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Understanding Income Tiers: how Pew Research Center Ensures Accurate Data Analysis
Accurately measuring and categorizing household income is crucial for understanding societal trends. At Pew Research Center, we employ a rigorous methodology to adjust for cost of living, household size, and geographic variations when determining income tiers for our American Trends Panel (ATP) studies. This ensures our data reflects a realistic picture of economic well-being across the United States. This article details the process we use,providing clarity and demonstrating our commitment to data integrity.
Why Adjust for Cost of Living and Household Size?
Simply looking at raw income figures can be misleading. A $75,000 income in rural Arkansas stretches much further than the same income in San Francisco. Similarly, a single-person household has different financial needs than a family of four, even wiht identical incomes. Therefore, adjustments are essential for meaningful comparisons.
The Pew Research Center Methodology: A Step-by-Step Approach
Our income tier calculation involves a multi-stage process, designed to provide the most accurate representation of financial circumstances.Here’s a breakdown of each step:
- Initial Income Assignment: Panelists initially report their family income. We assign them to the midpoint of the income range they select on their annual or recruitment survey. This provides a starting point for further calculations.
- geographic Cost of Living Adjustment: We utilize Regional Price Parities (RPP) data published by the U.S. Bureau of Economic Analysis (BEA).
* RPP compares the price of goods and services across different U.S. locations to the national average.
* this adjustment accounts for variations in expenses like housing, food, and transportation.* For areas outside of metropolitan statistical areas, we use the RPP for their state’s non-metropolitan region.
* The most recent data used in our analysis is from 2023.
- Household Size Adjustment: We adjust incomes based on the number of people in a household. This methodology builds on Pew Research Center’s previous work on the American middle class. Larger households naturally have higher expenses, so adjusting for size provides a more accurate comparison of financial strain.
- Income Tier Assignment: panelists are assigned to one of three income tiers: lower, middle, or upper.
* Middle-Income: Defined as families with adjusted incomes between two-thirds and double the median adjusted family income for the ATP. Currently, with a median of roughly $77,800, this range is approximately $51,900 to $155,600 (2024 dollars, scaled to a household of three).* lower-Income: Families with adjusted incomes below $51,900.* Upper-income: Families with adjusted incomes above $155,600.
* Panelists who don’t provide complete details (income, household size, and address) are categorized as “no answer.”
Illustrative Examples: The Impact of Location
To illustrate the impact of cost-of-living adjustments, consider these examples:
* Pine Bluff, Arkansas: A relatively inexpensive area, with prices 19.7% below the national average.A family earning $40,200 in Pine Bluff has the same purchasing power as a family earning $59,100 in San Francisco.
* San Francisco-oakland-Berkeley, California: One of the most expensive areas, with prices 18.2% above the national average.
These adjustments ensure that income comparisons are fair and reflect the true financial well-being of individuals and families across diverse locations.
Ensuring Data Quality and Transparency
We are committed to transparency in our research methods. By carefully adjusting for key factors like cost of living and household size, we strive to provide the most accurate and insightful data possible. This rigorous approach strengthens the validity of our findings and contributes
