Income Data for Policy Analysis: A Comparative Assessment of Eight Surveys. Contributions of Earned and Unearned Income to Total Income

12/23/2008

Across the three Census Bureau surveys, earned income accounts for between 82.1 and 82.8 percent of total income (Table IV.17). MEPS is only slightly higher at 84.1 percent while NHIS is highest at 86.0 percent, but inconsistencies between earnings and total income among NHIS families, discussed later in this chapter, may explain the relatively high share of earnings in total NHIS income. It is particularly striking that the earnings share of total income should be the same in CPS and SIPP despite the fact that total earned income in the SIPP is only 89 percent of the corresponding amount in the CPS. This implies that unearned income, the difference between total income and earnings, must be estimated no better than earnings in the SIPP—at least relative to the CPS. This is confirmed in the bottom panel of the table, where we see that aggregate unearned income in the SIPP is just 90 percent of the CPS amount. Continuing with SIPP we see again how much the survey’s estimates of self-employment help to offset the SIPP’s apparent understatement of wage and salary income. SIPP captures only 82.4 percent as much aggregate wage and salary income as the CPS, but the SIPP’s identification of 88 percent more self-employment income raises the SIPP’s share of CPS earnings by 6.5 percentage points. Overall, self-employment income in the SIPP is 10.7 percent of total income, which is more than double the CPS share.

TABLE IV.17

CONTRIBUTION OF EARNED AND UNEARNED INCOME TO TOTAL INCOME: FIVE SURVEYS
Income Estimate CPS ACS SIPP MEPS NHIS
Billions of Dollars
Total Income 6,468.4 6,346.3 5,766.2 6,257.7 6,116.2
Earned Income 5,354.3 5,207.9 4,760.1 5,263.8 5,261.4
Wages and salaries 5,026.3 4,817.2 4,142.5 NA NA
Self-employment income 328.0 390.7 617.6 NA NA
Unearned Income 1,114.1 1,138.3 1,006.0 994.0 854.8

 

CONTRIBUTION OF EARNED AND UNEARNED INCOME TO TOTAL INCOME: FIVE SURVEYS(continued)
Income Estimate CPS ACS SIPP MEPS NHIS
Percent of Total Income
Total Income 100.0 100.0 100.0 100.0 100.0
Earned Income 82.8 82.1 82.6 84.1 86.0
Wages and salaries 77.7 75.9 71.8 NA NA
Self-employment income 5.1 6.2 10.7 NA NA
Unearned Income 17.2 17.9 17.4 15.9 14.0

 

CONTRIBUTION OF EARNED AND UNEARNED INCOME TO TOTAL INCOME: FIVE SURVEYS(continued)
Income Estimate CPS ACS SIPP MEPS NHIS
Percent of CPS Income by Source
Total Income 100.0 98.1 89.1 96.7 94.6
Earned Income 100.0 97.3 88.9 98.3 98.3
Wages and salaries 100.0 95.8 82.4 NA NA
Self-employment income 100.0 119.1 188.3 NA NA
Unearned Income 100.0 102.2 90.3 89.2 76.7

Source:   Mathematica Policy Research, from tabulations of calendar year 2002 income from the 2003 CPS ASEC supplement, the 2001 SIPP panel, the 2002 Full-year Consolidated MEPS-HC, and the 2003 NHIS, and prior 12 months income, inflation-adjusted to calendar year 2002, from the 2002 ACS.

The ACS captures 4 percent lower wage and salary income than the CPS but 19 percent more self-employment income, which raises the ACS earned income to 97.3 percent of the CPS total. The ACS also captures slightly more (2.2 percent) unearned income than the CPS, which contributes to an overall total income that is 98.1 percent of the CPS total. MEPS earned income that is 98.3 percent of CPS earned income—the same share as NHIS. Similar to SIPP, MEPS captures 89 percent as much unearned income as the CPS (the aggregates for the two surveys are essentially identical), which lowers its total income to 96.7 percent of the CPS total. The NHIS does not collect unearned income, but the difference between total income and earned income collected in the NHIS implies unearned income that is 77 percent of the CPS total. This implied shortfall is simply an indication that the NHIS does not do as well in obtaining total income with its single question as it does in collecting earned income from all adults.

When we compare survey estimates of earned income by quintile of family income, we find, interestingly, that the ACS, SIPP, MEPS, and NHIS all find more earnings in the lowest quintile of family income than does the CPS (Table IV.18). The additional earnings range from 9 to 17 percent of the CPS total, but the aggregate amounts are small. The ACS and SIPP find progressively less total earnings relative to the CPS as the quintile increases. For MEPS this is true after the first quintile. The NHIS, on the other hand, finds progressively more aggregate earnings relative to the CPS over quintiles two through four.

Unearned income does not show such clear patterns. Overall, the ACS finds slightly more unearned income than the CPS, but unlike earned income, the ACS finds progressively more than the CPS as the quintile rises (Table IV.19). In the top quintile, the ACS finds 23 percent more unearned income than the CPS. Through the first four quintiles, SIPP obtains 99.6 percent as much unearned income as the CPS but identifies only 64 percent as much as the CPS in the top quintile. MEPS, on the other hand, falls short of the CPS in every quintile, being closest in the middle quintile. With its unearned income as a residual rather than a reported amount, the NHIS is erratic. The difference between aggregate total and aggregate earned income is as low as 60 percent of the CPS aggregate in one quintile and as high as 88 percent (in the adjacent quintile).

TABLE IV.18

AGGREGATE EARNED INCOME BY QUINTILE OF FAMILY INCOME: FIVE SURVEYS
Income Estimate CPS ACS SIPP MEPS NHIS
Billions of Dollars
Aggregate Earned Income 5,354.3 5,207.9 4,760.1 5,263.8 5,261.4
Family Income
Lowest 176.1 206.5 200.5 191.5 196.4
Second 542.9 565.3 528.0 615.5 514.4
Third 889.2 878.8 795.4 950.8 888.2
Fourth 1,255.9 1,225.5 1,119.4 1,288.3 1,301.9
Highest 2,490.2 2,332.0 2,116.7 2,217.7 2,360.5
Sum through Four Quintiles 2,864.1 2,876.0 2,643.5 3,046.1 2,900.9

 

AGGREGATE EARNED INCOME BY QUINTILE OF FAMILY INCOME: FIVE SURVEYS(continued)
Income Estimate CPS ACS SIPP MEPS NHIS
Percent of CPS
Aggregate Income, All Persons 100.0 97.3 88.9 98.3 98.3
Family Income Quintile
Lowest 100.0 117.3 113.9 108.8 111.6
Second 100.0 104.1 97.3 113.4 94.7
Third 100.0 98.8 89.5 106.9 99.9
Fourth 100.0 97.6 89.1 102.6 103.7
Highest 100.0 93.6 85.0 89.1 94.8
Sum through Four Quintiles 100.0 100.4 92.3 106.4 101.3

Source: Mathematica Policy Research, from tabulations of calendar year 2002 income from the 2003 CPS ASEC supplement, the 2001 SIPP panel, the 2002 Full-year Consolidated MEPS-HC, and the 2003 NHIS, and prior 12 months income, inflation-adjusted to calendar year 2002, from the 2002 ACS.

TABLE IV.19

AGGREGATE UNEARNED INCOME BY QUINTILE OF FAMILY INCOME: FIVE SURVEYS
Income Estimate CPS ACS SIPP MEPS NHIS
Billions of Dollars
Aggregate Unearned Income 1,114.1 1,138.3 1,006.0 994.0 854.8
Family Income Quintile
Lowest 194.4 162.2 190.8 168.4 117.3
Second 231.2 213.1 222.7 192.8 203.3
Third 201.0 208.6 213.4 193.9 170.2
Fourth 190.9 190.3 187.7 173.5 118.7
Highest 296.5 364.0 191.3 265.3 245.3
Sum through Four Quintiles 817.6 774.3 814.7 728.7 609.5

 

AGGREGATE UNEARNED INCOME BY QUINTILE OF FAMILY INCOME: FIVE SURVEYS(continued)
Income Estimate CPS ACS SIPP MEPS NHIS
Percent of CPS
Aggregate Income, All Persons 100.0 102.2 90.3 89.2 76.7
Family Income Quintile
Lowest 100.0 83.4 98.2 86.6 60.3
Second 100.0 92.2 96.3 83.4 88.0
Third 100.0 103.8 106.2 96.4 84.6
Fourth 100.0 99.7 98.3 90.9 62.2
Highest 100.0 122.8 64.5 89.5 82.7
Sum through Four Quintiles 100.0 94.7 99.6 89.1 74.5

Source:   Mathematica Policy Research, from tabulations of calendar year 2002 income from the 2003 CPS ASEC supplement, the 2001 SIPP panel, the 2002 Full-year Consolidated MEPS-HC, and the 2003 NHIS, and prior 12 months income, inflation-adjusted to calendar year 2002, from the 2002 ACS. Note: Unearned income is the difference between total income, reported in Table IV.1, and earned income, reported in Table IV.5.

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