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BEA’s State and Local Area Personal Income

Robert L. BrownNavigating the Nevada Economy

Reno, NV

September 29, 2009

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BEA Personal Income

▪The most current, comprehensive and consistent measure available of household income

▪Comprehensive: measures income received by persons from production (returns to labor and

capital) business and government transfers

▪Consistent across time and geography

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BEA Regional Personal Income

▪Consistent time series with BEA national statistics

▪Timely State—3 months Metro—8 months County—12-16 months

▪ Industrial structure of earnings and compensation

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State Personal Income

▪ Quarterly estimates by place of residence from 1948 3 months after the end of the quarter

▪ Annual estimates by place of residence from 1929 Preliminary 3 months after end of year Detailed 9 months after the end of the year Includes per capita and disposable personal

income estimates

▪ Annual earnings, compensation, wages, and employment by industry by place of work

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Local Area Personal Income

▪ Annual data from 1969 Metro area released 8 months after end of year County compensation released 12 months after end of

year County PI released 16 months after end of year

▪ Geographic availability: 3,111 counties 366 Metropolitan Areas 574 Micropolitan Areas 179 BEA Economic Areas

▪ Industry detail by place of work Compensation by county and industry available 12

months after reference year Earnings and employment by county available 16

month after end of year

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BEA Income is a Dynamic Series

▪Personal income has changed to better reflect the ever-changing economy Definitional and classificational

changes Source data and methodological

changes Presentational changes

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Regional Income First Produced

▪ 1940—”Income Payments to Individuals, by States, 1929-38” Income payments to individuals for services

rendered in current production An attempt to measure product

▪ Income payments definition—4 components: Salaries and wages Other labor income

Direct and work relief and unemployment benefits, workmen’s compensation, pension payments, and related items

Entrepreneurial withdrawals Income of self-employed persons

Dividends, interest, and net rents and royalties

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State and Local Area Personal Income

▪ State personal income first published in Survey of Current Business in 1955

▪ 6 Major Components Wages and Salaries Other Labor Income Proprietors’ Income Property Income Transfer Payments Less: Personal Contributions for Social Insurance

▪ Local area personal income first published in 1975

▪ Consistent with the integrated national economic accounts

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State and Local Area Personal Income—What Has

Changed?▪ More component detail▪ Broader range of income-in-kind and

imputed income items▪ Now includes income of nonprofit

institutions serving individuals▪ Now includes employer contributions to

private pension funds Instead of benefits

▪ New component—transfer payments Government payments to individuals

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Continued Improvements

▪Detail continues to expand Compensation by industry in 2005 Dividends, interest, and rent detail in

2009/10

▪Definitions continue to be updated Treatment of Medicare prescription

drugs Treatment of Economic Stimulus

payments

▪New source data and methods continue to be developed and used

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Key local area statistics

▪ Total personal income All income received by residents

▪ Per capita personal income Personal income divided by population Indicator of economic well-being

▪ Earnings by place of work and by industry Proxy for production Industrial structure

▪ Dividends, interest, and rent Income from assets and housing

▪ Transfer receipts Social Security, government-administered medical,

income maintenance

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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—must make adjustments to compensate for differences

▪ 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 Quarterly Census of

Employment and Wages (QCEW) report Byproduct of Unemployment Insurance (UI)

program Excellent quality--Most workers are

covered by UI

▪ Other data sources used for 6% of noncovered workers & under-reported wages & tips

▪ Data are by place of work

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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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Wages and SupplementsUnited States

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Proprietors’ income

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

▪Farm: Based on US Department of

Agriculture data

▪Nonfarm: Based on tabulations of IRS tax returns

—Schedule C & partnership Form 1065

▪Adjusted for misreported income

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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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Adjustment for Residence

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

Carson City -13.4% Douglas 10.5% Washoe -1.4%

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

updated with IRS wages (place of residence)

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Dividends, Interest, & Rent

▪16% of personal income▪Nearly 1/2 of interest is received

by pension funds and life insurance carriers on behalf of persons

▪Local estimates based on tabulations of income tax returns and Census housing statistics

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Personal Current Transfer Receipts

▪15% of personal income Social Security accounts for 1/3 Includes in-kind transfers such as

Medicare & Medicaid—45% of transfers

Income maintenance, unemployment benefits, veterans’ benefits, etc.

▪Based on primary data tabulated by state or county

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