ECONOMIC

measured income than some families in which the wife confines her work tocaring for the home and children, although the extra expenses or loss ofleisure time of the working couple could mean that they are really less welloff. Finally, the data used here refer to income received in one year beforepayroll and income taxes.The reason for not including these sources of income in census surveysof consumer income is that they are all extremely difficult to measure forindividuals or families. Several studies have attempted to measure the magnitudeand distribution of the different items, but so far the net effect onincome inequality of all the items cannot be stated with complete confidence.Nor can we say how past changes in the importance of the different omittedsources may have affected the true trend in income inequality.TABLE 35.—Income inequality under alternative definitions of income, 1968Definition of income1. Money income2. Line 1 plus rental value of owner-occupied homes3. Line 2 plus nonmoney wages and nonmoney farm income4. Line 3 plus medicare payments5. Line 4 plus imputed interest from banks and insurance companies6. Line 5 plus other imputations2 equals money income plus imputed income..7. Line 6 less direct taxes equals disposable family personal incomeIncomeinequality 10.75.74.69.62.61.61.521 Income inequality is measured by the variance in the natural log of income. (See supplement to this chapter.)The income classes used are: Under $2,000; $2F000-$3,999; $4,000-$5,999; $5,000-$7,999; $8,000-$9,999; $10,000-$14,999; $15,000-$24,999; $25,000-$49,999; and $50,000 and over.2 Other imputations include services furnished without payment by banks and insurance companies, military clothing,and miscellaneous other items.Sources: Department of Commerce (Bureau of the Census) and Council of Economic Advisers.Table 35 presents estimates of the effect that some of these omittedsources of income would have had on measured income inequality. Forconvenience the basic measure of income dispersion used in the calculationis the variance in the natural logarithm of income (see supplement to thischapter). The measure is zero when there is perfect equality of income, andit increases for greater income inequality. However, while a reduction from0.7 to 0.6 conveys an acceptable suggestion about a decline in inequality,and a decline from 0.7 to 0.5 an acceptable suggestion about a greater decline,the statement that the second of these two declines is twice the firstwould not be meaningful.The rental value of owner-occupied dwellings can be imputed by assumingthat it is proportional to the value of the house. When the imputedrental value of owner-occupied dwellings is added to money income, theinequality of family income does not change significantly. Although theimputed rental value of housing rises with money income, it does not riseas a percentage of income.143