Personal Income

Personal Income

What is personal income?

Personal income refers to all income collectively received by all individuals or households in a country. Personal income includes remuneration from a number of sources, including wages, salaries and bonuses from employment or self-employment, dividends and distributions received from investments, rental income from real estate investments and participation in corporate profits.

Key points to remember

  • Personal income is the amount of money collectively collected by the people of a country.
  • Sources of personal income include money earned from employment, dividends and distributions paid by investments, rents from land, and participation in corporate profits.
  • Personal income is generally taxable.

Understanding personal income

The term “personal income” is sometimes used to refer to the total compensation received by an individual, but it is more aptly called “individual income”. In most jurisdictions, personal income, also called “gross income”, is taxable above a certain basic amount.

Personal income has a significant effect on consumer consumption. With consumer spending driving most of the economy, national statistical organizations, economists and analysts track personal income on a quarterly or annual basis. In the United States, the Bureau of Economic Analysis (BEA) tracks personal income statistics each month and compares them to figures from the previous month. The agency also divides the figures into categories, such as personal income earned from employment wages, rental income, farming and sole proprietorship. This allows the agency to analyze the evolution of revenue trends.

Personal income tends to increase during periods of economic expansion and to stagnate or decrease slightly during periods of recession. Rapid economic growth since the 1980s in economies such as China, India and Brazil has resulted in a substantial increase in the personal income of millions of citizens.

Contributions to public social insurance programs, such as social security, are not included in the calculation of personal disposable income.

Personal income vs personal disposable income

Personal disposable income (DPI) refers to the amount of money a population has left after paying taxes. It differs from personal income in that it takes into account taxes. However, it is important to note that contributions to public social insurance are not taken into account in the calculation of personal income. Therefore, only income taxes are removed from personal income when calculating personal disposable income.

Personal income vs personal consumption expenditure

Personal income is often compared to personal consumption expenditure (PCE). The PCE measures changes in the price of consumer goods and services. Taking these changes into account, analysts can determine how changes in personal income affect spending. For example, if personal income increases significantly a month, and the PCE also increases, consumers collectively may have more money in their pockets but may have to spend more money on consumer goods and services. based.

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