While you may be tempted to equate personal income with the income available for spending and saving, this temptation should be resisted. Personal income is reported before income and property taxes, but after deductions for social insurance. A better measure of income available for consumption and saving is disposable income, which is computed as personal income less income and property taxes. The purpose of this article is to highlight the importance of personal income, briefly examine its components, and discuss its recent trends in West Virginia. As we shall see, the concepts used to compute personal income are very intuitive, but there are a couple of wrinkles to keep in mind.
Most people think of their paycheck as their income.
However, economists have a broader definition in mind when they refer to personal income. The formal definition of personal income is the income received by, or on behalf of, all residents of a given area. Let's take each of these in turn. Wages and salaries are the largest part of net earnings, itself accounting for half of personal income in West Virginia in 1996. For the nation in 1996, the ratio was slightly higher at 55 percent.