LIes, damn lies, and bogus income statistics

Greg Mankiw has a must-read post that describes very neatly how much of the talk about income and inequality is tainted by bogus income measures.  To wit, a paper by Piketty and Saez, which has received a lot of attention the past couple of years, used tax data to show that real median income rose by only 3.2 percent between 1977 and 2007.  But, because

(t)he data are on tax units rather than households, they do not include many government transfer payments, they are pre-tax rather than post-tax, they don't adjust for changes in household size, and they do not include nontaxable compensation such as employer-provided health insurance.

After accounting for these things, one obtains a 36.7 percent increase in real median income over the period.