Economics lecture set for Oct. 18; Marcus is speaker

Morton J. Marcus

As Gaul was to Caesar, so too is Personal Income divided into three parts by the U.S. Bureau of Economic Analysis (BEA). This is important because political leaders have latched onto per capita personal income (PCPI) as a favorite measure of economic well-being. They are wrong, but it takes generations for old ideas and politicians to be retired.

The first and biggest part of Hoosier personal income is what we earn as workers. That’s 64.3 percent for us (15th among the 50 states), slightly higher than the nation’s 62.6 percent in 2018. Both figures are down from their 2008 levels; about two percentage points nationwide and 1.5 points in our Hoosier Holyland.

The second part of personal income is composed of what we “earn” on our investments: dividends, interest, and rent. Note: neither the growth of your holdings in the stock market nor the increased value of your house is included.

What is included, for those of us who own our homes, is the rental value of those homes. It’s the imputed value we would “receive,” if we had rented from ourselves. That makes sense to economists, who are, fortunately, a small portion of the population.

Investment income, in 2018, accounted for over 20 percent of personal income nationally and nearly 17 percent in Indiana (47th in the nation). As a share of personal income, this second component rose over the decade by one percent in the U.S., but only 0.2 percent in Indiana.

The third component is transfer payments from government, including Social Security, medical payments on our behalf, welfare in its various forms, and other benefits. These transfers equaled over 19 percent of income in Indiana (22nd nationally), and approached 17 percent in the U.S. In both cases, the change in these shares were in the neighborhood of one percent.

So here we have earnings from employment equaling somewhere over 60 percent of income, with 20 percent coming from investments and another 20 percent from government transfers payments.

We think of investment income going primarily to those who have put money aside over time. Transfers we consider payments to those with limited current income. Both images are only partially true.

People with good investment income and strong savings (pensions, inheritance) receive both Social Security and Medicare. People with low income also have investment income, but they don’t see it. Dividends, interest and rent may be accumulating in their retirement funds. They can’t spend that at the grocery or to pay their rent, but it’s theirs, nonetheless.

A surprising aspect of all this: nationally, the growth rates from 2008 to 2018, for investment income and for transfers, were somewhat above 50 percent. Perhaps this is coincidence, or perhaps investment income and transfers are responding to the same dominant force in our society: the greying of America by persons 45 and older.

Morton Marcus is an economist. Reach him at Follow his views and those of John Guy on “Who gets what?” wherever podcasts are available or at

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