This report shows projections of income size distributions for families and unrelated individuals. No attempt has been made to forecast changes in income or its distribution. Rather the tables which follow show income size distributions for various sets of assumptions. The user can prepare his own income distribution forecasts by forecasting mean family income growth rates and then choosing the projected distributions which most nearly conform to his forecasts.

Projections have been prepared for families and unrelated individuals by age of the family head or of the individual for the following years: 1975, 1980, 1985, and 1990. For each of the years, separate projected distributions are shown for assumed income growth rates of 2.0, 2.5, 3.0, 3.5, 4.0, and 4.5 percent per year. These rates were chosen for illustrative purposes only and do not necessarily demarcate the range of reasonable growth in the future. Growth in mean income has been in the 2 to 4 percent range in the past 20 years. All of the above projections were made using Series 1 household projections.¹ However, because the household projections for 1985 and 1990 are different for each population projection series, a separate set of income size distribution projections were made for these years for population series C, D, and E. In addition to the projected number of units in each income class, the tables also show the projected aggregate income for each income class and a percent distribution for each of the above.

It should be noted that the income classes and income amounts refer to dollars of 1971 purchasing power. Thus the differences in the projected income distributions compared to those for 1971 are “real” in that they do not reflect any reduction in the purchasing power of the dollar resulting from inflation. Projections such as these are called “constant dollar” projections because they are made assuming that the purchasing power of the dollar is constant over the projection period. “Current dollar” projections, on the other hand, would show the projected distribution in terms of the purchasing power of the dollar in the projected year.

The difference between current dollar and constant dollar projections can be illustrated by comparing the change in mean family income between 1951 and 1971. During this 20 year period, mean family income measured in constant dollars increased at an average annual rate of about 3.0 percent per year. If in 1951, one had made a projection for 1971 in terms of dollars of 1951 purchasing power, assuming a 3.0 percent per year growth rate for mean family income, the projected amount would have been about $7,400. However because prices also increased during this period, estimated 1971 mean family income, when measured early in 1972 was about $11,600. The difference between the projected amount of $7,400 in 1951 dollars and the estimated amount of $11,600 in 1971 dollars does not reflect any difference in total purchasing power but rather reflects the reduction in the purchasing power of the dollar between 1951 and 1971. Looking ahead, one can expect the same type of differences to occur with these projections, although the magnitude of the difference will depend on the number of years being projected and future rates of inflation. Thus, for example, the 1980 current dollar mean family income when actually measured in 1980 will probably be somewhat greater than our projected amounts which are in 1971 constant dollars.

Although current dollar projections may have some usefulness, constant dollar projections are more meaningful. For example, if no real economic growth occurred, on a per family basis, between 1971 апd 1980 but the price level increased at a rate of 4 percent per year, then a 1980 income size distribution in dollars of 1980 purchasing power would show more families in the higher income brackets and fewer in the lower income brackets. The families in 1980 would not be any better off, however, in terms of real income, than were families in 1971. This is because, although the 1980 families have more dollars, the purchasing power of each dollar is less than it was in 1971, leaving the total purchasing power unchanged. On the other hand, if the same 1980 income distribution projections were made in 1971 constant dollars, the 1980 and 1971 income distributions would be similar.²

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¹ See Current Population Reports: "Demographic Projection for the United States", Series P-25, No. 476, February 1972 for details of how the projections of the number of families and unrelated individuals were prepared.
² Small differences would occur because of changes in the age structure of the population.