Income Data for Policy Analysis: A Comparative Assessment of Eight Surveys. Income in the PSID

12/23/2008

To assess the reporting of income in the PSID in comparison with other surveys, we replicated the tables above for the PSID and the three Census Bureau surveys. As we explained in Chapter III, the application of preliminary cross-sectional weights to the PSID yields an estimated population that falls short of the CPS population by 21 million. In part this is due to an omission of unrelated subfamilies and secondary individuals from the CPS-based control totals that were used to post-stratify the PSID weights. In addition to reducing the weighted number of persons, this omission from the PSID is likely to have an effect on the distribution of income because singles—who tend to have lower income than other family units—will be underestimated relative to the CPS. Therefore, we created an additional CPS series, labeled CPS-X in the tables, that excludes unrelated subfamilies and all secondary individuals except those who were identified as unmarried partners. In creating CPS-like families from the PSID families with unmarried partners, we separated the unmarried partners into their own families. We needed their counterparts in the CPS.

Despite 21 million fewer persons, as we noted, the PSID captures 3.9 percent more aggregate income than the CPS, or an additional $253.4 billion dollars (Table IV.4). Compared to the CPS-X series with the aforementioned exclusions, the PSID captures an additional $416.5 billion. The PSID also captures more aggregate income than the full CPS in every quintile, with the biggest difference in the top quintile, where the PSID aggregate is 105.5 percent of the full CPS aggregate.

PSID quintile boundaries are also higher than the quintiles from the full CPS, CPS-X, ACS, or SIPP. The biggest difference occurs at the 20th percentile, where the PSID value of $24,200 exceeds the corresponding full CPS value by $4,200 (or 21 percent) and exceeds the corresponding CPS-X value by $3,300 (Table IV.5). At higher percentiles, the PSID values exceed the corresponding full CPS values by 10 to 13 percent. The ratio of the 80th to the 20th percentile is 8 percent lower than that of the full CPS because the PSID exceeds the CPS by a smaller margin at the 80th percentile than the 20th percentile.

Because the PSID obtains more aggregate income than the CPS from a smaller weighted population, the differences in per capita income are even greater than the differences in aggregate income. The overall per capita income in the PSID, $25,710 is 12 percent higher than both the full CPS and CPS-X per capita incomes (Table IV.6). By quintile the differences grow from 10 percent in the lowest quintile to 14 percent in the highest quintile. Ratios of per capita income between quintiles are only slightly higher than the corresponding CPS ratios, implying that inequality across the income distribution is about the same in the two surveys.

TABLE IV.4

AGGREGATE INCOME BY QUINTILE OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS
Income Estimate CPS ACS SIPP PSID CPS-X1
Billions of Dollars
Aggregate Income, All Persons 6,468.4 6,346.3 5,766.2 6,721.8 6,305.2
Family Income Quintile
Lowest 370.5 368.7 391.4 375.8 361.4
Second 774.1 778.4 750.8 798.3 755.4
Third 1,090.2 1,087.4 1,008.8 1,103.7 1,054.6
Fourth 1,446.8 1,415.8 1,307.2 1,504.9 1,414.5
Highest 2,786.7 2,696.0 2,308.0 2,939.0 2,719.3
Sum through Four Quintiles 3,681.7 3,650.3 3,458.2 3,782.8 3,585.9

 

AGGREGATE INCOME BY QUINTILE OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS(continued)
Income Estimate CPS ACS SIPP PSID CPS-X1
Percent of CPS
Aggregate Income, All Persons 100.0 98.1 89.1 103.9 97.5
Family Income Quintile
Lowest 100.0 99.5 105.6 101.4 97.6
Second 100.0 100.6 97.0 103.1 97.6
Third 100.0 99.7 92.5 101.2 96.7
Fourth 100.0 97.9 90.3 104.0 97.8
Highest 100.0 96.7 82.8 105.5 97.6
Sum through Four Quintiles 100.0 99.1 93.9 102.7 97.4

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

1.The CPS-X estimates exclude all unrelated subfamilies and most secondary individuals (except unmarried partners of the householder) to mimic the population controls applied to the PSID.

TABLE IV.5

QUINTILES OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS
Quintile Boundaries CPS ACS SIPP PSID CPS-X1
Family Income in Dollars
Percentile Value
20 %-ile 20,000 20,191 20,672 24,200 20,900
40 %-ile 37,051 37,656 35,870 42,025 38,410
60 %-ile 59,133 58,453 54,328 64,996 60,162
80 %-ile 91,207 89,548 81,785 101,817 92,500
Ratio of 80th to 20th %-ile 4.56 4.44 3.96 4.21 4.43

 

QUINTILES OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS (continued)
Quintile Boundaries CPS ACS SIPP PSID CPS-X1
Percent of CPS
Percentile Value
20 %-ile 100.0 101.0 103.4 121.0 104.5
40 %-ile 100.0 101.6 96.8 113.4 103.7
60 %-ile 100.0 98.9 91.9 109.9 101.7
80 %-ile 100.0 98.2 89.7 111.6 101.4
Ratio of 80th to 20th %-ile 100.0 97.3 86.8 92.3 97.1

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

1.The CPS-X estimates exclude all unrelated subfamilies and most secondary individuals (except unmarried partners of the householder) to mimic the population controls applied to the PSID.

TABLE IV.6

AVERAGE INCOME PER CAPITA BY QUINTILE OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS
Income Estimate CPS ACS SIPP PSID CPS-X1
All Persons 22,893 22,854 20,514 25,710 22,975
Family Income Quintile
Lowest 6,513 6,526 6,962 7,178 6,584
Second 13,789 14,259 13,355 15,261 13,762
Third 19,293 19,576 17,946 21,132 19,204
Fourth 25,604 25,496 23,250 28,785 25,777
Highest 49,316 48,543 41,062 56,220 49,561
Ratio of fourth to lowest 3.93 3.91 3.34 4.01 3.92
Ratio of highest to lowest 7.57 7.44 5.90 7.83 7.53

 

AVERAGE INCOME PER CAPITA BY QUINTILE OF FAMILY INCOME: PSID AND CENSUS BUREAU SURVEYS(continued)
Income Estimate CPS ACS SIPP PSID CPS-X1
Percent of CPS
All Persons 100.0 99.8 89.6 112.3 100.4
Family Income Quintile
Lowest 100.0 100.2 106.9 110.2 101.1
Second 100.0 103.4 96.8 110.7 99.8
Third 100.0 101.5 93.0 109.5 99.5
Fourth 100.0 99.6 90.8 112.4 100.7
Highest 100.0 98.4 83.3 114.0 100.5
Ratio of fourth to lowest 100.0 99.4 84.9 102.0 99.6
Ratio of highest to lowest 100.0 98.2 77.9 103.4 99.4

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

1.The CPS-X estimates exclude all unrelated subfamilies and most secondary individuals (except unmarried partners of the householder) to mimic the population controls applied to the PSID.

 

Does the PSID truly capture more income than the CPS or does the PSID sample with its current weights simply overrepresent higher income families? We cannot answer this with the data available to us. We compared distributions of selected characteristics between the PSID and the CPS and found that the PSID had proportionately fewer Hispanics and blacks and slightly more persons with college degrees, but the PSID also had proportionately more persons with less than a high school education, so the comparison was inconclusive.26 Our conclusion at this point is that incomes in the PSID appear to run higher than in any of the other surveys, but given the nature of the PSID sample, this could easily be due to the PSID being less representative of the U.S. population as a whole than the Census Bureau surveys.

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