for larger 

families than for smaller ones. Although analysts disagree over which 

equivalence scale should be used for this purpose, one readily available candidate is that scale implicit in the official federal poverty 

thresholds. This scale assumes, for example, that a family of four 

needs about twice as much income as a single person to maintain an 

equivalent standard of living (see Table 1). 

Although the scale implicit in the poverty thresholds may not be 

an accurate indicator of the disparate needs of families of different 

sizes, it probably yields a better assessment of relative well-being than 

either unadjusted or per-capita measures. Figure 3 compares the 

three approaches, using median family incomes for 1984. The analy- 
6 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

sis in this paper adjusts incomes for differences in family size by 

dividing cash incomes by the appropriate poverty thresholds, and thus 

uses the needs equivalence scale implicit in those thresholds to define 

adjusted family incomes. 

Adiustments for Inflation 

To assess economic well-being, two adjustments for inflation are 

required: first, incomes from different years need to be made comparable by evaluating them in dollars with the same purchasing 

power; second, the equivalence scale used to adjust for family size differences--poverty thresholds, in this analysis--has to be updated to 

take account of increases in living costs. In both cases, the adjustment 

for inflation is generally made using the CPI, an index of the cost of a 

market basket of goods and services representing the average 

TABLE 1. FAMILY SIZE EQUIVALENCE SCALES IMPLICIT 

IN OFFICIAL POVERTY THRESHOLDS 

Family 

Size 

(Persons) 

Equivalence Increase From 

Value Next Smaller 

(One Person = 1) Family Size 

1 

2 

3 

4 

5 

6 

7 

8 

9 or more 

SOURCE: Derived from Bureau of the Census, Money Income and Poverty Status of Families and 

Persons in the United States: 1986 (Advance Data From the March 1986 Current Population Survey), Current Population Reports., Series P-60, No. 154 (August 1986), p. 33. 
CHAPTER I MEASURING FAMILY INCOME 7 

Figure 3. 

Median Family lncome by Family Size Using Alternative 

Adjustments for Family Size, 1984 

Median Family lncome 

(In thousands of dollars) 

1 

L I - - Unadjusted 

,!/. Adjusted Using 

Poverty Scales 

Per Capita 

Family Size 

(Persons) 

SOURCE: Bureau of the Census, Money lncome of Households, Families, and Persons in the 

United States: 1984, Current Population Reports, Series P-60, No. 151 (April 

1986). pp. 26 and 35. 

consumption of the urban population./ To the extent that the CPI 

accurately measures changes in living costs, inflating poverty thresholds or past-year incomes with the CPI is appropriate. 

Unfortunately, through 1982, the CPI measured housing costs in 

a way that led to excessive growth in the index during the late 1970s 

when interest rates increased rapidly. In particular, the housing 

3. Before 1969, poverty thresholds were adjusted using the CPI for food items only. Since that time, 

the CPI for all items has been used. 

The market basket used in calculating the CPI, defined on the basis of Consumer Expenditure 

Survey data on consumption patterns, has until recently been held constant for extended periods, 

with updating taking place only about once each decade. Because it does not account for changes in 

consumption patterna between updates, the CPI--like all fixed-weight price indices--mismeasures 

changes in the cost of living. 
8 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

component of the CPI gave inordinate weight to the costs of newly purchased houses, including both the purchase price and mortgage interest rates, as well as property taxes, insurance, and maintenance costs. 

This approach picked up both the flow of services and the investment 

aspects of homeownership, but only the former is appropriate in an 

index measuring consumption costs. Because of the large weight 

assigned to homeownership costs, many analysts think that the CPI 

overstated the true rise in living costs in the late 1970s. Using it to 

adjust poverty thresholds or incomes for inflation has consequently 

made families appear to be worse off than they really are. 

In 1983, the Bureau of Labor Statistics began using a revised 

method to calculate the CPI, known in experimental analyses and 

referred to as CPI-XI. This revised method uses estimates of the cost 

of renting equivalent housing to measure homeownership costs. This 

"rental equivalence" approach incorporates only the consumption 

aspects of owning a home, not the investment aspects, and consequently is less affected by changes in housing prices and mortgage rates. In 

addition, the relative importance of homeowner-ship costs in the 

CPI-X1 is only about half of that in the CPI. Estimates have been 

made of the values this revised index would have taken, had it been in 

place since 1967; these values provide an alternative price index for 

adjusting both poverty thresholds and incomes for inflation# Between 1967 and 1985, the CPI rose roughly 10 percent faster than the 

CPI-X1 .g 

Because of the greater accuracy of the CPI-XI, this study uses it to 

adjust both incomes and poverty thresholds for the effects of inflation, 

though other price indices might have been used to make inflation 

adjustments. For example, some analysts have chosen the Personal 

Consumption Expenditure (PCE) implicit price deflator from the 

National Income and Product Accounts, a price index based on the current-year consumption patterns of all Arnericans.€j/ Others prefer the 

4. See John C. Weicher, "Mismeasuring Poverty and Progress," American Enterprise Institute, 

unpublished manuscript, revised April 15,1986. 

5. Note that this divergence of the two price indices occurred entirely between 1967 and 1983. Since 

that time, the official CPI has followed the CPI-Xl, because both have been calculated using the same methodology. 

6. See, for example, Social Security Administration, Omce of Research, Statistics, and International 

Policy, "Changes in the Money Income of the Aged and Nonaged, 1967-1983," Studies in Income 

Distribution. no. 14 (September 1986). 
CHAPTER I MEASURING FAMILY INCOME 9 

gross national product (GNP) deflator, which uses the composition of 

all produced goods and services to weight individual prices into an 

index. Because it is based on the prices of both consumption and nonconsumption goods, however, the GNP deflator is not appropriate for 

indexing family incomes. Figure 4 shows how these indices and the 

CPI-X1 have varied relative to the oficial CPI since 1967. Over the 

19-year period, the PCE deflator and the CPI-X1 were quite similar, 

while the GNP deflator rose more and experienced wider swings.71 

A final note is in order with regard to poverty thresholds and inflation adjustments. Any set of poverty thresholds is arbitrary in that 

it is implicitly based on a particular concept of what constitutes a 

minimally adequate income. Reasonable people differ in how they 

define poverty, and definitions change over time to reflect what poverty is perceived to be. As a result, for any single year, it is relatively 

arbitrary what thresholds are used or how they are derived from the 

previous year's thresholds; thresholds simply define what poverty 

is@ How one year's thresholds relate to those of other years is important, however, when making comparisons over time; if such comparisons are to have any meaning, they must be based on thresholds 

that represent the same concept of poverty. Thus, while adjustments 

of poverty thresholds for inflation matter relatively little for any given 

year, they are crucially important for temporal comparisons./ 

Noncash Income 

A family's well-being is determined not only by its cash income, but 

also by any noncash income it receives. Yet, analyses of how families 

have fared over time generally ignore noncash benefits, both those 

received from employers in the form of fringe benefits and those pro7. Adjusted family incomes reported in this study would be about 1 percent lower in 1986 if the PCE 

deflator were used to index incomes, and about 6 percent lower ifthe GNP deflator were used. 

8. The relationships between poverty thresholds for different types of families are, however, 

important for single-year comparisons. The central issue is differences in living costs for different 

family types, arising from variations in size, composition, and prices paid for consumption goods. 

The thresholds currently used account only for differences in family size, number of children, 

and--for one-person and two-person families only--whether the family head is under age 65. 

9. Of course, what poverty thresholds are used has obvious effects on the poverty rate, but this again 

simply reflects the arbitrary nature of the thresholds. 
10 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

vided through social welfare transfer programs. As a result, such 

analyses understate how well off families are. Also, because in-kind 

income has grown as a share of personal income, omitting it from income comparisons over time means that the understatement becomes 

progressively greater, the longer the period of observation. As shown 

in Figure 5, in-kind income--employer-provided benefits and government transfers--increased from 11 percent of personal income in 1970 

to about 18 percent in 1984. 

Unfortunately, it is not possible to include noncash benefits in 

income distribution calculations because the necessary family-level 

data do not now exist. While information is available about the aggregate amounts of employer-provided fringe benefits, no large-scale data 

sets allocate such benefits among individuals. As part of its Current 

Figure 4. 

Comparison of Alternative Price Deflators 

Relative to the Consumer Price Index, 1967-1 986 

Ratio of Alternative Price lndex toconsumer Price lndex 

(1967 = 1.00) 

SOURCES: Derived from data in the Economic Report of the President (US. Government 

Printing Office, January 1987), pp. 251 and 307, and John C. Weicher 

"Mismeasuring Poverty and Progress," the American Enterprise Institute, 

unpublished manuscript (April 1986). 

1.06 

1.02 

GNP Deflator 

- CPI - ,--I 

\ -I--- \ 

// \ 0 @ 

- * 

/ \ - / 'LO-M \ - / \ / 

,e-----4/ \ 

PCE Deflator \\ - 

CPI \ 

- -. -. - -. 

0.94 - - 

- -. %.-.-.-.-.-.-.-.-.-.. 

0.90 111111111111 I I Ill I 
CHAPTER I MEASURING FAMILY INCOME 11 

Figure 5. 

Noncash Benefits as a Percentage of Personal Income, 

1970- 1985 

Noncash Benefits as a Percentaae 

P 

of Personal Income 

12 ------- /-- 

dd 

-*-Ad 

#/-- 

I 

Employee 

Fringe Benefits 

SOURCES: Economic Report of the President (US. Government Printing Office, January 

1987); Statistical Abstract of the United States, various issues. 

6 - - 

- 

Population Survey (CPS), the Bureau of the Census has been collecting information about receipt of in-kind transfers from the government--such as Medicaid, Medicare, food stamps, and housing assistance--but only since 1980. While these benefits could be included in 

total income estimates, the omission of most noncash income from private businesses would skew the income distribution toward lowincome families, thus giving an inaccurate picture of the well-being of 

families across the income scale and over time. Consequently, this 

analysis omits all in-kind income from its dollar-value estimates.u/ 

Thus, it is important to keep in mind that this omission understates 

family well-being for any given period and that trends in family incomes probably appear worse than they actually are. 

2 

10. In addition, if in-kind benefits were to be counted as income, the analysis would require a 

procedure for valuing those benefits in dollars. While some items--such as food stamps--are 

relatively easy to value, others are both more difficult and more controversial. Analysts disagree 

for example, about how to value medical benefits from employer-provided insurance, Medicaid, and 

Medicare. 

In-Kind 

- Government Transfers - 

0 I I I I I I I I I I I I I I 

1970 1975 1980 1985 
12 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Taxes 

While analyses of trends in family well-being are generally based on 

income before taxes, after-tax income would provide a better measure 

of the resources available to families to meet their needs. Both income 

and payroll taxes reduce disposable income; using pretax income 

therefore overstates how well off families are.Ql In terms of examining trends over time, this factor would not matter if taxes remained a 

fixed fraction of income. Between 1970 and 1986, however, the Social 

Security tax rates increased by nearly half, and the maximum amount 

of earnings subject to the tax roughly doubled in real terms. Over the 

same period, the percentage of income paid in federal income taxes 

fluctuated between 13 percent and nearly 17 percent with a generally 

upward trend until the 1981 tax reduction. At least until recent years, 

ignoring taxes would thus have caused trends in family income to look 

better than they have actually been. 

Again, the lack of appropriate family-level data makes this problem difficult to solve. Only since 1980 has the Bureau of the Census 

provided annual estimates of income and payroll taxes paid by 

families in their CPS files. To account for taxes before that time would 

require developing tax simulation programs that would be of limited 

use. Therefore, the following analyses are based on pretax incomes; as 

a result, the growth in family well-being throughout the 1970s is 

overstated, while the growth in more recent years is understated. 

11. Measuring income before taxes omits only the effects of direct taxes such as payroll and income 

taxes. The impact of indirect taxes, such as excise and sales taxes, is taken into account through 

their effects on prices. The same is true of corporate taxes, at least to the extent that they are 

shifted to consumers in the form of higher prices. 
CHAPTER I1 

FAMILY INCOME IN 1986 

The median income of all families in 1986--adjusted for inflation using 

the CPI-XI--was just over three times the adjusted poverty threshold, 

the highest level attained since detailed income data became available 

in the late 1960s.Y This aggregate figure, however, masks a wide 

variation in incomes among family types and age groups, and it gives 

no indication of the distribution of income among families. While 

most families had incomes that were well above adjusted poverty 

levels, the majority of single mothers with children were either below 

or just above the adjusted poverty line; if they were under age 35, they 

were more likely than not to be poor. At the other extreme, the 

median income of middle-aged families without children was more 

than five times the adjusted poverty threshold. 

Because looking only at the population as a whole can generate 

misleading conclusions, much of the following analysis examines 

individual types of families. It discusses five basic family types-- 

incorporating both families and unrelated individuals as shown in 

Figure 6. These family types are defined as follows:/ 

1. Two "adjusted" measures are used in this analysis: 

o Adiusted poverty thresholds are identical to the official poverty thresholds except that they are adjusted for inflation since 1967 using the CPI-X1 rather than the CPI; and 

o Adiusted family income is cash family income before taxes, measured as a percentage of the 

appropriate adjusted poverty threshold. 

See Chapter I for further discussion. 

2. While these family units are generally referred to in this paper as "families," not all of them are 

families under the definitions used by the Bureau of the Census. In particular, unrelated 

individuals--people not living with any reIatives--are included as two of the family types. On the 

other hand, the Census Bureaucounts as families only groups of two or more related people living 

together. 
14 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure 6. 

Distribution of Families by Family Type, 1986 

(As a percentage of all families) 

Families 

With 

Children 

35Oh 

SOURCE: Congressional Budget Office tabulations of March 1987 Current Population Survey data. 
CHAPTER I1 FAMILY INCOME IN 1986 15 

o Families with Children: families composed of two or more 

related people living together, at least one of whom is under 

age 18 and not married (34.3 million families in March 

1987); 

o Nonelderly Childless Families: families composed of two or 

more related people living together, in which neither the 

family head nor the spouse of the family head is age 65 or 

over, and there are no children under age 18 (20.7 million 

families); 

o Nonelderly Unrelated Individuals: people over age 17 and 

under age 65 who are not living with relatives (22.4 million 

families); 

o Elderly Childless Families: families composed of two or 

more related people living together, in which either the 

family head or the spouse of the family head is at least 65 

years old, and there are no children under age 18 (10.1 million families); and 

o Elderly Unrelated Individuals: people age 65 and over who 

are not living with relatives (9.2 million families). 

In addition, for some specific analyses, families with children are 

separated into three subgroups:/ 

o Married Couples with Children: families composed of a 

married couple living only with their own children, at least 

one of whom is under age 18, or related children under age 

18, or both (24.4 million families); 

o Single Mothers with Children: families composed of unmarried mothers (including those never married, widowed, 

divorced, or separated) living only with their own children, 

3. Some families classified as married couples with children or as single mothers with children 

include families that should be counted as "other families with children." For example, a family 

headed by an unmarried woman and containing only herself, her grown daughter, and the 

daughter's child under age 18 would be classified as a single-mother family with children. Such a 

three-generation family should properly be classified as an "other family with children." These 

misclassifications appear, however, to have little effect on the income data reported in this study. 
16 TRENDS IN FAMILY INCOME: 1910-1986 February 1988 

at least one of whom is under age 18, or related children 

under age 18, or both (6.9 million families); and 

o Other Families with Children: all other families with at 

least one member under age 18 (3.0 million families). 

Finally, at times, all family types are combined into a single group: 

o All Families: all families or unrelated individuals. This 

category combines all of the family types listed above. It 

differs from the Bureau of the Census definition of families 

in that it includes unrelated individuals as families with just 

one member (96.6 million families). 

INCOME BY FAMILY TYPE 

Adjusted family incomes in 1986 varied widely by family composition. 

Single mothers with children and elderly people not living with 

relatives were worst off, while nonelderly families without children 

had the highest incomes relative to adjusted poverty thresholds. 

Median Family Income 

Median incomes in 1986 varied from only slightly above the adjusted 

poverty level for single mothers with children to nearly five times the 

adjusted poverty thresholds for nonelderly childless families (see 

Figure 7). All families with children and nonelderly unrelated individuals were near the middle of this range, with median incomes just 

under three times their respective adjusted poverty thresholds. Families with children, however, showed wide divergence in median income levels; married-couple families were at more than three times 

adjusted poverty, compared with only about 15 percent above adjusted 

poverty for single mothers. The elderly in families had significantly 

higher incomes than their counterparts not living with relatives: the 

median income of elderly childless families was more than three times 

the adjusted poverty level, while that of elderly unrelated individuals 

was only about one and one-half times the adjusted poverty level. 
CHAPTER I1 FAMILY INCOME IN 1986 17 

Figure 7. 

Median Adjusted Family Income by Family Type, 1986 

Median Adjusted Family Income 

All All Familler Nonelderly No~lderl~ Elderly Elderly 

Families With Childless Unrelated Childless Unrelated 

Children Families Indlwiduals Families Indlvlduals 

Median Adjusted Family Income 

400 

All Familles 

With 

Children 

Married 

Couples 

With 

Children 

51ngle 

Mothers 

With 

Children 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current 

Population Survey. 
18 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

This inequality in incomes among family types was further 

evidenced by the fact that 46 percent of single mothers with children 

were below adjusted poverty in 1986, compared with just 7 percent of 

married couples with children and 4 percent of both elderly and nonelderly childless families. Unrelated individuals also had high 

poverty rates: 18 percent of those under age 65 and 20 percent of their 

elderly counterparts had incomes below the adjusted poverty line.1 

Distribution of Incomes within Family Types 

The distribution of incomes within family types also varied marked1y.Y Incomes among married couples with children, for example, were 

more equally distributed than incomes among single mothers with 

children. For married couples, incomes clustered fairly tightly around 

their median, while single mothers were more likely to have incomes 

significantly lower or higher than their median. Similarly, among 

nonelderly family units, the incomes of unrelated individuals were 

more unequal than those of childless families. The reverse was true 

for elderly units: the incomes of unrelated individuals were highly 

concentrated near their median, while those of elderly families 

showed greater dispersion. 

INCOME BY AGE OF FAMILY HEAD 

Family incomes as a percentage of poverty in 1986 rose with the age of 

the family head through middle age before declining when family 

heads were in their late fifties or older. Among all families, median 

income was lowest--less than twice the poverty level--for those with 

heads under age 25 (see Figure 8). The median then rose to a peak of 

nearly four times poverty for families whose heads were between 35 

and 54, and declined to under two and one-half times poverty for fami4. See Appendix C for additional data on poverty rates. 

5. Figures depicting the 1986 income distributions for the various family types are presented in 

Appendix E. 
CHAPTER II FAMILY INCOME IN 1988 19 

Figure 8. 

Median Adjusted Family Income by Age of 

Family Head,1986 

Median Adjusted Family Income 387 

Undrr 

25 

65 and 

Ovrr 

Age of Family Head 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current 

Population Survey. 

lies with elderly heads. Similar variation occurred within each of the 

individual family types./ 

FAMILY INCOME BY NUMBER OF WORKERS 

The number of workers in a family during a given year depends on 

how working is defined over a 12-month period. Because this study 

concerns family incomes, it considers workers with limited job 

attachments--and, therefore, limited total earnings--as less important 

to its purposes. As a result, the analysis focuses on full-time, full-year 

workers--those people who reported that they normally worked at 

6. If all childless families are considered, those with elderly heads have median incomes below those 

with heads in any other age group. The same is true for all unrelated individuals. Appendix Tables 

A-18 and A-19 provide data on median family incomes by age of family head and family type. 
20 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

least 35 hours each week and that they were employed at least 50 

weeks during the year. Alternative definitions count more people as 

workers, but there is little difference among these definitions in terms 

of changes over time in either the average number of workers per 

family or family incomes by number of workers.~l 

Not surprisingly, family incomes in 1986 increased as families 

had more members working, although not proportionately. The 

median income for families with no full-time, full-year workers was 

somewhat less than twice the poverty level, while families with one 

such worker had a median income of nearly four times poverty, more 

than twice as great (see Figure 9). Doubling the number of workers-- 

by adding a second one--raised the median to just over five times 

poverty, a gain of about 40 percent relative to one-worker families. 

The smaller income gain as a result of the second worker may derive 

from the fact that families with more workers are likely to be larger, 

so their higher incomes are diluted by increased family size. 

The number of workers in a family was closely associated with the 

family's position in the income distribution. Nearly 85 percent of 

families in the bottom income quintile had no full-time, full-year 

workers (see Figure 10). By contrast, nearly two-thirds of families in 

the middle three income quintiles had at least one full-time, full-year 

worker. Among families at the top of the income distribution, about 

half had one full-time, full-year worker, and over one-third had at 

least two. 

Median incomes within individual family types also tended to rise 

with the number of workers, although the major differences discussed 

earlier in income levels among family types remained. Moreover, 

families with children needed more workers to reach a given income 

level: married couples with two full-time workers had a median income roughly equal to that of childless families with just one worker, 

while the median income of single-mother families with one worker 

7. These other definitions include: (1) all people who worked more than 26 weeks during the year, 

regardless of the number of hours worked per week; (2) all full-time workers, regardless of how 

many weeks they worked, plus all part-time, full-year workers; (3) all people who reported working 

at least 500 hours during the year; and (4) people who worked at least 400 hours, earned at least 

400 times the minimum wage, or earned at least half as much as their families' principal earners. 
CHAPTER I1 FAMILY INCOME IN 1986 21 

Figure 9. 

Median Adjusted Family Income by Number of Family 

Members Working Full-Time, Full-Year, 1986 

Median AdjustedFamily Income 

600 

None One Two 

Number of Full-Time, Full-Year Workers in Family 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current 

Population Survey. 

was less than that of childless families with no workers./ Despite 

these differences among family types, having a single full-time, fullyear worker increased the median family income by at least one and 

one-half times the poverty threshold for every type of family. 

SOURCES OF INCOME 

Because macroeconomic conditions and public policies can have 

varying effects on incomes of different kinds, it is useful to know what 

fractions of families' incomes come from various sources. While most 

families receive the largest share of their income from wages and 

salaries, significant fractions also come from government transfer 

payments and investments. This section examines the distribution in 

8. See Appendix Tables A-16 and A- 17 for median incomes by number of workers and family type. 
24 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

1986 of family income among five major sources to determine the 

degree to which each contributed to family resources. 

The five income sources examined were: 

o Earnings of the primary worker ("Primary Earnings"): 

income from wages and salaries and self-employment for 

that family member with the greatest such income. 

o Earnings of other family members ("Other Earnings"): 

income from wages and salaries and self-employment for all 

family members other than the primary worker. 

Figure 10. 

Distribution of Families by Number of Members Working 

Full-Time, Full-Year, by Income Level, 1986 

Percentage of Families in Income Category 

with Given Number of Workers 

100 

Bottom Middle Three 

Quintile Quintiles 

None 

Number of Family Members Working 

one Two 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current 

Population Survey. 
CHAPTER II FAMILY INCOME IN 1988 23 

o Private income not from employment ("Other Private 

Income"): rent, interest, and dividend income; private and 

government pensions and annuities; alimony and child support payments; and any other income received from private 

sources. 

o Non-means-tested government transfers: government 

transfer payments that are not conditioned on recipients 

having low incomes. Major sources include Social Security, 

Unemployment Insurance, and Worker's Compensation. 

o Means-tested government transfers: government transfer 

payments that are provided on the basis of recipients having 

incomes below specified limits. Major sources include Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC), and general assistance. 

Incomes reported on the Current Population Survey are reported only 

as "more than" specified limits when they exceed those limits--often 

referred to as "top-coding." Consequently, it was not possible to obtain 

accurate estimates of the distribution of incomes by source for families 

with high incomes, and thus for the population as a whole./ This 

analysis therefore reports income sources only for two groups, the 

bottom 20 percent of the income distribution and the middle 60 percent--that is, the bottom quintile and the middle three quintiles. 

Earnings, mostly from the primary earner, provided the largest 

single share of family income for families in each income grouping: 47 

percent for those in the bottom quintile and 79 percent for those in the 

middle three quintiles (see Figure 11). Low-income families were 

much more reliant on transfer income than were middle-income families, receiving one-fourth of their income from non-means-tested 

sources such as Social Security and one-sixth from welfare, compared 

with one-twelfth and a negligible share, respectively, for middle- income families. Other private income accounted for about 12 percent of 

the income of each group. 

9. See Appendix D for further discussion of limitations of the CPS as a source of income data. 
24 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure 11. 

Distribution of Family lncome by Source, by Family lncome Level, 1986 

(As a percentage of total family income) 

Families in Bottom Quintile of lncome Distribution 

Other Earners 3% 

Families in Middle Three Quintiles of lncome Distribution a/ 

 on-~eansTested Transfers 8% 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current 

Population Survey. 

a. Means-tested transfers made up less than 0.5 percent. 
CHAPTER I1 FAMILY INCOME IN 1986 25 

TABLE 2. DISTRIBUTION OF FAMILY INCOME BY SOURCE, BY 

FAMILY TYPE AND INCOME LEVEL, 1986 (Inpercents) 

Other Non-Means- MeansPrimary Other Private Tested Tested All 

Family Type Earner Earners Income Transfers Transfers Sources 

Families in Bottom Quintile of Income Distribution 

All Families 44 3 12 25 16 100 

Families With Children a/ 54 5 9 7 25 100 

Married couples 74 10 7 4 5 100 

Single mothers 21 1 9 4 65 100 

Nonelderly Units b/ 

Childless families 56 12 17 12 3 100 

Unrelated individuals 53 --- 19 12 15 100 

Elderly Units j 

Childless families 6 d/ 13 75 5 100 

Unrelated individuals d/ --- 8 78 15 100 

Families in Middle Three Quintiles of Income Distribution 

All Families 65 14 12 8 d/ 100 

Families With Children g/ 74 19 6 2 1 100 

Married couples 74 21 4 1 a/ 100 

Single mothers 62 4 12 6 16 100 

Nonelderly Unitskl 

Childless families 63 25 10 2 d! 100 

Unrelated individuals 88 --- 9 2 - dl 100 

Elderly Units j 

Childless families 20 3 35 4 1 d/ 100 

Unrelated individuals 4 --- 29 65 1 100 

SOURCE: Congressional Budget Office tabulations of data from the March 1987 Current Population 

Survey . 

NOTE: Percentages may not sum to 100 because of rounding. 

a. This category includes families composed of children living with their single fathers, children 

living with their parents and other people besides their siblings, and children not living with their 

parents. Data for such families are not shown separately, however. 

b. Units in which the head (and the head's spouse, if any) is under age 65. 

c. Units in which the head (or the spouse of the head, ifany) is age 65or over. 

d. Less than 0.5 percent. 
26 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Different types of families relied on different sources of income in 

1986 (see Table 2 on preceding page). For the elderly, non-meanstested transfers were the dominant income source, particularly in the 

bottom quintile, with nonemployment private income providing most 

of the remainder; welfare was important only for low-income 

unrelated individuals. Single-mother families were much more reliant on welfare, especially those with low incomes who received nearly 

two-thirds of their income from that source. All other groups got at 

least half of their incomes from earnings, with substantial contributions by secondary workers; middle-income married-couple and childless families received over one-fifth of their income from such workers, 

while those with low incomes received at least one-tenth. 
CHAPTER 111 

INCOME TRENDS: 1970-1986 

Between 1970 and 1986, median adjusted incomes of all major family 

types increased, albeit more slowly than during the previous two 

decades and at different rates for different types of families.ll After 

adjustments for inflation and family size changes, median adjusted 

family incomes (AFI) rose by half for elderly families and individuals, 

compared with 14 percent for all families with children and just 2 

percent for single mothers with chi1dren.a At the same time, among 

families with children, those with the lowest incomes became worse off 

over the 16 years: the AFI of the family at the 20th percentile was 12 

percent lower in 1986 than in 1970.31 

INCOME TRENDS BY FAMILY TYPE 

Between 1970 and 1986, median AFI increased for each of the different family types, albeit with some ups and downs in the intervening 

years. Overall, the median income of all family units rose from about 

two and one-half times adjusted poverty in 1970 to more than three 

times adjusted poverty in 1986, an increase of 20 percent. At the same 

time, however, there were wide variations in both income levels and 

growth rates among family types. 

1. The terms "adjusted poverty thresholds" and "adjusted family income" are defined in Chapter I and 

summarized on p. 13. 

2. In interpreting these observations, note that families in 1986 were not the same as those in 1970: over the 16 years, existing families changed types and new families formed, resulting in significant 

changes in the mix of family typee. See further discussion below. 

3. Percentile incomes were determined by ranking families in order of their incomes as a percentage 

of poverty thresholds from lowest to highest. The 20th percentile income is that of the family 20 

percent up from the bottom, the 40th percentile income is that of the family 40 percent up from the 

bottom, and so forth. The median income is the 60th percentile income, that of the family halfway 

up the distribution. Unless otherwise stated, percentile incomes are calculated separately for each 

family type. 
28 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Median Adjusted Family Income 

In 1970, the median incomes of elderly unrelated individuals and 

single mothers with children were just above the adjusted poverty 

line, compared with over four times the adjusted poverty threshold for 

nonelderly childless families. Incomes of other family types clustered 

around two and one-half times adjusted poverty. By 1986, the range 

had broadened: the median income of single mothers was still only 

slightly above adjusted poverty, while that of elderly unrelated individuals had grown to over one and one-half times the adjusted poverty level, and that of nonelderly childless families had increased to 

nearly five times adjusted poverty (see Figure 12). Growth of median 

AFI was greatest for the elderly--up 50 percent--and least for singlemother families with children--up just 2 percent over the 16-year period (see Figure 13). 

Among elderly families, the upward trend in median AFI was 

fairly steady with only a few seemingly random downturns, while 

other families experienced much greater income variation over the 16 

years. For the latter, incomes rose until 1973 before falling moderately through the 1975 recession. In the late 1970s, incomes gained 

steadily. But from 1980 through 1982 they dropped--and quite sharply for some groups. Since 1982, all but one of the groups experienced 

consistent increases in median AFI; the exception was single mothers 

with children for whom a decline in income between 1985 and 1986 

erased most of the small gains they had made since 1970. 

The wide differences in growth of AFI across family types is reflected in the marked drop in poverty rates among the elderly compared with the virtually constant rates for families with children (see 

Figure 14).g Between 1970 and 1986, the adjusted poverty rate for 

elderly units was cut by more than half--from 46 percent to 20 percent 

for unrelated individuals and from 14 percent to 4 percent for childless 

families. By comparison, 46 percent of single mothers with children 

and 7 percent of married couples with children were poor in 1986, both 

rates virtually unchanged from 16 years earlier. 

4. See Appendix C for additional statistics on adjusted poverty rates. 
CHAPTER m INCOME TRENDS: 1970-1986 29 

Figure 12. 

Median Adjusted Family Income by Family Type, 1970- 1986 

Families With Children Elderly Childless Families 

300 - .._ ............... 

200 - Elderly Unrelated Individuals - 

Nonelderly Unrelated lndividuals I/ -' 

100 I 1 I I I I I I I I I I I 

1970 1975 1980 1985 

500 Median Adjusted Family Income 

000 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

Nonelderly Childless Families //---- -\ ____-.@--@. -. )-aC/ \-----k0 

#,lCC 

---4-- - - 

500 - Median Adjusted Family lncome 

400 

300 

200 

T 

- Married Couples With Children All Families With Children - 

*--- -------- I 00- 

- -I-- ----- /-----..-------- --A- - .......... /@; ... ............ .......... ............. -. . --- .................. ....... ........ .... ............... ....... 

- Single Mothers With Children - 

loo 

1970 1975 1980 1985 
30 TRENDS IN FAMILY INCOME: 1970-1985 February 1988 

Figure 13. 

Median Adjusted Family Income, Relative to 1970 Value, 

by Family Type, 1970-1 986 

lndex of Median Adjusted 

Family Income (1970 = 100) 

160 

Elderly Unrelated Individuals 

150 - 

Elderly Childless Families 

140 - 

Nonelderly Unrelated Individuals 

130 - - 

Nonelderly Childless Families I 

- Families With Children 

90 I I I I I I I I I I I I I I I 

1970 1975 1980 1985 

lndex of Median Adjusted 

Family income (1970 = 100) 

160 , 

- - 

- - 

- Married Couples With Children All Families With Children - 

- 

,..' - -0-. . ... ._..-. ,.< ..... - .... ...... I. ........... ........ / : 

Single Mothers With Children 

I I I I I I I I I I I I I I I 

SOURCE: Congressional Budget Office tabulations of data from the March Current 

Population Su~ey, 1971-1987. 
CHAPTER m INCOME TRENDS: 1970-1986 31 

In interpreting these income trends, keep in mind that changes in 

AFI for groups of families imply nothing about changes in the AFI of 

individual families. Over time, families alter their composition, move 

among classifications as their demographic characteristics change, 

and move up and down throughout the income distribution. As a 

result, no firm conclusions about changes in the incomes of the particular families in a group can be drawn from the aggregate findings. 

For example, the median AFI of families with children increased 14 

percent between 1970 and 1986. On the one hand, the adjusted incomes of some families might have risen 50 percent, while other families' incomes fell. On the other hand, it is possible that the AFI of 

every family that had children in 1970 rose more than 14 percent during the period. Many of those families would no longer contain children in 1986--and thus would not affect the group's 1986 median inFigure 14. 

Adjusted Poverty Rates by Family Type, 1970-1 986 

50 1 Adjusted Poverty Rate (In percents) 

1 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

40- 

30 

20 

.LC---- Single Mothers With Children ,p-- 

\ -- . -c ---- ----- , .-- \ J 0 

- - - .. ed-d 

k, 

'--- .."0' - \ 

\ Elderly Unrelated individualr 

- h-- - *--_)*- _ 

Nonelderly %-. 

. . - . Unrelated lndivlduals Y'-XO 

I -*--*-- --.-. -"I- W-, 

- --.-.I .-.-.-. -. --- - ---.-.- --. -.-.-. -.-...Z:-:Z:-<~ 

Nonelderly 

Childless Familles Married Coupler 

Elderly With Children 

Childless Families - .... I .._....-. _.... ... ..... ...... ............. -. -. .... ..... .- ........ - .. - I1 
33 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

come--while new families with children and lower incomes would pull the median downward. 

Distribution of Income within Family Types 

Income growth between 1970 and 1986 also varied widely among 

income levels, leading to greater income inequality for all family types 

as a group, for families with children, and for nonelderly childless 

families, while reducing inequality of incomes for other family types. 

Figure 15 shows the growth since 1970 of median AFI and of the 

adjusted income levels that define each income quintile, defined separately for each family type./ 

For all families and unrelated individuals considered as a single 

group, the adjusted incomes defining each quintile grew at roughly 

the same pace from 1970 through 1978. After that time, however, 

growth rates diverged sharply, with those at the top of the income 

distribution experiencing greater income gains than those at the 

bottom. Over the entire 16-year period, the 80th percentile adjusted 

income rose 29 percent, compared with only a 9 percent gain for the 

20th percentile income. This divergence reflected a widening of the 

gap between high- and low-income families. 

A similar pattern of increasing income inequality occurred for 

families with children--who experienced the greatest divergence 

among adjusted income levels (see Figure 16). Except among lowincome families, the incomes of families with children tracked 

reasonably closely through the 1970s--climbing roughly 15 percent by 

1979--before experiencing different growth rates in more recent years. 

In contrast, the 20th percentile income barely grew between 1970 and 

5. Income quintiles are f&hs of the income distribution, defined by ordering all units of a given family 

type from that with the lowest income--defined as a percentage of the poverty threshold--to that 

with the highest. The bottom quintile is the lowest fifth of that ordering, while the top quintile is 

the highest fifth. Because quintiles are defined separately for each family type, the quintile a particular family is in says nothing about ib place in the overall income distribution for all 

families as a group. See earlier discussion in Chapter 11. 

The 20th percentile income is the income of the family unit at the top of the lowest quintile, the 

40th percentile income is that of the family unit at the top of the second quintile, and so forth. 
CHAPTER m INCOME TRENDS: 1910-1986 33 

Figure 15. 

Percentiles of Ad'usted Family Income, Relative to 1970 Value, 

by Family Type, I 970-1986 (1970 = 100) 

Nonelderly Childless Families Elderly Childless Families 

160 160 

- 

140 140 - 

120 

100 

- 

80 80 IIIII IIIIIIIIII 

1970 1975 1980 1985 1970 1975 1980 1985 

All Families 

160 160 

All Families With Children 

160 Nonelderly Unrelated Individuals 

I 

140 140 

Elderlv Unrelated Individuals 

- - 

- - - - 

- 20th Percent~le ---- 40th Percentile ....... Median 

I 

120 120 - 

100 100 , 

80 80 

1970 1975 1980 1985 'g70 1975 1980 1985 

-.-.- 60th Percentile - 80th Percentile 

SOURCE: Congressional Budget Office tabulations of data from the Current Population 

Survey, 1971-1987. 
34 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

1979, and then fell sharply during the 1980s. Over the entire period, 

the 80th percentile income increased 27 percent, compared with a 12 

percent drop in the 20th percentile income. 

Figure 16. 

Percentiles of Adjusted Family Income, Relative to 1970 Value, 

by Type of Family With Children, 1970-1986 (1970 = 100) 

All Families With Children Married Couples With Children 

160 160 

Single Mothers With Children 

160 01 

- 20th Percentile ---- 40th Percentile ... ...., Median 

-.-.- 60th Percentile - 80th Percentile 

SOURCE: Congressional Budget Office tabulations of data from the Current Population Survey, 

1971-1987. 
CHAPTER III INCOME TRENDS: 1970-1986 35 

These income trends for all families with children reflect both the 

trends of specific types of families with children and the changing distribution of families among the different types within this group. The 

adjusted incomes of both married couples and single mothers with 

children grew at roughly the same rates through the 1970s before 

showing consistent divergences beginning in 1979. While this meant 

that the gaps between those with high incomes and those with low became wider, neither subgroup experienced as great a widening as the 

aggregate group. Between 1970 and 1986, the ratio of the 80th percentile income to the 20th percentile income rose 22 percent for married couples and 33 percent for single mothers, compared with the 44 

percent increase for all families with children. 

This apparent contradiction--that inequality within the aggregate 

family type increased more than within any subgroup--was the result 

of the growing proportion of single-mother families (who tend to have 

lower incomes) within the group of all families with children. Because 

over half of all single-mother families had adjusted incomes below the 

20th percentile income for all families in 1986, the simple fact that 

their numbers increased led to a greater disparity among adjusted 

family incomes. 

The divergence of adjusted incomes was smaller but still pronounced among nonelderly childless families. AFIs at all levels grew 

by about 15 percent between 1970 and 1978, after which the lower percentile incomes fell, while the higher ones continued to rise. Over the 

full 16 years, the 80th percentile income grew by 27 percent, but the 

20th percentile income increased only 12 percent, again expanding the 

gap between low- and high-income families. 

Among other family types, either no change or some lessening of 

inequality took place. The AFIs of elderly childless families became 

more equal between 1970 and 1975, as the 20th percentile income increased 27 percent, while the 80th percentile income rose only 11 percent. For the next 11 years, however, adjusted incomes at different 

levels grew at roughly the same rate, and little further change in income differentials occurred for this group. 

Elderly unrelated individuals experienced a similar reduction in 

inequality between 1970 and 1975, but those changes were erased by 

1986. Over the first period, low AFIs grew more than 30 percent while 
36 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

high incomes increased half as fast. Between 1975 and 1986, however, 

the situation reversed: high incomes rose an additional 34 percent 

and low incomes only 12 percent. 

This pattern of increasing equality followed by reversal also 

occurred for unrelated individuals under age 65, although the periods 

were different. In the early 1970s, high and low AFIs moved erratically with little change in their relative levels. Between 1972 and 

1979, however, the 20th percentile income grew by 28 percent while 

the 80th percentile income rose only 8 percent. The higher incomes 

then continued to increase, climbing an additional 13 percent by 1986, 

while low incomes retreated slightly. Thus, almost no net change took 

place in income inequality over the 16 years. 

Comparisons of the 1970 and 1986 income distributions for individual family types show the cumulative effects of these various 

changes in AFI. The greatest shift occurred for single mothers with 

children whose adjusted incomes became sharply less equal over the 

16-year period; a much larger share of these families had incomes 

either below three-fourths of their median or above twice their median 

in 1986 than in 1970.61 Similar but less pronounced increases in inequality affected married couples with children and nonelderly 

childless families. In contrast, other family types showed little change 

in income inequality. 

INCOME TRENDS BY AGE OF FAMILY HEAD 

Growth of AFI varied widely among families with heads of different 

ages between 1970 and 1986. Families headed by people age 65 and 

over experienced the greatest income gains--their median AFI rose 54 

percent--while young families with heads under age 25 saw their 

median AFI fall 18 percent (Figure 17 shows the trends in absolute 

AFI levels, while Figure 18 depicts the growth in AFI over time).y 

6. Figures comparing the 1970 and 1986 income distributions for each family type are presented in 

Appendix E. 

7. These changes in income levels for the various age groups do not indicate anything about changes 

in the incomes of particular families, because families shift age groups over time. For example, if it 

did not change otherwise, a family whose head was in the 25 through 34 age group in 1970 would be 

classified in the 36 through 54 age group in 1986. 
CHAPTER m INCOME TRENDS: 1910-1986 31 

Figure 17. 

Median Adjusted Family Income by Age 

of Family Head, 1970-1986 

Median Adjusted Family lncome I I 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987 

300 

Income growth for elderly families was consistent throughout the 

period, but that of the youngest group was erratic, rising and falling 

through 1979 before dropping 20 percent over the succeeding four 

years. The median adjusted family income increased 14 percent for 

those between 55 and 64 and 28 percent for those in the 35 through 54 

age range./ For each of these groups, income gains occurred almost 

entirely during the 1970s, with smaller gains or even losses in more 

recent years. 

55-64 35-i4 ::..... ..... ..... I ._.I._. $..< - -... , . ...... ./.-. 

.+ ;.:.-..& :-.-.-.- . ...... ./.-.- ..-. .-. -.-.C - ..... -...7.-./: 

- ............... ........._... 

------------ . /------ 

A ..... - - - - 0 

--- 4H-"-"l' -------/** 

---& 

25-34 65 and Over 

0 

A( 

The widening gap between high- and low-income families observed above for all families also occurred within each of the age 

- 

,. 

Under 25 

100 I I I I I I I I I I I I I I I 

1970 1975 1980 1985 

8. Income trends for particular age groups varied among family types (see Appendix Tables A-18 and 

A-19). For example, among family units with heads under age 25, median AFI dropped sharply for 

families with children, was virtually unchanged for childless families, and rose for unrelated 

individuals. 
38 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure 18. 

Median Adjusted Family Income, Relative to 1970 Level, 

by Age of Family Head, 1970-1986 

Index of Median Adjusted 

Family Income (1970 = 100) 

160 , 

- 65 and Over 

- 

- 25-34 

55-64 

- 

Under 25 

I I I I I I 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 

groups except the elderly, and the degree to which the gaps expanded 

was inversely related to age./ Among families with heads under age 

25, adjusted incomes fell at all levels between 1970 and 1986, but 

dropped most for those who were poorest: the 20th percentile income 

declined 34 percent, compared with an 18 percent drop in the median 

income and only a 5 percent fall in the 80th percentile.ul On the 

other hand, adjusted incomes of the elderly, which increased by more 

than those of any other group, became slightly more equal over the 16- 

year period, as the 20th percentile income climbed 48 percent while 

the 80th percentile rose 41 percent. Nevertheless, even among the elderly, income inequality increased between 1980 and 1986. 

9. See Appendix Tables A-9 and A-10 for data on income trends by age of family head and by income 

percentiles. 

10. This pattern varied among family types. Among unrelated individuals under age 25, whose 

incomes rose during the 16-year period, AFI grew fastest for those with lower incomes, while 

among families with children, the reverse was the case. See Appendix Tables A-18 and A-19. 
CHAPTER m INCOME TRENDS: 1970-1988 39 

INCOME TRENDS BY NUMBER OF WORKERS 

Between 1970 and 1986, the median adjusted incomes of families with 

at least one full-time, full-year worker grew for every family type, 

with increases ranging from 12 percent to 37 percent.U/ At the same 

time, for families with no workers, median AFI rose by even more for 

the elderly--more than 50 percent. It increased by less than 10 percent, however, for the nonelderly without children and fell by 11 percent for married couples with children and by 18 percent for single 

mothers with children. 

Gains in adjusted family income between 1970 and 1986 were 

roughly the same for families with one full-time, full-year worker as 

for those with two. Median adjusted incomes of both married couples 

with children and nonelderly childless families rose roughly 20 percent over the 16 years, for families with either one or two workers. By 

contrast, AFI gains for elderly families with no workers were greater 

than those for those with at least one worker, but the reverse was true 

for the nonelderly. 

TRENDS IN SOURCES OF INCOME 

For all families considered as a single group, the distribution of family 

incomes by source changed between 1970 and 1986 for families in the 

middle three income quintiles but stayed relatively constant for those 

in the bottom quintile (see Figure 19).s/ For middle-income families, 

earnings became less important, while other private income and nonmeans-tested transfers accounted for a growing share of income. On 

the other hand, low-income families experienced some year-to-year 

variation, but only small changes in their sources of income over the 

16-year period. At the same time, individual family types experienced significant changes at both income levels. 

11. See Appendix Tables A-16 and A-17 for data on median family incomes by number of workers and 

by family type. 

12. Because of data limitations for high-income families, distributions of incomes by source are 

reported here only for the bottom 20 percent and the middle 60 percent of the income distribution. 

See Chapter I1 for further discussion. 
40 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Figure 19. 

Distribution of Family lncome by Source, 

by lncome Level, 1970-1986 

Bottom lncome Quintile 

Percentageof Total Family lncome 

100 

Middle Three Income Quintiles 

Percentage of Total Family Income 

100 1 

- Primary Earner ----- Other Earners 

. . . . . . . . Other Private Income -.-.- Non-Means-Tested Transfers 

Y Means-Tested Transfers 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 
CHAPTER III INCOME TRENDS: 1910-1986 41 

Among families with children, earnings as a share of income 

dropped for those in the bottom quintile, stayed constant for middleincome married couples, and grew markedly for middle-income single 

mothers (see Figure 20). Among low-income families, primary earnings for both married couples and single mothers fell, but some of the 

drop for married couples was made up by a rise in the earnings of other 

family members. Of greater importance was an increase in welfare income--especially among single mothers--and the growth in the share 

of families with children headed by single mothers. Among middleincome families, an increase in secondary earnings offset a decline in 

primary earnings for married couples, while single mothers received 

markedly larger shares of income from earnings--up from 53 percent 

to 66 percent--with the gain replacing mostly transfer income. 

Among the nonelderly, childless families received significantly 

less from earnings and more from other private income in 1986 than 

they had in 1970 (see Figure 21). Middle-income families, which 

received 93 percent of their income from earnings in 1970, saw that 

share drop to 88 percent by the end of the 16-year period, while the 

earnings share of income for low-income families fell from 78 percent 

to 68 percent. Unrelated individuals in the bottom quintile had slight 

gains in earnings and other private income sources balancing small 

declines in transfer incomes, while those in the middle three quintiles 

had virtually no changes. 

Incomes of the elderly continued to be dominated by non-meanstested transfers, primarily Social Security, which grew slightly in 

importance over the 16-year period (see Figure 22). The earnings of 

middle-income families, the only elderly group for whom earnings 

were significant, declined from one-third to one-fifth of total income, 

replaced by a sharp rise in other private income. Low-income elderly 

families and unrelated individuals in both income categories showed 

little change in their income from other private sources. The share of 

income from welfare fell for all elderly groups; by 1986, only lowincome unrelated elderly people received more than 5 percent of their 

income from that source. 
48 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Figure 20. 

Distribution of Family Income by Source, by Income Level, 

Married Couples and Single Mothers With Children,l970-1986 

(As a percentage of total family income) 

Single Mothers With Children 

Married Couples With Children 

100 - - 100 

Bottom Quintile Middle Three Quintiles 

- - - - 

80 80 - - 

60 

40 

20 

- ----- Primary Earner Other Earners 

100 Bottom Quintile Middle Three Quintiles 

-.-.- ........ Other Private Income Non-Means-Tested Transfers 

ooc 

1970 1975 1980 1985 1970 1975 1980 1985 

x---K Means-Tested Transfers 

- - 

- - 

- - 

- - 

- - 

- C 

,,,,---d------- 

- - 

- - 

- - 

- - 

- - 

- - 

- - 

r- - Za.T.3 =;: z 5 ---C'. <- 

80 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

.-. .. 

60 

40 

20 

- - 

- - 

100 

80 

- - 

- - 

- L 

- - 

60 - 60 - 

- - 

40 - - 40 - - 

- - - 

..-... .......-... .......... ....-.._.. .. -..-- . .-.- .-._. -.-.-. , -.- .-.4. -,... 0 --- 4 
CHAPTER m INCOME TRENDS: 1970-1988 43 

Figure 21. 

Distribution of Family Income by Source, by Income Level, 

Nonelderly Childless Families and Unrelated Individuals, 1970- 1986 

(As a percentage of total family income) 

Nonelderly Childless Families 

Bottom Quintile Middle Three Quint~les 

- Primary Earner ----- Other Earners 

Nonelderly Unrelated Individuals 

Bottom Quintile 100 

Middle Three Quintiles 

100 - 

- - - - 

........ Other Private Income -. -. - Non-Means-Tested Transfers 

- - 

- - 

5 - 

- 

- - 

- 9 

- - 

---------- - - ........... - - ..-......... -..-..-- . ..- ....._... .. OL,.....C._,&..,t.-h -.-.-. .-.-.-.-. .-.-.,-.-. . 

100 

80 

60 

40 

20 

u Means-Tested Transfers 

1970 1975 1980 1985 1970 1975 1980 1985 

- - 

- - 

- - 

- - 

- - 

- - 

- 

......................... 7.- .-1._...- ......... ..-. ---.-. .-.-. -._. .-._._. . , 

00 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

- 

- - 

- - -- - - 

- 

- - 

- - 

- - 

- -"-"-' . - ........ - , ..-/., ?...T...-.-. .-.-.-.-.- .-.-.-. dd ,,,,,---,, ---i 

ooc 

1970 1975 1980 1985 1970 1975 1980 1985 

80 

60 

80 

60 

100 

80 

60- 

40 

2o 

- - 

- - 

- - 

- 40 

20 

0 

- - :z ... ,..= .: .."'-"-. -.-. .. . . --. - - 

I I I _ 

20 
44 TRENDS IN FAMILY INCOME: 19'70.1986 February 1988 

Figure 22. 

Distribution of Family lncome by Source, by lncome Level, 

Elderly Childless Families and Unrelated Individuals, 1970-1986 

(As a percentage of total family income) 

Elderly Childless Families 

Bottom Quintile Middle Three Quintiles 100 100 

- - 

80 - 80 - 

- - 

60 60 - - 

- - 

,.-.-. %.-.-.-.-.-.-.-.-.. 

40 40 -&' 

-.-.. - ...... ............ - 

20 

- - 

0 0 ---7*7( 

- Primary Earner ----- Other Earners 

Elderly Unrelated Individuals 

Bottom Quintile Middle Three Quintiles 

........ Other Private Income - .-. - Non-Means-Tested Transfers 

Means-Tested Transfers 

............. 

100 

80 

60 

40 

20 . 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 

( - - ... .._.......... _.._.._ ..-..- ................ 

0 

- I I 

1970 1975 1980 1985 1970 1975 1980 1985 

- - 

-,.-.-. -.-. - .-.-. H*-.w.-*-= 

L -.-. - 

- - 

- - 

- - 

- - 
CHAPTER IV 

FACTORS AFFECTING FAMILY INCOME 

Four major factors influence family incomes--macroeconomic conditions, government policies, demographic characteristics of the population, and labor market behavior--and their effects vary for different 

sources of income. The general state of the economy has perhaps the 

greatest influence on incomes for a variety of reasons: labor market 

conditions cause earnings to rise and fall across business cycles; property income is affected by business activity and interest rates; and 

transfer payments vary inversely with economic conditions.l/ Government policies directly affect transfer payments and indirectly influence other income sources through their impacts on the general 

economy as well as on economic behavior. Demographic characteristics of the population help determine adjusted family income levels, 

in part through family composition effects and in part through the age 

distribution of workers. Finally, labor market behavior--specifically 

the number of earners in each family--has a major impact on total 

family earnings. The remainder of this chapter discusses what has 

happened to each of these factors and how they might have affected 

family income trends since 1970. 

MACROECONOMIC CONDITIONS 

The state of the economy--and particularly the availability of jobs--has 

obvious and important effects on family incomes. Family incomes rise 

in strong labor markets in which there are jobs for virtually everyone 

who wants one, in which workers are often able to work additional 

hours, and in which productivity gains allow real wages to increase. 

1. One other macroeconomic factor that should be noted is the tendency of family incomes to rise with 

increases in worker productivity and consequent higher real wages. In recent years, productivity 

has not risen as quickly as in earlier years, and this factor has had lessinfluence on incomes. 
46 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Property income also varies with economic conditions, affected both by 

aggregate business activity and by the level of interest rates. A wide 

range of factors influences the overall performance of the American 

economy; among the most visible are the government's fiscal and 

monetary policies, although their precise effects are highly uncertain. 

Since 1970, the American economy has performed erratically. 

There have been four recessions, the most recent in 1981 and 1982 

being the deepest since the Great Depression. Unemployment rates 

have moved across a wide range, from a low of just under 5 percent in 

the early 1970s to a peak of nearly 10 percent in 1982; between 1970 

and 1986, unemployment increased, averaging 5.4 percent from 1970 

to 1974, 7.0 percent from 1975 to 1979, and 8.0 percent from 1980 to 

1986. Since 1983, however, the unemployment rate has dropped 

markedly to 7 percent in 1986, and continues to follow a downward 

trend. 

Between 1970 and 1986, median adjusted family incomes moved 

in a cyclical pattern corresponding to that for the national employment rate, with periods of rising employment corresponding to periods 

of increasing median AFI (see Figure 23). At the same time, median 

AFI followed a general upward trend over the 16 years, while a 

declining fraction of the labor force held jobs. Two possible explanations are changes in the relationship between the two measures and 

the influence of other factors on income levels. 

An important element that appears to have affected incomes 

during the 1970s and 1980s has been the ability of the economy to 

absorb vast numbers of additional workers. Between 1970 and 1986, 

employment grew from just under 80 million workers to nearly 110 

million workers, an increase of about 40 percent, and the labor force 

participation rate climbed from 60 percent to 65 percent. Although 

economists disagree about whether recently created jobs are comparable to previously existing jobs, the growth was much greater 

between 1970 and 1986 than in earlier periods: employment grew 31 

percent in the preceding 16 years from 1954 to 1970. 

Aggregate economic performance also affects property income, 

although the impact on family incomes is much less than that from 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 47 

Figure 23. 

Median Adjusted Family Income and Percentage of 

Labor Force With Jobs, 1970-1986 

T P T PT P T 

m Recessions 

SOURCES: Congressional Budget Office tabulations of Current Population Survey data, 1971- 

1987, and Economic Report of the President (U.S. Government Printing Office, 

January 1987). p. 285. 

labor income./ While the precise impacts are difficult to identify empirically, rising interest rates generally lead to increased incomes 

from financial assets. Similarly, corporate profits are high in a strong 

economy; this may lead to increased dividend income for investors, as 

well as to rising stock values, Because asset holdings are distributed 

2. For families in the middle three quintiles, only 12 percent of income was derived from private sources other than earnings in 1986, compared with about 80 percent from earnings. At the same time, such income was more important in 1986 than it had been in 1970, when 88 percent of income 

came from earnings and just 6 percent from other private sources. 
48 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

very unequally, changes in property income have significant effects on 

both the levels and distribution of family incomes. 

GOVERNMENT POLICIES 

AND CASH TRANSFER PROGRAMS 

Government policies have an impact on family incomes through their 

effects on the general economy and through the effects of regulations 

and taxes on the economic behavior of individuals. But their most 

direct impact is through cash transfer programs. Overall, cash transfers in 1985 accounted for about 8 percent of family incomes, and over 

40 percent of the incomes of families in the bottom quintile. Social 

Security benefits were by far the dominant component, accounting for 

about 70 percent of all cash transfers. Means-tested transfers such as 

Aid to Families with Dependent Children (AFDC) were much less important in the aggregate, but were the major source of income for 

single mothers with children in the bottom quintile; means-tested 

transfers constituted about two-thirds of their income in 1986.31 Government policies influence both the levels of benefits available and, in 

many cases, who is eligible to receive payments@ 

Social Security 

Much of the rapid growth in the incomes of the elderly has resulted 

from increases in Social Security payments, the major source of income for the elderly. Among all retired workers receiving Social 

Security, average monthly benefits rose 57 percent from $311 to 

$488--in 1986 dollars--between 1970 and 1986, somewhat more than 

the 50 percent gain in the median adjusted incomes of elderly families 

3. While there are many other government transfer payments such as Unemployment Insurance (UI) 

and Supplemental Security Income (SSI), only Social Security and AFDC provide significant 

amounts of income to any singIe family type. As a result, this analysis discusses only the latter two 

income sources. 

4. The federal government sets minimum categorical eligibility requirements for various transfer 

programs, while states often are allowed to choose some options, such as AFDC for two-parent 

families (AFDC-UP). Similarly, the federal government may set minimum benefit levels, as is the 

case with SSI, while states may offer supplements to the minimy levels or may be free to select 

any payment amounts, as in the AFDC program. 
CHAPTER 1V FACTORS AFFECTING FAMILY INCOME 49 

and individuals. Three factors were largely responsible for the Social 

Security increase, two of which involved government policies. First, 

the Congress raised benefit levels almost every year through either 

one-time increases or automatic cost-of-living adjustments (COLAs) 

that affected all recipients. Second, benefit levels were changed by 

other policy actions affecting program elements, such as the way in 

which basic benefits are calculated, the reduction in benefits for early 

retirement, or the amount of earnings exempt from the earnings test. 

Finally, new retirees as a group received higher benefits than their 

older counterparts, in large part as a result of their greater earnings 

during their working years. Only the last factor was not a result of 

legislated policies. 

Social Security benefits were increased markedly between 1970 

and 1986, both through ad hoc adjustments in the early 1970s and 

later through automatic COLAs. Primary insurance amounts were 

raised 10 percent in 1971,20 percent more in 1972, and an additional 

11 percent in 1974, before automatic annual COLAs were begun in 

June 1975. Since that time, benefit levels have been increased in line 

with the CPI-W, the price index for urban wage earners and clerical 

workers.&/ These increases caused Social Security benefits to grow 

sharply in real terms, both because of the large ad hoc increases and 

because the CPI-W rose more rapidly than the CPI-XI. Relative to the 

CPI-XI, basic benefit levels rose roughly 15 percent between 1970 and 

1973, leveled off through 1979, and then moved fitfully with an upward trend to a 1986 level more than 20 percent above that in 1970 

(see Figure 24). This recent increase explains a large part of the 

growth in the median incomes of the elderly observed in Chapter III: 

incomes rose most rapidly between 1970 and 1973, more slowly 

through the rest of the 1970s, and then somewhat faster since 1980. 

Other policy changes affecting Social Security are harder to quantify. Legislation enacted in 1972 altered the method by which basic 

benefits were calculated in a way that led to markedly higher payments for workers retiring during much of the 1970s. On the other 

hand, 1977 legislation to correct a "double-indexing" flaw in the 

5. The 1983 COLA--and all subsequent COLAS--were delayed for six months in order to shift the 

adjustment from June to December. 
50 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Figure 24. 

Percentage Growth Since 1970 in Average Real Social Security 

Benefits, Total and Amount Resulting from Statutory and 

Automatic Increases, All Retirees, 1970-1986 

Percentage Real Growth Since 1970 in Average 

Social Security Benefitsof All Retirees 

60 

Growth from 

- Other Factors - 

- - 

- 

_c--- 

rMC ------__ - /* d 

/ 

~-------------------d' 

- 

Growth from Statutory 

and Automatic Increases 

I I 

SOURCE: Social Security Bulletin, Annual Statistical Supplement, 1986, pp. 32 and 170; and 

1977-1979, p. 151; and SocialSecurity Bulletin, vol. 50, no. 7 (July 19871, p. 41. 

NOTE: Benefit levels inflated using CPI -XI. 

method for calculating benefits lowered payments to workers born 

after 1916. By themselves, these laws would have caused incomes of 

the elderly to move upward during the mid-1970s and then downward 

in succeeding years, but other factors such as higher lifetime earnings 

have kept average real benefits rising@ 

6. For example, between 1970 and 1986. the average payment for all retireee rose 57 percent in real 

terms (see Figure 24). About one-third of the increase stemmed from the legislated and automatic 

benefit changee discussed above, and moat of the remainder probably resulted from higher 

earnings of new retirees. 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 51 

Aid to Families with Dependent Children 

Government policies since 1970 have made major changes in the 

AFDC program, the largest single source of cash income for lowincome single mothers with children, but the effects of those changes 

on family incomes are difficult to identify. Government policies in the 

1970s and 1980s have affected the AFDC program in two important 

ways: benefit levels, which are set by the individual states, have not 

been raised in line with inflation, so they have fallen significantly in 

real terms, and changes in eligibility criteria and net income formulas, which are set by the federal government, have reduced or eliminated benefits for some families. While these factors are likely to have 

led to smaller incomes for low-income families, the relationships are 

complicated and the effects unclear. 

Over the last 16 years, most states allowed AFDC benefit levels to 

fall in real terms by not increasing payments in line with inflation. 

Between 1970 and 1986, only three states maintained real benefit 

levels; maximum payments for four-person families dropped in real 

terms by at least 40 percent in 10 states, and by 25 percent or more in 

half the states.71 The median maximum payment fell over 30 percent 

from $581 to $399 (in 1986 dollars), If nothing else had changed, these 

passive reductions would not only have cut the incomes of recipient 

families, but would also have made some recipients ineligible for further benefits. 

The second policy effect resulted from program modifications 

enacted by the Congress. Legislation passed in 1981 tightened AFDC 

eligibility criteria in ways that made some families with earnings 

unable to qualify for assistance./ Opinions differ on whether these 

changes have reduced welfare rolls and made families more selfsufficient or caused some AFDC mothers to quit their jobs to maintain 

their benefits. No direct evidence supporting either view has been 

found. Although the percentage of recipients with earnings did fall, 

7. Between 1970 and 1975, the median decrease in the maximum benefit level for a four-person 

family was 9 percent, compared with 14 percent between 1975 and 1980 and 11 percent between 

1980 and 1986. The trend was reversed somewhat in very recent years: between 1986 and 1987.22 

states and the District of Columbia raised real benefits. 

8. Subsequent legislation passed in 1984 relaxed eligibility requirements somewhat, but did not 

change the qualitative nature ofthe effects of the 1981 act. 
5a TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

that finding is consistent with either working families moving off the 

AFDC rolls or recipient families quitting their jobs. 

Any effects, however, of these two factors on the incomes of singlemother families with children are difficult to detect. The 20th percentile income rose irregularly between 1970 and 1977 to a level 16 

percent above that in 1970, even though real AFDC benefits were 

falling in most states and families were increasingly unlikely to contain any workers.% Furthermore, in spite of declining benefit levels, 

low-income, single-mother families became more dependent on welfare and less reliant on employment. Over the same period, the fraction of their income coming from welfare rose from 45 percent to 57 

percent, while the fraction derived from earnings fell from 36 percent 

to 27 percent. 

Although these apparent contradictions are difficult to understand, two explanations are possible. First, recipient families might 

have become relatively more common in states with high AFDC benefits. If so, incomes could rise and a larger share of income could derive 

from AFDC, even if real benefits were declining in each state. A 

second possibility is that families changed size in ways that increased 

benefits relative to poverty thresholds. In 1985, for example, the 

maximum benefit level in every state was a larger percentage of the 

relevant poverty threshold for single mothers with two children than 

for single mothers with three children. Because the average size of 

AFDC families declined between 1970 and 1986, this relationship 

could have led to higher adjusted incomes, even if real benefit levels 

and unadjusted family incomes were falling. 

Between 1977 and 1986, the 20th percentile income of single 

mothers with children fell 25 percent to just under half the poverty 

threshold. At the same time, such families in the bottom quintile 

became even less likely to have any earnings; earnings fell from onequarter of family income to one-fifth, while means-tested transfers 

grew in importance from 57 percent to 65 percent. Although the decline in incomes of single mothers with children probably stemmed 

largely from the deep recession in the early 1980s, it is likely that 

9. In 1970.95 percent of single-mother families in the bottom quintile had no members working full 

time throughout the year. In 1977, 96 percent had no working members, and by 1985, the 

percentage had climbed to 99 percent. 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 53 

falling real benefit levels and tightened eligibility criteria and benefit 

calculations also played a role. 

DEMOGRAPHIC CHARACTERISTICS 

The composition of the population influences family incomes in two 

distinct ways. First, the distribution of people into families affects 

both family needs and the number of potential workers (or earners) 

available to meet those needs. Second, the distribution of people by 

age--both overall and in terms of living arrangements--affects incomes 

because the earning power of workers changes as they grow older, 

described by what is known as the "age-earnings profile." These demographic characteristics have changed markedly over the past 16 

years, and their effects show up in family income trends. 

Composition of Family Units 

The composition of family units in 1986 was significantly different 

from that in 1970. Families with children had fewer children.lJ/ 

Moreover, the fraction of families with children declined from 45 percent in 1970 to 35 percent in 1986, while households consisting of nonelderly people not living with any relatives became more common, 

growing from 14 percent of all family units to 23 percent (see Figure 

25). In addition, among families with children, single-mother families 

grew in importance, roughly doubling from 10 percent of families with 

children in 1970 to 20 percent in 1986. In combination, these changes 

caused a reduction in the average family size from 3 people to 2.5 

people.lJl 

10. In part, the drop in the average number of children per family may result from declining family 

income. Parents may have decided they could not afford to have as many children as families had 

in earlier years. 

11. Within family types, average size changed significantly only for families with children--down from 

4.4 people to 3.9 people. Much of the decrease in average size of all families came from the increase 

in the relative number of unrelated individuals. 
34 TRENDS IN FAMILY INCOME: 1970-1988 February 1988 

Figure 25. 

Distribution of Families by Family Type, 1970-1986 

Percentage of All Families 

50 1 I 

Families Withchildren ........ .. ..... ........... C ........ 

........ ..... . ........ .-... 40 ...-..._ .- I 

- ... .. _ ......... 

Elderly Unrelated Individuals 

0 I I I I I I I I I I I 1 I I I 

1970 1975 1900 1985 

30 

Percentage of All Families With Children 

100 

- Nonelderly Unrelated Individuals Nonelderly Childless Families - 

- 

Married Couples With Children 

"""". ............... I - ...................... ... -. ........ .......... ........................................... 

- - 

- Single Mothers With Children Other Families With Children - 

- 

- I - - - .. -- - I . 

I I I I I I I I I 

1 I --h - - 20 - CC---+-- 

\---

- 

__---- _CC---d------C 

- Elderly Childless Families 

I 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 55 

Apart from any changes in the average income of each family 

type, these demographic shifts had two effects on family incomes. 

First, because smaller families need less income to maintain a given 

standard of living, families would have become better off over the 

period, even if their real incomes had remained fixed. This phenomenon only affected families with children, however, since they were 

the only family type that, as a group, saw their average family size 

change markedly. 

The second effect was the result of the growth in relative importance of two family types with lower incomes--single mothers with 

children and nonelderly unrelated individuals. As noted earlier, 

among families with children, single-mother families became relatively more numerous over the period; combined with the fact that 

their median income was markedly lower than that for other families, 

this growth caused the observed drop in the median income for all 

families with children. Similarly, because nonelderly unrelated individuals have a lower median income than most other families, their 

increasing numbers lowered the median income for all families. 

Age Composition of the Population 

The shift in the age distribution of the population toward younger 

families would also tend to have caused family incomes to be lower 

than otherwise. The maturing of the baby-boom generation during 

the 1970s meant that large numbers of young people were both entering the work force and forming families, with two likely effects. First, 

because the earnings of younger workers tend to be less than those of 

their older counterparts, the greater numbers of younger families 

would have led to lower incomes for individual family types. Between 

1970 and 1986, the fraction of all families whose heads were under age 

45 rose from 46 percent to 52 percent, while families with heads 

between ages 45 and 64 became less common, falling from 35 percent 

of all families to 27 percent (see Figure 26). Again, all else the same, 

this shift toward younger families with lower earnings would have 

caused median family income to fall over the 16-year period. At the 

same time, because incomes rise with age, this trend is likely to be reversed, at least in part, as the baby-boom population grows older. 
56 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure 26. 

Distribution of All Families by Age of Head, Selected Years, 1970-1986 

Percentage of All Families 

50 

0 

Under 25 25-44 45-64 65 and Over 

Age of Family Head 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971, 

1976,1981, and 1987. 

The second effect of the entry of the baby-boom generation into the 

labor force was a reduction in the incomes of workers in that group, a 

loss that is likely to persist even as the cohort ages. Between 1970 and 

1984, as the bulk of the baby boomers entered the labor force, real 

incomes of full-time, full-year male workers between 20 and 24 years 

old dropped 21 percent; since 1975, as the group has moved into the 

next age category, real incomes of men between 25 and 34 years of age 

who were employed full time throughout the year fell by 8 percent.=/ 

These drops are likely to stem in large part from the size of this cohort 

12. Female workers had a somewhat different experience. The real median income ofthose between 20 

and 24 fell 7 percent between 1970 and 1984. Between 1976 and 1984, however, the income of the 

26- to 34-year-old8 increased 3 percent. The difference from the experience of male workers is 

probably the result of improved job opportunities forwomen. 

These data may not be fully accurate reflections of the labor market for two reaeons. First, the 

Bureau of the Census defines full- time, full-year workers as people who worked at least 50 weeks 

during the year and whose normal work week was at least 36 hours long. This definition leaves 

considerable room for variation in total hours worked, so incomes could be affected not by lower 

wages but rather by reduced hours. Second, the trend described is for total cash income, not 

earnings, and could thus be influenced by changes in other income sources such as transfers. 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 57 

of workers and the resulting increased competition for jobs. Because 

the cohort will always be larger than its predecessors, the lower incomes are likely to continue into the future. This cohort effect is likely 

to be larger than any wage gains coming from the tendency of earnings to rise with age. 

NUMBER OF WORKERS PER FAMILY 

A final factor that appears to have affected family incomes since 1970 

is the changing number of workers per family.U/ While two opposing 

trends combined to leave the average number of full-time, full-year 

workers unchanged for all families, they resulted in significant 

changes in employment patterns for individual family types. On one 

hand, the demographic shift toward one-person and single-mother 

families meant that families had fewer potential earners, and average 

earnings per family would thus be expected to fall. On the other hand, 

adults were more likely to be workers: the labor force participation 

rate for women rose from 43 percent in 1970 to 55 percent in 1986, 

while that for men fell from 80 percent to 76 percent, resulting in an 

overall increase from 60 percent to 65 percent (see Figure 27). The 

increase was particularly marked among married women with children under the age of six, whose participation rate rose from 30 percent to 54 percent over the 16-year period. 

This rise in labor force participation among women led to marked 

increases in the average number of full-time, full-year workers per 

family for individual family types.u/ Married couples with children 

were nearly twice as likely to have two full-time, full-year workers at 

the end of the period than at the beginning--up from 14 percent to 26 

percent--while the fraction of nonelderly childless families with two 

such workers rose from 27 percent to 32 percent (see Figure 28). 

Single-mother families became more likely to have at least one fulltime, full-year worker--40 percent in 1986 compared with 33 percent 

in 1970--and unrelated individuals under age 65 were more likely to 

have full-time jobs throughout the year--57 percent in 1986 versus 51 

13. This analysis is based on full-time, full-year workers. See Chapter 11, page 20 for other definitions 

considered in initial analyses. 

14. See Appendix Table A-16. 
58 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

percent in 1970. Only for the elderly did the average number of 

workers per family decline. 

The increase in workers per family provides part of the explanation for the income growth for each family type between 1970 and 

1986. If there had been no change in the earnings of individual 

workers, incomes would have risen because of the increased likelihood 

that single mothers and nonelderly unrelated individuals would be 

employed and that married couples with children and nonelderly 

childless families would have two workers. In fact, earnings have not 

Figure 27. 

Labor Force Participation Rates of Males, Females, 

and All People, 1970-1986 

SOURCE: Economic Report of the President (US. Government Printing Office, January 

1987), p. 284. 

100 

80 

60 

40 

20 

0 

- Percentage of Group in Labor Force 

Men 

------ I - 

------------------------ ------------------ 

All 

I - 

- ............. ........................... ..................... ......................... ......................... 

- I - 

Women 

- - 

I I I I I I I I I I I I I I I 

1970 1975 1980 1985 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 59 

Figure 28. 

Distribution of Families by Number of Full-Time, Full-Year 

Workers, by Family Type, 1970-1 986 

Married Couples With Children Single Mothers With Children 

Percentage of Families Percentage of Families 

100 100 

- - 

- One Worker - 

- - ---- 

- ----- - I 

------= 

- - 

- Two Workers No Workers - 

- 

- - 

I I I > 

- - 

No Workers - - 

- 

- 

- One Worker - 

- J-------= L-d #-4- - 

- - 

- - 

I I I 

- - 

- - 

- One Worker 

- 

- I - 

--------- - -------- 

- Twoworkers - 

- I .....-........_... . . . - . . . . . . . . . . . ..-..-.A 

. . , . . .. '---I 3 

- No Workers - 

I I I 

Nonelderly Childless Families Nonelderly Unrelated Individuals 

Percentage of Families Percentage of Families 

- - 

- One Worker - 

- - 

- - I -----/-- 

- 

- - 

- m 

No Workers - - 

- - 

I I I 

100 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971 -1 987. 

100 
60 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure 29. 

Distribution of Families in the Bottom Income Quintile by Number 

of Full-Time, Full-Year Workers, by Family Type, 1970-1 986 

Married Couples With Children 

Percentage of Families 

loo I 

No Workers 

60 

40 

Two Workers 

0 

Single Mothers With Children 

Percentage of Families 

100 

- - 

- - 

No Workers 

- - 

- - 

- - 

- - 

- - 

One Worker 

- - 

- - ----- ---- I A_ I 

Nonelderly Childless Families Nonelderly Unrelated Individuals 

Percentage of Families Percentage of Families 

100 100 

- - 

- No Workers - 

- 

- One Worker - r-0--7 --L-. - 

- 'v' \----- - 

- Two Workers - 

- 

- - 

No Workers 

- - 

- - 

- - 

- - 

- - 

One Worker - - 

-- 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971-1987. 
CHAPTER IV FACTORS AFFECTING FAMILY INCOME 61 

kept pace with inflation for many workers, especially those in the 

younger age gr0ups.W The rise in the number of workers per family 

appears to be the principal reason why incomes increased.s/ 

Families in the bottom income quintile did not increase their average 

numbers of workers during the period; this lack of growth in workers 

provides at least a partial explanation for their not having experienced the same income growth as other families (see Figure 29 on 

preceding page and Appendix Table A-15). For example, the fraction 

of low-income married couples with no full-time, full-year worker rose 

from 42 percent in 1970 to 52 percent in 1975, fell to 43 percent in 

1979, and climbed to 53 percent in 1982 before dropping back to 46 

percent in 1986. Other family types showed similar fluctuations 

throughout the period with little overall change. 

15. There is a growing literature discussing the question of why real earnings have fallen for many 

workers. One line of argument points to the changing nature of jobs in the American economy. It 

claims that rapid growth of service industries, particularly compared with the decline of 

manufacturing, has resulted in a polarization of jobs, with relatively few high- and many 

low-paying service sector jobs replacing traditional middle-income manufacturing jobs. An 

alternative view lays blame on the great influx of women and young people into the labor market. 

It asserts that the resulting increased supply of workers depressed wages below levels they 

otherwise would have reached. For a brief review of this literature and bibliographic references, 

see Frank Levy, Dollars and Dreams: The Changing American Income Distribution (New York: 

Russell Sage Foundation, l987), chapters 5 and 7. 

16. Families are likely to bear a cost, however, when more of their members work. In particular, there 

are direct costs associated with employment, such as for childcare or for commuting. Furthermore, 

the new workers have less time available to perform household chores, so either costa rise--if 

services are purchased--or some chores are not done. 

APPENDIXES 

APPENDIX A 

DEMOGRAPHIC AND INCOME DATA, 1970-1986 
TABLE A-1. NUMBER OF PAMILIES AND PERCENTAGE DISTRIBUTION, BY FAMILY TYPE, 1970-1986 

Number of Pamilies (In thousands) 

All Families 67,261 69,522 71,095 73,166 74,450 76,365 78,041 80.195 82,246 84,229 87,702 88,969 89,625 91,665 93,398 95,297 96,602 

Families with Children 30,067 30,798 30,918 31,098 31,401 31,392 31,436 31,638 31,737 32,166 33,116 32,901 32,931 33.130 33,353 33,952 34,267 

Married couples 24,457 24,913 24,832 24,798 24,723 24,639 24,465 24,148 24,219 24,166 24,611 24,149 24,105 24,101 23,960 24,444 24,426 

Single mothers 3.386 3,639 3,858 4,126 4.472 4.678 4,873 5,256 5,353 5,650 6,014 6,205 6,150 6.410 6,571 6,646 6,852 

Nonelderly Units 

Childless families 14,977 15,343 16,083 16,363 16,539 16,965 17,309 17,489 17,702 17,931 18,534 19,195 19,487 19,805 20,181 20,175 20,677 

Unrelated individuals 9,469 10,154 10,533 11,820 12,222 13,252 14.304 15,660 16.831 17,799 19,008 19,445 19,384 20,573 21,403 22,312 22,360 

Elderly Units 

Childless families 

Unrelated individuals 

All Families 

Families With Children 

Harried couples 

Single mothers 

Nonelderly Units 

Childless families 

Unrelated individuals 

Elderly Units 

Childless families 

Unrelated individuals 

Families with Children 

Married couples 

Single mothers 

Other families 

Percentage Distribution of All Families 

Percentage Distribution of Pamilies With Children 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
TABLE A-2. NUMBER OF FU4ILlES BY ACE OF FAMILY BEAD AND FAMILY TYPE. 1970-1986 (In thoulands of famllles) 

Undsr 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-31 

35-54 

55-64 

65 L Over 

All FamLlier With Chlldren 

Married Couples Vith Children 

Slngle Hothers With Children 

Childless Families 

Unrelated Indlvldvals 

SOURCE: Con~ressional Budget Office tcbulntlons of Current Population Survey data, 1971-1987. 
TABLE A-3. DISTRIBUTION OF FAMILIES BY AGE OF FAMILY BEAU AND PAUILY TYPE. 1970-1986 (In percents of famllles of given type) 

Age of 

Pam119 

Herd 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

Under 25 

25-34 

35-54 

55-64 

65 L Over 

A11 Pamlller 

10 10 10 10 

22 22 22 23 

33 33 33 32 

15 15 15 14 

20 20 20 2 0 

A11 Famllles Ulth Chlldren 

7 8 8 8 

33 33 33 34 

52 51 52 51 

6 6 6 5 

2 2 2 2 

Uarrled Couples Ulth Chlldren 

6 6 6 6 

34 34 34 3 4 

53 53 53 54 

6 6 6 5 

1 1 1 1 

Slngle Uothers Ulth Chlldren 

15 15 15 15 

33 34 3 4 3 5 

45 44 44 4 3 

6 5 5 4 

2 2 2 2 

Childless F-llles 

7 6 6 6 

11 11 11 11 

24 24 24 24 

26 27 2 7 27 

32 32 32 33 

Unrelated Indlvldualr 

17 17 18 18 

19 20 20 22 

17 17 17 18 

14 14 13 13 

33 32 31 3 0 

SOURCE: Con~rerslonal Budget Offlce tabulations of Current Population Surrey data, 1971-1987 
TABLE A-4. MEDIAN AND PERCENTILES OF ADJUSTED FAMILY INCOME, BY FAMILY TYPE, 

1970-1986 (In percents of poverty thresholds) 

Income 

Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

20TH 

40TH 

Median 

60TH 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

---- 

All Families 

All Families With Children 

Married Couples With Children 

Single Mothers Wirh Children 

50 4 9 

8 7 86 

119 114 

158 156 

265 262 . - - - - - - 

(Continued) 
TABLE A-4. Continued 

Income 

Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Nonelderly Childless Families 

20TH 240 239 255 259 252 246 250 258 275 279 272 251 241 249 252 256 268 

40TH 356 359 373 380 373 367 380 389 408 414 401 384 375 387 393 397 420 

Median 407 413 432 442 429 426 436 449 468 475 461 450 438 449 464 469 491 

60TB 461 467 490 501 491 484 495 511 529 543 527 515 509 523 538 549 570 

80TH 612 624 655 669 648 645 657 673 699 710 700 692 691 705 735 763 779 

Nonelderly Unrelated Individuals 

20TH 9 0 85 9 0 9 7 9 8 9 7 98 106 109 115 111 107 107 103 106 113 114 

40TH 185 179 185 196 190 186 194 198 210 219 213 209 215 212 214 223 226 

Median 238 235 237 245 234 239 245 255 264 273 266 262 263 265 269 279 289 

60TH 293 289 295 307 292 296 305 311 321 326 319 323 328 322 329 347 349 

80TH 429 424 438 451 428 435 442 452 470 471 470 475 482 495 501 514 531 

Elderly Childless Families 

20TH 119 126 139 142 146 151 152 153 156 158 158 162 167 171 177 179 186 

40TH 180 190 202 204 210 215 218 216 226 230 234 238 243 247 262 265 275 

Median 215 223 238 243 246 251 259 255 265 270 278 280 291 296 311 314 323 

60TE 259 266 286 290 292 300 309 306 314 316 325 332 346 349 368 369 383 

80TH 407 410 437 454 434 453 467 470 471 470 492 504 513 523 548 549 570 

Elderly Unrelated Individuals 

20TH 6 7 7 0 76 82 8 7 89 89 9 2 95 92 93 9 2 9 7 99 102 102 100 

40TH 9 2 99 107 115 114 119 118 121 126 124 124 126 131 136 137 137 136 

Median 107 115 122 130 130 133 134 137 143 140 140 145 150 159 161 160 161 

60TH 128 135 142 150 147 156 157 161 170 167 167 173 181 192 195 197 197 

80TH 207 215 226 228 242 240 244 249 263 260 257 275 295 312 325 321 324 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1870-1888 71 

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TABLE A-6. PERCENTAGE OF FAMILIES WITE ADJUSTED FAMILY IACOMh BELOW TEE MEDIAN IBCOWE AND TEE 20TE PERCENTILE INCOHE 

FOR ALL FAMILIES, BY FAMILY TYPE, 1970-1986 (In percentages of families of given type) 

Percentage of Families Uith Income Below the Median Income for ALL Families 

FamiliesWithChildren 52 53 52 52 53 53 52 52 53 52 54 54 55 56 55 55 55 

Harried couples 48 47 46 46 46 46 45 45 45 40 45 45 47 47 46 46 45 

Single mothers 87 87 87 87 86 87 86 85 86 85 85 86 85 87 86 85 87 

Nonelderly Units 

Childless families 23 23 23 24 23 24 24 24 23 23 23 25 26 25 27 26 25 

Unrelatedindividuals 55 55 57 56 58 56 56 55 55 55 54 55 54 54 51 54 54 

Elderly Units 

Childless families 60 59 58 58 56 55 55 57 57 56 53 51 49 49 48 48 48 

Unrelatedindividuals 86 86 86 86 83 84 84 85 84 85 84 82 79 77 77 78 78 

Percentage of Families With Income Below 20th Percentile Income for ALL Families 

Families With Children 16 17 17 17 18 19 18 19 19 19 20 21 22 22 22 22 22 

Harried couples 10 11 11 10 11 12 11 11 11 11 12 12 13 13 13 13 12 

Single mothers 54 57 58 58 57 57 56 55 54 52 53 53 56 55 55 54 57 

Nonclderly Units 

Childless families 6 6 6 6 6 6 6 6 6 6 6 7 7 7 7 8 7 

Unrelatedindividuals 28 30 30 29 30 28 28 26 26 25 25 25 25 26 25 24 25 

Elderly Units 

Childless families 22 20 18 19 16 15 15 15 16 16 14 12 12 11 10 11 10 

Unrelatedindividuals 60 56 55 54 53 50 51 50 49 51 48 44 40 37 39 40 41 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
74 TRENDS IN FAMILY INCOME: 1970-lB86 February lB88 

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APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1970-1986 75 

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TABLE A-8. DISTRIBUTION OF FAMILY INCOME BY SOURCE. FAMILIES IN THE MIDDLE THREE INCOME QUINTILES, 

BY FAMILY TYPE, 1970-1986 (In percents of family income) 

Income 

Source 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

primary~arner 75 74 73 73 71 70 70 70 69 68 68 66 66 65 66 66 65 

Other Earners 13 13 13 13 13 13 13 13 14 14 14 14 13 14 14 14 14 

Other Private 

Income 6 7 7 7 7 10 10 9 9 10 11 11 12 12 12 12 12 

Non-Means-Tested 

Transfers 5 5 7 7 8 7 7 7 7 7 8 8 9 9 8 8 8 

Means-Tested 

Transfers 1 1 a/ 51 1 1 1 1 a/ ;I/ ;r/ %I pl - PI q/ p/ 21 

All Families With Children 

PrimaryEarner 80 80 80 79 78 77 77 77 76 75 75 74 74 74 74 74 74 

Other Earners 14 14 14 15 15 15 15 15 16 17 17 17 17 17 18 18 19 

Other Private 

Income 4 4 4 3 4 6 5 5 5 5 6 6 7 6 6 6 6 

Non-Means-Tested 

Transfers 2 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 

Means-Tested 

Transfers - a/ 5/ p/ ;I/ 1 1 1 1 1 1 1 1 p/ p/ a/ 1 1 

Married Couples Uith Children 

primaryEarner 82 82 81 81 80 79 79 79 78 77 76 76 75 75 76 75 74 

Other Earners 14 14 15 15 15 16 16 16 18 18 19 19 19 19 19 20 21 

Other Private 

Income 3 3 3 3 3 5 4 4 4 4 5 5 5 5 4 4 4 

Non-Means-Tested 

Transfers 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 

Means-Tested 

Transfers =I pl sl - a1 ;I/ 11 pl tl - a1 pl ;I/ 11 21 &I pI PI PI 

Single Mothers Uith Children 

Primary Earner 

Other Earners 

Other Private 

Income 

Non-Means-Tested 

Transfers 

Means-Tested 

Transfers - - - - - - - - - . 16 17 16 15 15 16 --------------------- (Continued) 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1970-1986 77 
TABLE A-9. ADJUSTED FAMILY INCOME BY AGE OF FAMILY HEAD, 1970-1986 (In percents) 

Age of 

Family Income 

Head Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

Under 25 20TH 96 88 92 92 93 88 85 91 92 95 88 76 73 63 65 66 63 

4018 175 161 169 178 169 158 160 164 171 177 166 151 146 136 135 138 135 

Median 212 196 210 214 207 194 198 198 212 217 201 190 185 170 175 177 174 

60TH 249 234 248 252 246 231 237 241 257 259 245 232 221 212 213 218 217 

80TH 348 338 349 354 345 330 339 345 359 365 345 339 329 318 322 334 332 

25-34 ZOTH 156 154 159 170 164 160 163 165 165 169 158 144 141 134 144 148 148 

40TB 234 236 250 260 252 251 258 258 266 271 258 248 245 242 252 254 258 

Median 270 273 291 303 294 291 300 305 312 318 303 295 293 290 305 306 310 

6OTH 312 312 337 348 336 338 306 351 360 367 352 347 347 341 361 364 368 

80TH 428 431 &59 476 461 459 472 481 498 499 487 487 482 490 509 521 534 

35-54 20TH 169 167 176 181 173 169 175 179 186 190 179 174 163 170 176 179 188 

40TH 256 261 277 284 273 272 279 289 299 304 294 289 282 295 301 307 323 

Median 301 305 324 333 322 320 331 342 353 355 347 346 337 354 362 368 387 

60TH 351 355 376 386 377 372 385 400 411 416 410 402 397 416 427 434 458 

80TH 485 494 530 536 525 522 535 551 569 577 568 567 567 593 615 625 652 

55-64 20TE 148 146 151 161 155 144 149 156 164 165 160 155 153 149 151 152 158 

40TH 266 262 280 283 273 271 275 279 293 296 292 281 279 281 283 287 299 

Median 322 323 341 343 334 331 339 342 361 363 357 348 344 348 348 359 366 

60TH 381 380 402 410 397 393 407 409 431 441 429 419 417 422 427 435 448 

BOTH 536 541 569 582 560 567 577 589 617 622 615 612 613 613 638 652 665 

65 and 20TH 83 89 96 103 105 107 107 110 112 111 112 113 118 118 124 123 123 

Over 40TH 127 134 140 150 151 156 157 157 165 165 166 170 176 183 188 189 194 

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60TH 195 203 217 219 227 226 230 229 241 244 247 254 264 274 286 287 296 

80TH 330 331 349 356 363 364 373 372 382 379 391 401 421 430 450 454 465 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1970-1988 79 

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TABLE A-11. DISTRIBUTION OF ALL FAMILIES BY NUMBER OF FULL-TI-, FULL-YEAR WORKERS, 

BY FAMILY TYPE, 1970-1986 (In percents of families of given type) 

Number of 

Workers 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

All Families With Children 

Married Couples With Children 

Single Mothers Wich Children 

Nonelderly Childless Families 

Nonelderly Unrelated Individuals 

Elderly Childless Families 

Elderly Unrelaced Individuals 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. l r 
IABLE A-12. DISIRIBUIION OF PMILIES IN 'IRE BOITOU INCOHE QUINIILE BY NLMBER OF FULL-IIME. 

FULL-YEAR WORKERS, BY FAHILY IYPE, 1970-1986 (In percents of families of given type) 

Number of 

Workers 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

- 

All Pamilies 

AIL Families With Children 

Harried Couples With Children 

Single Mothers With Children 

Nonelderly Childless Families 

Nonelderly Unrelated Individuals 

Elderly Childless P-ilies 

Elderly Unrelated individual^ 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 

a. Less than 0.5 percent. 
TABLE A-13. DISTRIBUTION OF FAMILIES IN TEE MIDDLE THREE INCOUE QUINTILES BY NUMBER OF FULL-TIUE, 

FULL-YEAR WORKERS, BY FAMILY TYPE. 1970-1986 (In percents of families of given type) 

Number of 

Worker, 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

3 7 3 6 35 3 6 37 

52 5 3 5 3 52 52 

10 10 11 11 11 

All Families With Children 

2 0 19 18 17 19 

6 6 6 7 65 65 64 

13 14 15 16 15 

Harried Couples With Children 

14 13 13 12 14 

69 6 9 67 6 6 65 

16 16 19 20 20 

Single Mothers With Children 

70 6 7 65 61 62 

29 32 33 38 3 7 

1 1 1 1 1 

Nonelderly Childless Families 

16 16 14 14 15 

56 54 5 3 52 52 

26 28 3 0 3 1 3 0 

Nonelderly Unrelated Individuzls 

49 46 43 4 3 4 2 

51 5 4 57 57 58 

Elderly Childless Families 

8 1 82 81 82 81 

17 16 17 16 17 

2 2 2 2 2 

Elderly Unrelated Individurls 

98 98 98 98 99 

2 2 2 2 1 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1970-1986 83 

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TABLE A-15. AVERAGE NUMBER OF FULL-TIME, FULL-YEAR WORKERS, BY FAMILY TYPE, 1970-1986 (In workers per family) 

Family Type 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

A11 Families 

All Families 0.76 

All Families With Children 0.91 

Married couples 0.98 

Single mothers 0.36 

Nonelderly Units 

Childless families 1.10 

Unrelated individuals 0.51 

Elderly Units 

Childless families 0.35 

Unrelated individuals 0.07 

Families in the Bottom Income Quintile 

All Families 0.19 

All Families With Children 

Harried couples 

Single mothers 

Nonelderly Units 

Childless families 

Unrelated individuals 

Elderly Units 

Childless families 

Unrelated individuals ------------- 

0.06 0.06 

0.00 0.01 

------ 

(Continued) 
TABLE A-15. Continued 

Family Type 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

ALL Families 0.80 

All Families Uith Children 0.95 

Married couples 0.99 

Single mothers 0.31 

Nonelderly Units 

Childless families 1.15 

Unrelated individuals 0.54 

Elderly Units 

Childless families 0.28 

Unrelated individuals 0.03 

All Families 

ALL Families Yith Children 

Married couples 

Single mothers 

Nonelderly Units 

Childless families 

Unrelated individuals 

Elderly Units 

Childless families 

Unrelated individuals 

Families in the Middle Three Income Quintiles 

0.81 0.79 0.73 0.75 0.75 0.78 0.78 0.76 

Families in the Top Income Quintile 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987 
TABLE A-16. HEDIAN ADJUSTED FAMILY INCOME BY NUMBER OF WORKERS, BY FAMILY TYPE, 1970-1986 (In percents) 

Number of 

Workers 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

160 162 164 168 164 163 166 

343 346 356 358 351 349 350 

468 485 496 495 491 486 487 

All Families With Children 

135 130 135 132 126 119 115 

294 299 303 307 300 291 294 

388 401 413 411 408 404 399 

Harried Couples With Children 

179 180 191 192 180 176 170 

305 308 318 320 314 306 310 

396 408 419 419 417 413 408 

Single Mothers With Children 

85 85 82 83 77 73 68 

219 226 225 235 226 216 215 

286 320 334 318 316 267 289 

Nonelderly Childless Families 

244 247 256 263 261 241 236 

438 444 456 465 451 448 435 

569 575 593 597 590 581 582 

Noneldsrly Unrelated Individuals 

132 138 135 149 141 136 134 

367 365 374 376 368 372 377 

Elderly Childless Families 

221 220 229 234 238 246 253 

427 428 429 444 434 430 445 

530 545 613 574 550 616 570 

Elderly Unrelated Individuals 

131 134 140 136 137 140 146 

320 320 339 349 369 392 394 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
TABLE A-17. UEDIAN ADJUSTED FAMILY INCOUE, RELATIVE TO 1970 LEVEL, BY NUMBER OF WORKERS, 

BY FAUILY TYPE, 1970-1986 (In percents of 1970 median family income) 

Number of 

Workers 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

111 113 114 116 114 113 115 

112 113 116 117 114 114 114 

106 110 112 112 111 110 110 

All Families With Children 

92 88 92 90 86 81 78 

111 113 114 116 113 110 111 

109 113 116 116 115 113 112 

Harried Couples With Children 

95 96 102 102 96 94 90 

113 114 117 118 116 113 114 

109 113 116 116 115 114 113 

Single Mothers With Children 

102 102 99 100 93 88 82 

108 112 111 116 112 107 106 

101 113 118 113 111 94 102 

Nonelderly Childless Families 

103 104 108 111 110 102 99 

111 113 116 118 115 114 111 

105 106 110 110 109 107 107 

Nonelderly Unrelated Individuals 

106 110 108 119 113 109 107 

104 103 106 106 104 105 106 

Elderly Childless Families 

126 126 131 133 136 140 144 

119 120 120 124 121 120 124 

115 118 133 125 120 134 124 

Elderly Unrelated Individuals 

127 130 136 132 133 136 142 

110 110 116 120 127 134 135 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
TABLE A-18. NEDIAN AND PERCENTILES OF ADJUSTED FAMILY INCOME BY AGE OF FAMILY BEAD 

AND FAMILY TYPE, 1970-1986 (In percents) 

Age of 

Family Income 

Bead Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Families 

Under 25 2018 96 88 92 92 93 88 85 91 92 95 88 76 73 63 65 66 63 

4018 175 161 169 178 169 158 160 166 171 177 166 151 146 136 135 138 135 

Median 212 196 210 214 207 194 198 198 212 217 201 190 185 170 175 177 174 

6018 249 234 248 252 246 231 237 241 257 259 245 232 221 212 213 218 217 

8018 348 338 349 354 345 330 339 345 359 365 345 339 329 318 322 334 332 

25-34 2018 156 154 159 170 164 160 163 165 165 169 158 144 141 134 144 148 148 

4018 234 236 250 260 252 251 258 258 266 271 258 248 245 242 252 254 258 

Median 270 273 291 303 294 291 300 305 312 318 303 295 293 290 305 306 310 

6018 312 312 337 348 336 338 346 351 360 367 352 347 347 341 361 364 368 

8018 428 431 459 476 461 459 472 481 498 499 487 487 482 490 509 521 534 

35-54 2018 169 167 176 181 173 169 175 179 186 190 179 174 163 170 176 179 188 

4018 256 261 277 284 273 272 279 289 299 304 294 289 282 295 301 307 323 

Median 301 305 324 333 322 320 331 342 353 355 347 346 337 354 362 368 387 

60TH 351 355 376 386 377 372 385 400 411 416 410 402 397 416 427 434 458 

BOTH 185 494 530 536 525 522 535 551 569 577 568 567 567 593 615 625 652 

55-64 2018 148 146 151 161 155 144 149 156 164 165 160 155 153 149 151 152 158 

4018 266 262 280 283 273 271 275 279 293 296 292 281 279 281 283 287 299 

Median 322 323 341 343 334 331 339 342 361 363 357 348 344 348 348 359 366 

6018 381 380 402 410 397 393 407 409 431 441 429 419 417 422 427 435 448 

8018 536 541 569 582 560 567 577 589 617 622 615 612 613 613 638 652 665 

65 and 

Over 

2018 83 89 

4018 127 134 

Median 156 165 

6018 195 203 

8018 330 331 . - - - - - - - - - - - - 

96 103 105 107 107 110 112 111 112 113 118 118 124 123 123 

144 150 151 156 157 157 165 165 166 170 176 183 188 189 194 

175 181 185 189 189 190 200 201 202 207 216 223 233 233 240 

217 219 227 226 230 229 241 244 247 254 264 274 286 287 296 

349 356 363 364 373 372 382 379 391 401 421 430 450 454 465 ................................................... 

(Continued) 
TABLE A-18. Continued 

Age of 

FamiLy Income 

Head Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

A11 Families With Chlldren 

Under 25 20TH 103 94 94 89 84 78 80 74 76 75 68 61 54 49 48 46 45 

40TE 170 159 158 160 149 123 130 130 144 139 126 114 102 90 94 91 8 5 

Median 200 187 189 192 182 157 159 162 169 169 160 145 135 121 124 126 115 

60TH 232 214 222 225 211 191 190 193 203 210 192 175 172 153 153 158 148 

80TH 301 295 305 302 287 263 271 276 284 296 278 260 248 229 238 238 239 

25-34 20TH 142 139 146 153 147 143 144 143 146 145 131 122 114 110 113 114 116 

4 OTH 211 214 227 234 227 222 226 225 234 232 222 208 201 198 209 204 208 

Median 244 247 261 270 260 254 263 261 270 271 258 250 241 240 250 251 252 

BOTH 275 277 296 305 298 289 298 302 308 313 298 290 283 280 293 295 300 

BOTH 357 361 389 A00 390 377 390 401 412 419 397 397 390 391 413 419 425 

35-54 20TH 159 156 165 171 165 158 164 168 176 179 167 162 152 154 161 168 174 

40TH 234 236 253 260 251 248 255 263 271 279 268 262 254 260 268 278 287 

Median 268 273 293 299 291 287 297 307 318 323 313 307 303 313 320 329 342 

60TH 311 314 336 343 335 329 342 353 365 369 360 357 349 362 375 381 398 

BOTH 416 424 454 461 451 447 453 471 488 498 491 480 485 507 522 532 557 

55-64 20TH 131 131 140 140 140 125 133 134 141 148 134 134 123 122 116 124 121 

40TB 222 220 223 236 232 223 229 232 239 245 225 219 218 218 218 228 218 

Median 263 265 277 289 275 273 280 278 287 293 282 268 262 269 276 281 269 

60TH 312 314 329 339 324 318 324 323 338 344 337 319 316 319 336 331 322 

80TH 436 422 45A 473 A65 443 453 460 475 485 460 454 451 470 487 480 480 

65 and 20TH 60 68 72 79 78 85 87 78 90 88 92 79 81 75 87 94 91 

Over 40TA 101 110 113 116 126 140 126 122 143 149 133 120 142 132 141 146 144 

Median 137 142 153 147 157 166 149 150 169 180 163 145 177 164 185 173 188 

60TH 191 174 198 184 189 199 184 179 211 209 201 182 219 204 209 222 230 

BOTH 304 294 299 284 300 294 283 283 308 308 304 287 292 308 317 340 350 ...................................................................... (Continued) 
TABLE A-18. Continued 

Age of 

Family Income 

Head Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Under 25 

65 and 

Over 

20TB 

40TH 

Median 

60TH 

80TB 

20TH 

40TH 

Median 

60TB 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

20TH 

40TH 

Median 

60TH 

80TH 

---- 

Harried Couples With Children 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1970-1986 91 

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TABLE A-18. Continued 

Age of 

Family Income 

Head Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Childless Families 

Under 25 20TH 193 172 193 208 201 174 188 196 221 223 216 192 183 181 172 185 191 

40TH 281 268 282 291 292 263 272 291 318 316 314 278 276 271 257 281 277 

Median 320 306 323 332 331 302 313 332 360 358 352 320 322 312 300 322 324 

60TB 367 350 366 377 370 344 355 371 400 403 392 370 366 357 340 360 374 

80TH 469 450 477 486 472 445 455 473 508 511 491 487 459 451 474 474 505 

25-34 20TB 294 272 299 308 296 311 308 314 333 328 324 307 306 300 311 312 314 

40TH 408 397 429 429 421 429 422 434 454 455 448 432 422 429 443 447 460 

Median 465 450 473 487 485 476 475 496 503 509 502 487 473 499 505 516 526 

6OTH 510 505 533 545 544 524 529 549 551 568 554 542 539 556 569 586 599 

80TB 652 640 660 688 681 660 675 676 692 707 693 691 688 710 727 768 775 

35-54 20TB 272 279 281 291 279 282 283 293 300 306 284 273 255 267 269 282 299 

40TH 386 392 404 415 403 405 416 430 440 441 431 418 396 417 422 430 464 

Median 436 448 467 476 463 462 475 488 500 514 490 479 465 486 494 506 539 

60TH 491 506 528 536 523 521 534 548 563 579 559 544 534 555 574 584 615 

80TB 651 668 696 715 680 680 685 728 739 749 731 729 720 756 787 805 835 

55-64 20TH 225 220 239 239 233 229 230 233 252 257 254 233 223 231 233 229 238 

4 OTH 339 344 359 360 357 352 364 369 387 396 384 367 357 367 370 370 388 

Median 391 397 415 421 414 410 425 428 454 461 447 432 425 432 444 446 457 

60TH 441 457 473 486 474 471 485 498 521 531 518 503 502 502 521 526 536 

80TH 605 622 659 664 648 653 662 672 705 720 708 695 700 689 725 749 756 

65 and 

Over 

----- 

20TH 

40TH 

Median 

60TH 

BOTH 

162 166 170 177 179 186 

238 243 247 262 264 275 

279 291 296 311 314 322 

331 346 349 367 368 383 

503 513 522 548 549 569 

(Continued) 
APPENDIX A DEMOGRAPHIC AND INCOME DATA, 1W0-1988 93 

4 9 9 9 e 

mmdmm mmdmm mm:mm mmdmm mmdmm ~nann ~nann ~nenn u~enn cwann OOUOO OOUOO OOUOO OOUOO OOUOO ~rsom ~rsom us am NUX~W ~uxom 
TABLE A-19. MEDIAN AND PERCENTILES OF ADJUSTED FAMILY INCOME, RELATIVE TO 1970 LEVEL, 

BY AGE OF FAMILY BEAD AND FAMILY TYPE, 1970-1986 (In percents of 1970 lncome level) 

Age of 

Family Income 

Bead Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Under 25 

25-34 

35-54 

55-64 

65 and 

Over 

----- 

20TE 

4 OTB 

Uedlan 

60TE 

80TE 

2013 

4018 

Uedian 

6018 

80TH 

20TH 

40TH 

Uedian 

60TH 

80TH 

20TH 

4OTH 

Uedian 

60TH 

80TH 

20TH 

40TB 

Uedian 

60TE 

80TH 

----- 

All Families 

148 148 

149 153 

149 154 

147 152 

137 141 . - - - - - - 

(Continued) 
TABLE A-19. Continued 

Age of 

Family Income 

Bead Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Pamil~ea With Children 

Under 25 20TE 

4028 

Uedian 

6018 

BOTH 

25-34 20TE 

4028 

Uedian 

60TH 

8028 

35-54 2018 

4OTE 

Median 

6028 

80TH 

55-64 2028 

40TH 

Median 

60TH 

80TH 

65 and 

Over 

- - - 

2018 

40TH 

Median 

60TH 

80TH . - - - - - - 

157 152 

144 142 

126 137 

116 120 

112 115 ------ 

(Conr inued) 
98 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

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TABLE A-19. Continued 

Age of 

Family Income 

Bead Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Single Uotherr With Children 

Under 25 2028 100 103 100 105 103 111 111 100 100 92 100 89 82 76 68 76 71 

402H 100 97 104 104 99 103 99 94 99 95 90 83 78 78 77 72 74 

Median 100 97 109 104 104 106 101 96 105 101 96 86 85 83 83 81 83 

602H 100 96 100 99 107 100 93 96 106 99 97 90 86 85 84 81 81 

8028 100 86 89 84 105 93 78 86 99 100 102 89 95 88 87 89 81 

25-34 2028 100 113 117 128 122 122 128 137 120 132 117 111 102 100 100 102 98 

402H 100 101 108 109 109 111 113 114 109 117 109 106 95 95 97 92 91 

Uedian 100 102 105 109 108 115 115 120 117 129 116 113 101 100 106 99 97 

602H 100 103 108 118 112 117 121 128 131 129 122 121 110 110 117 113 102 

8028 100 97 108 113 114 112 118 117 123 124 120 111 111 111 116 116 106 

55-64 2028 100 92 98 139 121 137 129 131 127 154 127 136 117 129 106 119 119 

402H 100 91 96 115 109 118 111 132 110 143 122 136 105 115 104 123 124 

Uedian 100 108 109 131 123 121 123 143 136 163 131 140 117 121 117 138 138 

602H 100 104 106 126 129 116 116 142 140 157 127 142 116 119 137 159 125 

8028 100 96 89 95 110 92 102 119 111 118 99 102 96 103 112 123 113 

65 and 202H 

Over 401H 

Uedian 

601H 

802H ---------- 

132 132 161 197 202 

142 151 185 186 174 

145 172 207 185 217 

153 177 222 202 255 

151 105 153 160 207 ---------------- (Continued) 
98 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

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Age of 

Family Income 

Bead Percentile 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Under 25 2018 

4 018 

Median 

6018 

8028 

25-34 2018 

4 018 

Median 

6018 

8018 

55-64 2018 

4018 

Median 

6018 

8018 

65 and 2018 

Over 4018 

Median 

6018 

8018 

Unrelated Individuals 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987 

APPENDIX B 

INCOME, PRICE INDEXES, AND 

POVERTY THRESHOLDS 
l0a TRENDS IN FAMILY INCOME: 1970.1986 February 1988 

TABLE B-1. MEDIAN FAMILY INCOME, 1947-1986 

Median Family Income 

In Current In 1986 

Year Dollars Dollars 

SOURCES: Bureau of the Census, Money Income of Households. Families, and Persons in the United 

States: 1984, Current Population Reports, Series P-60, No. 151, April 1986, p. 29; Money 

Income and Poverty Status ofFamilies and Persons in the United States: 1986, Series P-60, 

No. 157. July 1987, pp. 11 and 38. 
APPENDIX B INCOME, PRICE INDEXES, AND POVERTY THRESHOLDS 103 

TABLE B-2. COMPARISON OF ALTERNATIVE PRICE 

INDEXES, 1967-1986 

Official 

Personal 

Consumption 

Expenditures 

Gross 

National 

Product 

Consumer CPI-X1 ~eflator Deflator 

Price Ratio Ratio Ratio 

Index Value to CPI Value to CPI Value to CPI 

SOURCES: Economic Report of the President (U.S. Government Printing Office, 1987), pp. 251, 307, 

and 312; unpublished data from the Bureau of Labor Statistics. 
104 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

TABLE B-3. ADJUSTED POVERTY THRESHOLDS, WEIGHTED 

AVERAGE BY FAMILY SIZE, 1967-1986 (In dollars) a/ 

Family Composition 

Two 

Unrelated Persons 

Individual Head Head Seven 

Under Over Under Over Three Four Five Six or More 

Year 65 65 65 65 Persons Persons Persons Persons Persons 

1967 1,722 1,600 2,238 2,017 2,661 3,410 4,019 4,516 5,550 

1968 1,788 1,659 2,322 2,092 2,761 3,536 4,168 4,683 5,761 

1969 1,867 1,733 2,424 2,185 2,884 3,692 4,355 4,890 6,018 

1970 1,963 1,818 2,544 2,293 3,027 3,876 4,571 5,138 6,318 

1971 2,050 1,895 2,653 2,391 3,154 4,042 4,767 5,362 6,595 

1972 2,113 1,954 2,736 2,465 3,254 4,166 4,915 5,528 6,805 

1973 2,248 2,076 2,908 2,619 3,457 4,424 5,221 5,874 7,245 

1974 2,477 2,286 3,202 2,883 3,805 4,871 5.753 6,477 7,979 

1975 2,682 2,475 3,469 3,124 4,117 5,275 6,233 7,016 8,653 

1976 2,838 2,618 3,669 3,304 4,354 5,576 6,594 7,441 9,194 

1977 3,020 2,784 3,901 3,512 4,631 5,932 7,013 7,915 9,788 

1978 3,224 2,972 4,165 3,748 4,943 6,331 7,489 8,450 10,456 

1979 3,538 3,258 4,568 4,111 5,417 6,942 8,218 9,285 11,500 

1980 3,935 3,623 5,079 4,571 6,022 7,719 9,142 10,338 b/ 

1981 4,304 3,967 5,561 5,004 6,598 8,452 10,017 11,329 b_/ 

1982 4,566 4,208 5,901 5,309 6,998 8,972 10,629 12,015 b/ 

1983 4,713 4,345 6,093 5,480 7,222 9,260 10,963 12,401 b/ 

1984 4,912 4,529 6,352 5,715 7,529 9,651 11,431 12,924 b/ 

1985 5,088 4,690 6,578 5,916 7,799 9,997 11,832 13,369 b/ 

1986 5,186 4,780 6,706 6,031 7,948 10,191 12,061 13,633 b/ 

SOURCE: Derived from data in Tables B-2 and B-4. 

a. Poverty thresholds have been adjusted for inflation using the CPI-X1 since 1967. See text for 

discussion of adjustment methodology. 

b. Until 1979, families with seven or more people had the same poverty threshold. Since 1980, there 

have been separate thresholds for families with seven, eight, and nine or more members. These 

thresholds are: 

Seven 

Persons 

Eight 

Persons 

Nine 

or More 

Persons 
APPENDIX B INCOME, PRICE INDEXES, AND POVERTY THRESHOLDS 106 

TABLE B-4. OFFICIAL POVERTY THRESHOLDS, WEIGHTED 

AVERAGE BY FAMILY SIZE, 1967-1986 (In dollars) 

Family Composition 

Two 

Unrelated Persons 

Individual Head Head Seven 

Under Over Under Over Three Four Five Six or More 

Year 65 66 66 65 Persons Persons Persons Persona Persons 

SOURCES: Social Security Bulletin, Annual Statistical Supplement, 1986, p. 73; Money Income and 

Poverty Status of Families and Persons in th~ United States: 1986, Current Population 

Reports, Series P-60, No. 157, July 1987, p. 38. 

a. Until 1979, families with seven or more people had the same poverty threshold. Since 1980, there 

have been separate thresholds for families with seven, eight, and nine or more members. These 

thresholds are: 

Nine 

Seven Eight or More 

Persons Persons Persons 

APPENDIX C 

POVERTY STATISTICS FOR FAMILIES, 1970-1986 

TABLE C-1 . Continued 

Family Income 

as a Percentage 

of the Adjusted 

PovertyThreshold 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

Less than 50 Percent 

50 - 100 Percent 

100 - 125 Percent 

125 - 150 Percent 

150 - 200 Percent 

Over 200 Percent 

Less than 50 Percent 

50 - 100 Percent 

100 - 125 Percent 

125 - 150 Percent 

150 - 200 Percent 

Over 200 Percent 

Less than 50 Percent 

50 - 100 Percent 

100 - 125 Percent 

125 - 150 Percent 

150 - 200 Percent 

Over 200 Percent 

Less than 50 Percent 

50 - 100 Percent 

100 - 125 Percent 

125 - 150 Percent 

150 - 200 Percent 

Over 200 Percent 

Nonelderly Childless Families 

Nonelderly Unrelated Individuals 

Elderly Childless Families 

Elderly Unrelated Individuals 

SOURCE: Congressional Budget Offlce trbulatlons of Current Population Survey data, 1971-1987. 
TABLE C-2. ADJUSTED POVERTY RATES BY FAMILY TYPE, 1970-1986 (In percents of families of given type) 

Family Type 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 

All Famllies 

Familles With Chlldren 

Harried couples 

Single mothers 

Nonelderly Units 

Childless families 

Unrelated individuals 

Elderly Units 

Childless families 

Unrelated individuals 

- 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 1971-1987. 
APPENDIX D 

LIMITATIONS OF THE CURRENT 

POPULATION SURVEY 

Virtually all of the income and demographic data used in the analysis 

come from the March Current Population Survey for the years 1971 

through 1987. A supplement to the March survey obtains detailed information about incomes and work experience during the preceding 

calendar year for all members age 14 and over in nearly 60,000 interviewed households. Sample weights allow estimating values for the 

total noninstitutional population of the United States. 

The reader should keep in mind a number of weaknesses in the 

data when examining the analytic findings. First, survey respondents 

do not fully report their incomes from all sources: compared with independent estimates, only about 72 percent of aggregate money income 

is reported on the CPS. Nearly two-thirds of the unreported income is 

subsequently imputed to CPS families by the Bureau of the Census. 

As a result, total income shown on the CPS--both reported and imputed--is about 90 percent of independent estimates of income.l/ This 

underreporting of income means that family well-being is understated. At the same time, the degree of underreporting of income has 

changed only marginally over time, so relative changes over the years 

are probably more accurately estimated. 

A second problem with the CPS income data involves "topcoding," the lumping together of incomes exceeding a maximum 

value. For example, the data file for the March 1987 CPS reported 

wage and salary income for all people with earnings greater than 

$99,999 as equal to "$99,999 or greater." While top-coding does not 

affect the vast majority of families or most descriptive statistics such 

as medians, it does mean that one cannot accurately estimate either 

1. Even with the addition of imputed incomes, the CPS shows larger fractions of income--estimated on the basis of other data--for some sources of income than for others. For example, about 99 percent of 

wage and salary income is identifled, compared with between 76 percent and 86 percent of 

means-tested transfer income and less than half of income from interest, dividends, and rent. 
lla TRENDS IN FAMILY INCOME: 1970.1988 February 1988 

incomes of those at the very top of the income distribution or distributions of aggregate income. This study omits estimates that would 

be influenced by top-coding. 

Sampling problems of the CPS appear to affect income analyses at 

both ends of the distribution. Wealthy households seem to be more 

likely to refuse interviews, while low-income households are apparently more difficult to locate. As a result, both groups seem to be underrepresented in the CPS population, and estimates of their incomes 

may be inaccurate. 

A final problem involves differences in family composition 

between the time of the CPS interview and the previous year to which 

income data apply. The CPS implicitly assumes that the family composition when the survey is conducted in March is the same as that for 

the previous year when reported incomes were received, even though 

many families will have changed. Because the income analyses in this 

paper are based on families, any differences in family composition 

between the two times will lead to inaccurate estimates of family 

well-being. The direction of any resulting bias is unknown. 
APPENDIX E 

INCOME DISTRIBUTION BY FAMILY TYPE 

The figures in this appendix show the distribution of adjusted family 

income (AFI) among families of different types. Family incomes vary 

widely both among family types and over time. To compare two income distributions, the absolute variation must be removed so that 

incomes are measured on comparable scales. In this appendix, such 

standardization is accomplished by measuring each family's income 

relative to the median AFI for the relevant family type--that is, the 

income measure depicted on the horizontal axis equals AFI divided by 

median AFI. Each point on the curves represents the percentage of 

families of a given type whose AFI fell in a range equal to 20 percent of 

the median AFI. Thus, for example, the highest point on the solid line 

in Figure E-1 shows that about 14 percent of married-couple families 

with children had adjusted incomes between 70 percent and 90 percent 

of the median AFI for all married couples with children in 1986. 

The shape of each curve indicates how equally incomes are distributed among families of a given type in a given year. The more equally 

incomes are distributed, the higher will be the percentage of families 

with incomes near the median. In the figures, greater equality is 

shown by a high and narrow hump centered on the median AFI. In the 

extreme, perfect equality in which every family had the same AFI 

would be represented by a vertical line at the median reaching a vertical value of 100 percent. Conversely, shorter and wider humps indicate greater inequality of incomes. For example, in Figure E-2, the 

taller hump centered on the median AFI for nonelderly childless families shows that their incomes were distributed more equally than were 

the incomes of nonelderly unrelated individuals, whose curve is both 

shorter and more widely spread. 
114 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure E-1. 

lncome Distribution of Families 

With Children, by Family Type, 1986 

Percentage of Families of Given Type 

20 

i - Median Adjusted Family 

lncome for Family Type 

- 

Married Couples 

With Children 

- 

Single Mothers 

With Children 

- 

Adjusted Family Income Relative to Median 

Adjusted Family Income for Family Type 

SOURCE: Congressional Budget Office tabulations of March 1987 Current Population 

Survey data. 

NOTE: Adjusted family income is measured as income divided by the poverty threshold. 
APPENDIX E INCOME DISTRIBUTION BY FAMILY TYPE 115 

Figure E-2. 

lncome Distribution of Nonelderly Families 

Without Children, by Family Type, 1986 

Percentage of Familiesof Given Type 

Median Adjusted Family .- Income for Family Type 

- - 

Nonelderly Childless Families 

- 

Nonelderly Unrelated Individuals - 

-. ---- 

I , - - _- 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

SOURCE: Congressional Budget Office tabulations of March 1987 Current Population 

Survey data. 

NOTE: Adjusted family income is measured as income divided by the poverty threshold. 
116 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure E-3. 

lncome Distribution of Elderly Families 

Without Children, by Family Type, 1986 

Percentage of Families of Given Type 

I"\\ i Median Adjusted Family I \ ;- Income for Family Type ,' 1: 

I " ! :- 

Elderly Childless Families - 

Elderly Unrelated Individuals 

- 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

SOURCE: Congressional Budget Office tabulations of March 1987 Current Population 

Survey data. 

NOTE: Adjusted family income is measured as income divided by the poverty threshold. 
APPENDIX E INCOME DISTRIBUTION BY FAMILY TYPE 117 

Figure E-4. 

Income Distribution of Married Couples With Children and 

Single Mothers With Children, 1970 and 1986 

Married Couples With Children 

Percentage of All Families of Given Type 

20 

; - Median Adjusted 

Family lncome 

- 

- 

- 

Adjusted Family Income Relative to Median 

Adjusted Family lncome for Family Type 

Single Mothers With Children 

Percentage of All Familiesof Given Type 

20 1 1 

i - Median Adjusted 

Family Income 

Adjusted Family lncome Relative to Median 

Adjusted Family Income for Family Type 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971 and 1987. 

NOTE: Adjusted family income is measured as income divided by poverty threshold. 
118 TRENDS IN FAMILY INCOME: 1970-1986 February 1988 

Figure E-5. 

Income Distribution of Nonelderly Families Without Children, 

1970 and 1986 

Nonelderly Childless Families 

Percentage of All Families of Given Type 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

Nonelderly Unrelated Individuals 

Percentage of All Families of Given Type 

20 

.- Median Adjusted Family lncome 

- - 

1970 

- 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

SOURCE: Congressional Budget Office tabulations of Current Population Survey 

data, 1971 and 1987. 

NOTE: Adjusted family income is measured as income divided by poverty threshold. 
APPENDIX E INCOME DISTRIBUTION BY FAMILY TYPE 119 

Figure E-6. 

Income Distribution of Elderly Families Without Children, 

by Family Type, 1970 and 1986 

Elderly Childless Families 

Percentage of All Families of Given Type 

20 

i - Median Adjusted 

Family lncome 

- 

- 

- 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

Elderly Unrelated Individuals 

Percentage of All Families of Given Type 

20 

Adjusted Family lncome Relative to Median 

Adjusted Family lncome for Family Type 

SOURCE: Congressional Budget Office tabulations of Current Population Survey data, 

1971 and 1987. 

NOTE: Adjusted family income is measured as income divided by poverty threshold. 


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