Income Sources

Most people have a job and receive wages in return, but that starts to change when you get into the higher income groups. We turn to the 2021 American Community Survey (ACS) to see how income sources can vary.

Let’s say this square represents one hundred dollars:

 
If someone makes $10,000 in a year, we represent the year’s income with 100 squares (10,000 divided by 100).

Here’s the income for an aircraft technician in the ACS sample:
 

 
That’s 450 squares, which represents $45,000 in wages. So if someone makes $100,000 in a year like the sales representative below, we use one thousand squares:
 

 
The aircraft technician and sales representative both earned all of their income from wages.

Here’s a manager who earned $300,000, but 83% of it was in wages and the remainder came from business or self-employment:
 

 
 
That’s two income sources with wages and a business. ACS provides six more classifications for a total of eight income sources:
 

 
 
Wages are money received as an employee; business income is self-employment income from one’s own business or farm; investment income comes from interest, dividends, and rents; retirement income is from pension or retirement accounts, not including Social Security; Social Security is income from Social Security; welfare income is from public assistance programs; Supplemental Security Income (SSI) is government-funded and based on need; and the other category is for any income that doesn’t fall in the defined categories.

Knowing that people spend money differently when income varies, I wondered how people earn money differently. Below shows the average percentage and amount, by income group:
 

 
People who make the big bucks appear to be more likely to earn income from their own business and investments, in addition to an employee salary.

But keep in mind that the above shows averages. If you take the average of a person who makes all their income from a business and a person who makes all their money from a salary, then the average looks like a half-half split between business and salary. It’s probably more likely that someone either earns income from a salary or a business and that gets supplemented by investments.

You can kind of see this in a sample of individuals’ incomes:
 

People only list their primary occupation, so the property manager who earned $220,000 likely has another job which may or may not be related to property management.

You can probably see though that most people’s income is from wages. For those who don’t work, Social Security and retirement income come into play.

Finally, most people do not earn from investments, but those who reported non-zero investment income seem to earn a significant portion of their income in this way. Maybe we’re looking at survivorship bias? We don’t see those who invested but did not earn. However, out of those who reported non-zero investment income, only five percent reported a loss for the year, so take that information as you like. And of course those with higher salaries have more to set aside after paying for essentials.

For the other side of the coin, see how people spend their money.