Savings Rates in the United States: Calculation and Comparison

Saving Rates in the United States:
Calculation and Comparison
Brian W. Cashell
Specialist in Macroeconomic Policy
Government and Finance Division
Summary
The amount of money saved has important economic consequences. Nationally,
the amount of saving determines how much can be invested and ultimately the size of
the capital stock. Increasing the size of the capital stock is believed to be one way to
raise the productivity of the labor force. Individually, saving is critical to accumulating
sufficient wealth to maintain living standards after retirement. This report explains how
national saving is measured, presents recent estimates of saving rates in the United
States, and, for comparison, provides those of other major industrial countries. This
report will be updated periodically.
Introduction
Anyone with income and a future must decide how much to spend and how much
to save. Individuals may save a fraction of their income for precautionary reasons, as well
as to provide for themselves in retirement. Businesses retain a fraction of their profits in
order to finance new investments. Governments save (or dis-save) as a consequence of
policy decisions about how much to tax and how much to spend.
The amount of money saved as a nation has important economic consequences. If
individuals save too little during their working lives to avoid falling living standards in
old age, that may influence policymakers’ views about the appropriate level of Social
Security taxes and benefits. National saving, the sum of individual, business, and public
saving, has important consequences for the balance of trade, economic growth, and future
standards of living.¹
Although economic theory gives no reason to prefer one saving rate to another, it
may still be useful to examine trends in saving and to compare U.S. saving rates with
those in other countries. This report provides a brief explanation of how saving is

¹ For a discussion of public policy and saving, see CRS Report RL32119, Can Public Policy
Raise the Saving Rate?, by Brian W. Cashell.

measured, and it provides current data on saving rates in the United States and for selected
foreign countries.
Measuring Saving
Saving, in a nutshell, is income minus consumption. In an economic sense, however,
consumption is not the same as expenditures. Translating the theoretical notion of saving
into a statistical measure is a challenge.
The source for U.S. saving data is the national income and product accounts (NIPA)
published by the Department of Commerce, Bureau of Economic Analysis (BEA). The
NIPA constitute the accounting framework which is used to produce estimates of gross
domestic product (GDP). GDP is the total value of goods and services produced, and it
can be calculated in two different ways. One way is to add up the value of all the goods
and services produced (the product side of the accounts), and the other way is to add up
all of the income earned in the production of those goods and services (the income side
of the account).
On the product side, GDP is the total value of those goods and services produced for
personal consumption (C), investment (I), government (G), as well as for export (X). On
the income side, the income earned in the production of those goods and services can be
accounted for as consumer spending (C), taxes (T), private saving (S), and spending for
imported goods and services (M).
Since each of these approaches measure the same variable (GDP), they can be set
equal to each other, in this way:
C + I + G + X = C + T + S + M
Subtracting consumption (C) from both sides simplifies the equality:
I + G + X = T + S + M
This can now be rearranged by subtracting government spending (G) and exports (X)
from both sides, which gives:
I = S + ( T — G ) + ( M — X)
This equation illustrates the importance of saving. Total investment is equal to the sum
of private saving (S), public saving (T-G), and the net inflow of capital from abroad (M-
X).²

² Just as there is a balance between the income and product sides of the NIPA, there is a balance
in international payments. If Americans buy more goods and services from abroad than they
export, then (at least in this simplified example) the net outflow of dollars will be used by
foreigners to buy dollar-denominated assets, which thus helps to finance domestic investment.

Gross and Net Saving
In the broadest sense, saving is income less consumption. Consumption is typically
taken to mean spending on goods and services by households. But consumption can also
refer to the wear and tear (depreciation, or capital consumption) on the capital stock that
occurs in the production of those goods and services. Thus, some saving must be
allocated to the replacement of the existing capital stock as it wears out. Only if saving
is more than sufficient to replace the existing capital stock as it wears out can the capital
stock grow.
For this reason, saving data distinguish between “gross” and “net” saving. The
difference between the two measures is the estimated deterioration in the existing capital
stock. In some cases, such as computers, capital may be completely depreciated in a very
short period of time, whereas in others, such as buildings or heavy equipment, capital may
take a long time to wear out.
Saving and Economic Growth
Economic growth, in the long run, is determined by three factors: the growth rate of
the labor force; the rate of technological progress; and the rate of growth of the capital
stock. The productivity of the labor force depends on both the level of technology and the
size of the capital stock. The more capital there is, the more productive the labor force
can be. The size of the capital stock, in turn, depends on the rate of investment.
Investment must equal saving. The amount that can be invested depends on the
amount of saving. Saving more can lead to increased investment, resulting in a larger
stock of capital and higher levels of productivity. Consuming less now enables more
consumption in the future.
Thrift is considered by many to be a virtue, but economic theory gives no reason to
prefer one saving rate over another. The amount saved is seen simply as a reflection of
the trade off made between a desire to consume now and a willingness to consume less
than one’s current income to provide resources for the future.
Historical Saving Data
Table 1 presents historical estimates of U.S. saving rates since 1997. The data in the
top third of the chart relate to the contribution of the private sector (personal or household
saving, and business saving) to national saving, followed by data indicating the saving of
the public sector, with separate accounting for the federal and state and local government.
The bottom third of the table shows both total gross and net national saving, the amount
of saving imported from abroad, and total investment as a percentage of gross domestic
product.

CRS-4
Table 1. Accounting for Saving in the United States
^(al^l^fⁱ^g^u^r^es^as^{a percen}^t^a^g^e^of^g^r^os^s^dom^es^tⁱ^c^produ^ct⁾
¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷
^G^r^os^s^Pers^on^al^s^a^vⁱⁿ^g^2.6³^.2^1.7¹^.7^1.3¹^.8^1.6¹^.6^0.3⁰^.5^0.4
^Gr^o^{ss B}^u^sine^{ss sa}^ving¹³^.¹¹²^.⁰¹²^.⁶^11.9^12.5^13.1^13.2^13.6^14.6^14.1^13.3
^Pri^v^at^{e C}^a^pi^t^a^l^C^oⁿ^s^u^m^ptⁱ^oⁿ^9.6⁹^.7^9.9^10.1^10.6^10.3^10.2^10.3^10.9^10.3^10.4
^G^r^os^s^Pri^v^at^{e S}^a^vⁱⁿ^g^15.7^15.2^14.3^13.6^13.8^14.9^14.8^15.2^14.9^14.6^13.7
^N^e^t^Pri^v^at^{e S}^a^vⁱⁿ^g^6.1⁵^.5^4.5³^.5^3.2⁴^.6^4.6⁴^.8^3.9⁴^.3^3.3
^G^r^os^s^F^e^deral^S^a^vⁱⁿ^g^0.3¹^.4^2.0²^.8^1.3^-^1.5^-^2.6^-^2.4^-^1.6^-^0.7^-^0.9
^Fed^e^r^a^{l Cap}^{ital Co}ⁿ^s^u^m^p^tioⁿ^1.0⁰^.9^0.9⁰^.9^0.9⁰^.8^0.8⁰^.8^0.8⁰^.8^0.8
ⁱ^{ki/CRS-RS21480}^{Net Federal Sav}ⁱⁿ^g^-⁰^.7^0.4¹^.1^1.9⁰^.5^-²^.4^-³^.4^-³^.2^-²^.3^-¹^.5^-¹^.7
^g/w^G^r^os^s^S^&^L^G^o^v^e^rn^m^eⁿ^t^S^a^vⁱⁿ^g^1.6¹^.7^1.6¹^.6^1.2⁰^.8^1.0¹^.2^1.5¹^.6^1.4
^s^.or^S^&^L^C^a^pi^t^a^l^C^oⁿ^s^u^m^ptⁱ^oⁿ¹^.1^1.1¹^.1^1.1¹^.2^1.2¹^.2^1.2¹^.2^1.2¹^.3
^le^ak^N^e^t^S^&^L^S^a^vⁱⁿ^g^0.5⁰^.6^0.5⁰^.5^0.0^-^0.3^-^0.2⁰^.0^0.2⁰^.4^0.1
^://wiki^G^r^os^s^Pu^blⁱ^c^S^a^vⁱⁿ^g^1.9³^.1^3.7⁴^.4^2.5^-^0.7^-^1.6^-^1.2^-^0.1⁰^.9^0.5
^h^ttp^{Net P}^u^{blic Sav}ⁱⁿ^g^-⁰^.2^1.0¹^.7^2.4⁰^.5^-²^.7^-³^.6^-³^.2^-²^.1^-¹^.2^-¹^.6
^G^r^os^s^N^a^tⁱ^oⁿ^a^l^S^a^vⁱⁿ^g^17.6^18.3^18.1^18.0^16.4^14.2^13.3^13.8^14.8^15.5^14.2
^N^e^t^N^a^tⁱ^oⁿ^a^l^S^a^vⁱⁿ^g^5.9⁶^.5^6.2⁵^.9^3.7¹^.9^1.1¹^.6^1.9³^.1^1.7
^N^e^t^F^o^rei^gⁿ^In^v^e^s^t^m^eⁿ^t^1.3²^.1^3.0⁴^.0^3.7⁴^.4^4.7⁵^.3^5.7⁵^.9^5.2
^T^o^{tal Gr}^o^{ss Do}^m^e^{stic I}ⁿ^v^e^stm^eⁿ^t¹⁸^.⁹²⁰^.⁴^21.0^22.1^20.0^18.6^18.0^19.2^20.6^21.3^19.4
^Source:^D^e^part^m^eⁿ^t^of^C^o^m^m^e^{rce, Bu}^reau^of^Econ^omⁱ^c^Aⁿ^al^y^sⁱ^s^.

International Comparisons
Although no particular saving rate is prescribed by economic theory, the case for
saving more is sometimes argued on the grounds that either less is saved now than in prior
years, or that the current saving rate is below that of other countries. Table 2 presents
data showing how national saving in the United States compares with that in other major
industrial countries. These data differ somewhat from those presented in Table 1 because
the Organization for Economic Co-operation and Development (OECD) uses a different
set of economic accounting rules, and because the OECD data are not revised on the same
schedule as the NIPA data.
Table 2. Gross National Saving for Selected Countries
^(as^{a percen}^t^a^g^e^of^g^r^os^s^dom^es^tⁱ^c^produ^ct⁾
^United^C^aⁿ^a^d^a^Fran^ce^G^erm^an^y^I^tal^y^Jap^an^United
^St^a^t^es^Kⁱ^ng^do^m
¹⁹⁹⁶^16.1^18.8^18.7^20.5^22.2^29.7^16.3
¹⁹⁹⁷^17.3^19.6^19.9^20.7^22.2^29.8^17.4
¹⁹⁹⁸^18.0^19.1^21.0^20.9^21.6^28.8^18.3
¹⁹⁹⁹^17.8^20.7^21.8^20.3^21.1^27.2^16.0
²⁰⁰⁰^17.7^23.6^21.6^20.2^20.6^27.5^15.4
²⁰⁰¹^16.1^22.2^21.3^19.5^20.9^25.8^15.6
²⁰⁰²^13.9^21.2^19.8^19.4^20.8^25.2^15.8
²⁰⁰³^12.9^21.4^19.1^19.5^19.8^25.4^15.7
²⁰⁰⁴^13.4^22.8^19.0^21.5^20.3^25.8^15.9
²⁰⁰⁵^13.5^23.7^18.5^21.8^19.6^26.8^15.1
²⁰⁰⁶^13.7^24.3^19.1^23.0^19.6^26.6^14.9
^Source:^O^r^g^aⁿⁱ^zatⁱ^oⁿ^f^o^{r Econ}^omⁱ^c^C^o^-^operatⁱ^oⁿ^an^{d D}^e^v^e^l^opm^en^t^.
Over the period shown, Japan saved at a higher rate than any of the other countries,
although its saving rate has been falling. The United Kingdom and the U.S. saving rates
were the lowest of these seven countries.
Table 3 presents data comparing historical household saving rates for the same
countries. The OECD household saving data are based on the most recent internationally
comparable data.

Table 3. Household Saving for Selected Countries
^(as^{a percen}^t^a^g^e^of^g^r^os^s^dom^es^tⁱ^c^produ^ct⁾
^United^C^aⁿ^a^d^a^Fran^ce^G^erm^an^y^I^tal^y^Jap^an^United^a
^St^a^t^es^Kⁱ^ng^do^m
¹⁹⁹⁶^4.0⁷^.0^11.9^10.5^17.9^10.6⁹^.4
¹⁹⁹⁷^3.6⁴^.9^12.8^10.1^15.1^10.3⁹^.5
¹⁹⁹⁸^4.3⁴^.9^12.4^10.1^11.4^11.3⁷^.0
¹⁹⁹⁹^2.4⁴^.0^12.1⁹^.5^10.4^10.0⁵^.3
²⁰⁰⁰^2.3⁴^.7^12.0⁹^.2^8.5⁸^.6^5.1
²⁰⁰¹^1.8⁵^.2^12.7⁹^.4^10.5⁵^.0^6.4
²⁰⁰²^2.4³^.5^13.8⁹^.9^11.4⁴^.9^5.0
²⁰⁰³^2.1²^.6^12.7^10.3^10.4³^.9^4.9
²⁰⁰⁴^2.1²^.9^12.6^10.4^10.4³^.5^3.7
²⁰⁰⁵^0.5¹^.6^11.8^10.5^10.0³^.9^5.6
²⁰⁰⁶^0.4²^.3^11.9^10.5⁸^.7^3.3⁴^.8
²⁰⁰⁷^0.4¹^.5^12.7^10.9⁶^.8^3.1²^.9
^Source:^O^r^g^aⁿⁱ^zatⁱ^oⁿ^f^o^{r Econ}^omⁱ^c^C^o^-^operatⁱ^oⁿ^an^{d D}^e^v^e^l^opm^en^t^.
^a^.^T^h^e^Uⁿⁱ^t^e^d^Kⁱ^ngd^o^m^r^e^p^o^r^t^s^gr^o^{ss sa}^vi^ng,^t^h^e^o^t^he^r^s^a^r^e^ne^t^sa^vi^{ng r}^a^t^e^s.