Read table of contents, executive summary and introduction
[return to main excerpts page]

Download PDF version of Table of Contents, Executive Summary and Introduction

jump to:
[table of contents] [executive summary] [introduction] [documentation and methodology]

Documentation and methodology

Documentation

The comprehensive portrait presented in this book of changes in incomes, taxes, wages, employment, wealth, poverty, and other indicators of economic performance and well-being relies almost exclusively on data in the tables and figures. Consequently, the documentation of our analysis is essentially the documentation of the tables and figures. For each, an abbreviated source notation appears at the bottom, and complete documentation is contained in the Table Notes and Figure Notes found at the back of the book. (In rare circumstances, however, we incorporate data in the discussion that are not in a table or figure.) This system of documentation allows us to omit distracting footnotes and long citations within the text and tables.

The abbreviated source notation at the bottom of each figure and table is intended to inform the reader of the general source of our data and to give due credit to the authors and agencies whose data we are presenting. We have three categories of designations for these abbreviated sources. In instances where we directly reproduce other people’s work, we provide an “author/year” reference to the bibliography. Where we present our own computations based on other people’s work, the source line reads “Authors’ analysis of author (year).” In these instances we have made computations that do not appear in the original work and want to hold the original authors (or agencies) blameless for any errors or interpretations. Our third category is simply “Authors’ analysis,” which indicates that the data presented are from our original analysis of microdata (such as much of the wage analysis) or our computations from published (usually government) data. We use this source notation when presenting descriptive trends from government income, employment, or other data, since we have made judgments about the appropriate time periods or other matters for the analysis that the source agencies have not made.

Economic indicators fluctuate considerably with short-term swings in the business cycle. For example, incomes tend to fall in recessions and rise during expansions. Therefore, economists usually compare business cycle peaks with other peaks and compare troughs with other troughs so as not to mix apples and oranges. In this book, we examine changes between business cycle peaks. The initial year for many tables is 1947, with intermediate years of 1967, 1973, 1979, 1989, and 2000, all of which were business cycle peaks (at least in terms of having low unemployment). We also present data for the latest full year for which data are available (2005, when available) to show the changes over the current business cycle.

In some tables, we also separately present trends for the 1995-2000 period in order to highlight the differences between those years and those of the early 1990s (or, more precisely, 1989-95) and earlier business cycles. This departs from the convention of presenting only business-cycle comparisons (e.g., comparing 1979-89 to 1989-2000 trends) or comparisons of recoveries. We depart from the convention because there was a marked shift in a wide variety of trends after 1995, and it is important to understand and explain these trends.

Since business cycles differ in length, we usually present the annual growth rates in each period rather than the total growth. We also present compound annual growth rates rather than simple annual rates. Compound annual growth rates are just like compound interest on a bank loan: the rate is compounded continuously rather than yearly. In some circumstances, as noted in the tables, we have used log annual growth rates. This is done to permit decompositions. In presenting the data we round the numbers, usually to one decimal place, but we use unrounded data to compute growth rates, percentage shares, and so on. Therefore, it is not always possible to exactly replicate our calculations by using the data in the table. In some circumstances, this leads to an appearance of errors in the tables. For instance, we frequently present shares of the population (or families) at different points in time and compute changes in these shares. Because our computations are based on the “unrounded” data, the change in shares presented in a table may not match the difference in the actual shares. Such rounding errors are always small, however, and never change the conclusions of the analysis.

In most popular discussions, the Consumer Price Index for All Urban Consumers (CPI-U), often called simply the consumer price index, is used to adjust dollar values for inflation. However, some analysts hold that the CPI-U overstated inflation in the late 1970s and early 1980s by measuring housing costs inappropriately. The methodology for the CPI-U from 1983 onward was revised to address these objections. Other changes were introduced into the CPI in the mid-1990s but not incorporated into the historical series. Not all agree that these revisions are appropriate. We chose not to use the CPI-U so as to avoid any impression that this report overstates the decline in wages and understates the growth in family incomes over the last few decades.

Instead of the CPI-U, we adjust dollar values for inflation using the CPI-URS index. This index uses the new methodology for housing inflation over the entire 1967-2001 period and incorporates the 1990s changes into the historical series (though not before 1978, which makes economic performance in the years after 1978 falsely look better than the earlier years). The CPI-U-RS is now used by the Census Bureau in its presentations of real income data. Because it is not available for years before 1978, we extrapolate the CPI-U-RS back to earlier years based on inflation as measured by the CPI-U.

In our analysis of poverty in Chapter 6, however, we generally use the CPI-U rather than the CPI-U-RS, since Chapter 6 draws heavily from Census Bureau publications that use the CPI-U. Moreover, the net effect of all of the criticisms of the measurement of poverty is that current methods understate poverty. Switching to the CPI-U-RS without incorporating other revisions (i.e., revising the actual poverty standard) would lead to an even greater understatement and would be a very selective intervention to improve the poverty measurement. (A fuller discussion of these issues appears in Chapter 6.)

We often categorize families by the age or the race/ethnic group of the “household head,” that is, the person in whose name the home is owned or rented. If the home is owned jointly by a married couple, either spouse may be designated the household head. Every family has a single household head.

Unless specified otherwise, data from published sources employ the Census Bureau’s designation of Hispanic persons. That is, Hispanics are included in racial counts (e.g., with blacks and whites) as well as in a separate category. For instance, in government analyses a white person of Hispanic origin is included both in counts of whites and in counts of Hispanics. In our original analyses, such as the racial/ethnic wage analysis in Chapter 3, we remove Hispanic persons from other racial (white or black) categories; using this technique, the person described above would appear only in counts of Hispanics.

[top of page]

jump to:
[table of contents] [executive summary] [introduction] [documentation and methodology]

[return to main excerpts page]

Download print-friendly PDF version of Table of Contents, Executive Summary and Introduction