The National Income and Product Accounts provide a detailed statistical description of the U.S. economy. They depict in dollar terms the volume, composition, and use of the Nation's output and, therefore, make it possible to trace long-term trends and current fluctuations in economic activity. The data that measure the Nation's total goods and services-referred to as the income side. output are estimated from two principal tion of national economic policies. • the value of the goods and services produced by the economy-referred to as the product side of the account; ⚫ the costs incurred and types of income earned in producing those The product side of the National Income and Product Accounts is divided into the major markets for the output of the economy: consumer purchases, business investment, exports, and government purchases. More detailed breakdowns are published in supporting tables in the Survey of Current Business, particularly in the July issue. The Survey is published monthly by the Bureau of Economic Analysis. The income side of the National Income and Product Accounts summarizes the wages and salaries and other forms of income, indirect taxes, and capital consumption allowances generated in the production process. These income categories are further broken down by industry and legal form of organization in the July and other issues of the Survey of Current Business. The terms defined in this chapter are organized in the order of the line numbers in the basic summary table reproduced from the Survey of Current Business. NATIONAL INCOME is the total earnings of labor and property from the production of goods and services PERSONAL INCOME is the total income received by persons from all sources DISPOSABLE PERSONAL INCOME is the income remaining to persons after payment of personal taxes CHART 4 TERM DEFINITION Gross National Product Gross national product is the market value of the output of goods and services produced by the Nation's economy. GNP is a "gross" measure because no deduction is made to reflect the wearing out of machinery and other capital assets used in production. An alternative measure-net national product (NNP)-is defined as GNP minus allowances for the consumption of capital during the period. National Income National income is the total earnings of labor and property from the production of goods and services. It is the income earned but not necessarily received by all individuals and enterprises in the country in a specified period. This aggregate measure may be estimated directly by summing the various forms of income of persons and income retained in business firms before corporate profit taxes. Or it may be derived by subtracting indirect business taxes, business transfers, and capital consumption allowances from GNP and making adjustments for subsidies and of the current surplus of government enterprises. Compensation of Employees (Line 1) Compensation of employees is income received as remuneration for work. It includes not only line 2, Wage and salary disbursements, but also line 5, Supplements to wages and salaries. Compensation of employees has, historically, accounted for about 70 to 75 percent of national income, with wages and salaries being by far the largest component. Wage and Salary Disbursements (Lines 2 and 3) Wage and salary disbursements are the wages and salaries paid to employees in a given period of time, irrespective of when these are earned. They cover all employee earnings, including executive salaries and bonuses, commissions, payments in kind, incentive payments, and tips. Note that this estimate is made on a cash receipts basisfollowing the usual thinking and practice of households. Other entries in the National Income and Products Accounts are made on an accrual basis-in accord with predominant business practice. See also Wage accruals less disbursements, below. Wage Accruals Less Disbursements (Line 4) Wage accruals less disbursements is an adjustment item occasionally made in the National Income and Product Accounts to take account of the fact that wages and salaries are not always received at the same time as they are earned. Income in the national accounts is typically recorded in the period when earned, rather than when received-i.e., an accrual basis of accounting, but an exception is made in the wage and salary component of personal income. It is regularly estimated on a cash receipts basis-following the usual thinking and practice of households. Ordinarily, wage and salary payments disbursed in one quarter but earned in the preceding quarter are approximately offset by those earned in the current quarter but not received until the following quarter, making the wage accruals less disbursements adjustment small or negligible. See also Accrual basis of accounting, p. 73. Supplements to Wages and Salaries (Lines 5, 6, and 7) Supplements to wages and salaries are employer contributions for social insurance and other labor income. The latter includes items such as employer payments for private pension, health and welfare funds, compensation for injuries, directors' fees, and pay of the military reserves. These supplements constituted about 11 percent of total compensation of employees in 1971. |