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What is Your Contribution to National Income?

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The government uses a number of different economic measurements to determine the overall health of the economy. One of them is something known as national income. In basic terms, national income is the total amount of income earned by citizens and privately owned businesses for a specific period. The U.S. government typically measures national income annually.

A broader definition encompasses not only cash income, but also income relating to ownership of resources used to generate cash income. And of course, every measurement of income must be considered on both a net and gross basis. As a citizen or resident of the U.S., your annual income is considered part of the national income and, therefore, part of the overall economy. Whatever money you earn is your contribution to the annual measurement.

Economic Health

The most interesting thing about national income is that it is rarely reported in the press alongside the other two major indicators: gross domestic product (GDP) and gross national product (GNP). The former is a measurement of the total products and services generated by the national economy while the latter is a measurement of the real value of those products and services.

The reason we do not hear much about national income in light of these other two measurements comes down to one simple word: inflation. When GDP and GNP both increase, household wages need to increase proportionally in order to keep the economy on track. When wages do not keep up, economic expansion is limited.

One other thing to consider is that wage growth is directly related to national income. Where wage growth is not as fast as GDP and GNP, national income slips as compared to the other two measurements. Including national income along with the other two gives a clearer picture of economic health. It would stand to reason that government would want to keep the national income number quiet if it were not as healthy as GDP and GNP.

So, is your contribution to national income as much as you would like to be? Here’s hoping so.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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