What’s Behind the Regional Personal Income Statistics

Robert L. BrownCalibrating the Nevada Economy: Data and

Tools for Assessing Our State and Local Economies

Reno, NevadaFebruary 2, 2007

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Overview

▪ Personal income & its chief alternatives

▪ Revision schedule▪ Sources of personal income by

component▪ Employment and why BLS & BEA

job counts differ

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Alternative Incomes

Per Capita Income (dollars), Nevada, 2004

0

10,000

20,000

30,000

40,000

Adjusted GrossIncome (IRS)

Money Income(Census)

PersonalIncome (BEA)

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Per Capita Income Change 2000-01

(Dollars)

Nevada

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

Adjusted GrossIncome (IRS)

Money Income(Census)

PersonalIncome (BEA)

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Per Capita Income, 2004, dollars

 

Adjusted Gross

Income (IRS)

Money Income

(Census)

Personal Income

(BEA)

California 24,601 23,250 35,219

Nevada 27,016 22,360 33,787

Oregon 20,544 21,386 30,561

Utah 18,578 18,592 26,603

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Some differences between BEA, Census, & IRS

▪ Definitional differences Transfers, in cash, in kind Capital gains Pension benefits FICA taxes Misreporting

▪ Production of the estimates Revisions

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Revision Schedule

2005 2008 200920072006

MAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MAR

MAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MAR

Jobs for 2005:Q1

Misc. late or revised quarterly

data

Misc. late or revised

data for 2005

Misc. late or revised

data for 2005

Benchmark revision, all

years

Wages for 2005:Q1

USDA, Transfers for

2005

SOI Dividends,

interest & rent for 2005

SOI Proprietors’income for

2005

2005 2008 200920072006

MAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MARMAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MAR

MAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MARMAR JUNE SEP MAR JUNE SEP MAR JUNE SEP JUNE SEP MAR

Jobs for 2005:Q1Jobs for 2005:Q1

Misc. late or revised quarterly

data

Misc. late or revised quarterly

data

Misc. late or revised

data for 2005

Misc. late or revised

data for 2005

Misc. late or revised

data for 2005

Misc. late or revised

data for 2005

Benchmark revision, all

years

Benchmark revision, all

years

Wages for 2005:Q1

Wages for 2005:Q1

USDA, Transfers for

2005

SOI Dividends,

interest & rent for 2005

SOI Dividends,

interest & rent for 2005

SOI Proprietors’income for

2005

SOI Proprietors’income for

2005

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Revisions

▪ Regular revision schedule to incorporate data that are: More complete More detailed More appropriate

▪ Comprehensive revisions every 5 years Definitional changes Statistical changes Presentational changes

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Personal Income: income from all sources

▪ Income from labor services Compensation

▪ Income from household enterprises Proprietors’ income Net rent

▪ Income from ownership of capital Dividends Interest

▪ Taxes and transfers

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Derivation of Disposable Personal Income

Wage and salary disbursements+ Supplements to wages and salaries= Compensation+ Proprietors’ income= Earnings (pow) — Contributions for govt. social

insurance+ Adjustment for residence= Earnings (por)+ Dividends, interest, and rent+ Personal current transfer receipts= Personal income— Personal current taxes= Disposable personal income

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How We Produce the Estimates

▪ Administrative record information Advantage--provides detailed information at

low cost Disadvantage--does not precisely match

what is being estimated Adjustments made to compensate for differences

in definition, coverage, and geographic detail

▪ Some census data--quinquennial Agriculture and decennial Population and Housing

▪ Very little from survey information

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Sources of Data

Other

CMS SSA

IRS

BLS

PersonalIncome

60%

23%

6%6%

5%

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Wage & Salary Disbursements

▪ 55% of personal income (2005)▪ Based primarily on edited ES 202 report

(QCEW)▪ Excellent quality--Most workers are

covered by UI▪ Data adjusted upward by ~6% for

uncovered workers & under-reported wages & tips

▪ Data are by place of work

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Wage & Salary Disbursements

▪ Includes: Salaries of corporate officers Bonuses and incentive pay Pay in kind (meals, lodging, clothing) Commissions & Tips Stock options Severance pay Employee contributions to defined

compensation plans

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Real Wages – Nevada & US

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5

2.7

1990 1992 1994 1996 1998 2000 2002 2004 2006

Nevada

US

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Supplements to Wages & Salaries

▪ 13% of personal income▪ Employer contributions to:

Pension & private insurance funds (9%)

Govt. social insurance funds (4%)

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Supplements as a % of Compensation, Nevada 2005

0

10

20

30

40

50

Social Assistance

Private SectorAvg

Arts, entertainment& recreation

Federal,civilian

Military

2005 data

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Real Compensation & Wages per Worker,U.S., 2000=1.00

1.00

1.02

1.04

1.06

1.08

1.10

2000 2001 2002 2003 2004 2005

Compensation

Wages

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Real Compensation & Wages per Worker,Nevada, 2000=1.00

1.00

1.02

1.04

1.06

1.08

1.10

2000 2001 2002 2003 2004 2005

Wages

Compensation

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Real Compensation & Wages per Worker,California, 2000=1.00

0.96

0.98

1.00

1.02

1.04

1.06

1.08

1.10

2000 2001 2002 2003 2004 2005

Compensation

Wages

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Proprietors’ income

▪ 9.2% of personal income (farm 0.4%, nonfarm 8.8%)

▪ Accounting framework▪ Nonfarm: Based on tabulations of

IRS tax returns—Schedule C & Form 1065

▪ Farm: Based on USDA data▪ Adjusted for misreported income

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Contributions to Nevada Earnings Growth,2006:3

-0.05 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35

FarmForestry, f ishing, relatedMiningUtilitiesConstructionDurable goodsNondurable goodsWholesale tradeRetail tradeTransportation, w arehousingInformationFinance and insuranceReal estate, rental, leasingProfessional, technicalMgt of companies, enterprisesAdministrative, w asteEducational servicesHealth care, social assistanceArts, entertainment, recreationAccommodation, foodOther servicesFederal, civilianMilitaryState and local

0

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Contributions for Govt. Social Insurance

▪ 8% of personal income▪ This is a deduction in the

derivation of personal income▪ Mostly contributions for Social

Security & Medicare▪ Contributions from Employers,

Employees, & the Self-Employed

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Major Social Insurance Programs

▪ OASDI (Social Security)▪ Health Insurance (Medicare)▪ Unemployment Insurance▪ Workers’ Compensation▪ Supplementary Medical Insurance▪ Temporary Disability Insurance▪ Veterans’ Life Insurance▪ Pension Benefit Guaranty Corporation▪ Railroad Employee Retirement

Insurance

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Adjustment for Residence

▪ <0.5% of personal income nationally Nevada: -0.6%

Clark, NV -1.1% Washoe, NV -1.6%

Oregon: -2.0% California: >-0.1%

San Francisco -30.0% Utah: <0.1%

▪ Inter-county commuters Based on Census Journey to Work data &

updated with IRS wages (por)

▪ Border commuters Based on BEA Balance of Payments data

▪ Exceptions: College students Migratory workers

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Adjustment for Residence

▪ Place of work compensation and earnings Shows location of production Used as proxy for current production

▪ Place of residence income Indicator of economic well-being Shows where income is available for

tax planning and for spending analyses

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Dividends, Interest, & Rent

▪ 16% of personal income▪ Almost half of interest is received

by pension funds and life insurance carriers on behalf of persons

▪ About 20% of interest is an imputation for banking and other services

▪ National estimate is distributed regionally on the basis of tabulations of income tax returns and Census housing statistics

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Personal Current Transfer Receipts

▪ 15% of personal income▪ Includes in-kind transfers such as

Medicare & Medicaid▪ Excludes in-kind transfers such as

housing and public schools▪ Based on primary data tabulated

by state or county

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CA30 Regional Economic ProfilesWashoe, NV

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Nevada Per Capita Dividends, Interest, Rent

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CA35 Personal Current Transfer Receipts—Nye, NV

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Personal Current Taxes

▪ 11% of personal income▪ Mostly income taxes▪ Property taxes deducted in

derivation of rental income▪ Sales taxes are considered part of

personal consumption expenditure

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State & Local Personal Taxes as a % of 2005 Personal Income: US=2.7%

0

1

2

3

4

5

CA NV OR UT

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Federal Personal Taxes as a % of Personal Income: US=9.1%

0

2

4

6

8

10

12

CA NV OR UT

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Personal Income

▪ Comprehensive▪ Timely

Quarterly income by sector is available 3 months after end of period

▪ Historical Comparability▪ County-based local areas

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Caveats

▪ Extreme per capita income Unusual conditions such as bumper

crop, drought, or hurricane Special populations such as college

students, prisoners Major construction projects

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Employment Data

▪ Total employment: Wage & salary jobs Sole proprietorships General partners

▪ Job Count not Worker Count Earnings and employment are

consistent Earnings per job

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BEA vs. BLS Employment

Total Employment, QCEW 127.8Misreporting adjustment 2.8Exempt employment 3.4Other employment 3.1

W&S Employment, BEA 137.1Proprietors employment 29.9

Total Employment, BEA 167.0

US, millions of jobs

QCEW and BEA employment estimates, 2003

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MSA Income and Employment Growth(% change 2002-03)

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0

Wage and Salary Employment, % change

Per

son

al I

nco

me,

% c

han

ge

inflation rate, 1.9%

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For Further Information

Working papers available at

http://www.bea.gov/bea/regional/articles.cfm?section=papers

Alternative Measures of Household Income: BEA Personal Income, CPS Money Income and Beyond by John W. Ruser, Adrienne T. Pilot, and Charles Nelson

Reliability of the State Personal Income Estimates by Robert L. Brown, Bruce T. Grimm, and Marian B. Sacks

Using Efficiency Tests to Reduce Revisions in Panel Data: The Case of Wage and Salary Estimates for U.S. States by Jeremy J. Nalewaik

State Pension Benefit Estimates

Methodologies available athttp://www.bea.gov/bea/regional/articles.cfm?section=methods

41www.bea.gov

Questions/Comments

Robert.Brown@bea.gov(202) 606-9246