Changes in family finances from 1983 to 1989: evidence from the Survey of Consumer Finances

Federal Reserve Bulletin, Jan, 1992 by Arthur Kennickell, Janice Shack-Marquez

The sampling weights used in the calculations reported in this article were produced by the Survey Research Center at the University of Michigan and were based on the probability design of the original sample. These weights have been adjusted with data from the Bureau of the Census to reflect aggregate information available on the age and geographic distribution and on homeownership patterns of the U.S. population. These weights were further adjusted to minimize the influence of extreme cases on the estimation of net worth.

The SCF data are available to the public. Copies of the survey are available on magnetic tape from the National Technical Information Service, Federal Computer Products Center, 5285 Port Royal Road, Springfield, VA 22161 or (703) 487-4763.

1. When the obserbations in a set of data are arranged in order of magnitude from lowest to highest, the middle value is the median. The sum of all observed values divided by the number of observations in a set of data is the mean. The mean and the median each have advantages for describing distributions of income and other financial variables. Because of the focus on the ranking of values, the median is not influenced by extremely large values; thus it is a good indicator of the position of the "typical" family. However, the mean is a better indicator of the dollar amount of income or assets held by all families because it considers all values, the extreme as well as the typical. If the median of a distribution drops, the mean may rise or fall, as may the means of the upper and lower halves of the distribution. For the variables examined in this article, the mean of the lower half of each distribution generally drops when the median does. Thus, with before-tax family income, the near-constancy of the median plus the rise in the overall mean implies that the mean value of the distribution above the median increased - that is, the concentration of income increased in the top half of the distribution.

2. All dollar figures reported in the article are adjusted to 1989 levels using the consumer price index (CPI) for all urban consumers. There are problems with the use of any deflator to compare income, assets, and liabilities over time, particularly where changes in the interest rate implicitly change the costs of debts. The CPI is used for two reasons. First, it is widely known and applied. Second, because it is intended to reflect the relative costs of a standardized collection of goods and services, it seems a natural indicator of the importance of price level changes for most families.

3. Calculations not reported in the tables indicate that the increase in mean income for dual-earner couples more than accounted for the overall mean increase in income for married couples.

4. Data from the 1984 and 1988 Surveys of Income and Program Participation conducted by the Bureau of the Census show a similar change in real median net worth.

5. Any division of assets into financial and nonfinancial categories is somewhat arbitrary. The classifications used here may differ from others, such as those in the flow of funds accounts, which are published by the Federal Reserve.