Income Data for Policy Analysis: A Comparative Assessment of Eight Surveys. Measurement Issues

12/23/2008

The fact that SIPP identifies so many more persons with self-employment income than the CPS can be attributed to the unique way in which SIPP requests such income. SIPP asks business owners to report their monthly draw from the business as part of their monthly earnings from self-employment, and this appears to have a marked impact on the number of business owners reporting nonzero self-employment income. Beginning with the 2004 SIPP panel the Census Bureau has expanded the questions about self-employment in order to obtain distinctly separate reports of draw and net profit or loss. While the impact of these changes has yet to be determined, two possible outcomes are more total income from self-employment and, for the first time, the reporting of negative self-employment income, which the SIPP has historically failed to elicit.

TABLE IV.15

AVERAGE EARNINGS, WAGES AND SALARIES, AND SELF-EMPLOYMENT INCOME OF WORKERS: FIVE SURVEYS
Source of Income CPS ACS SIPP MEPS NHIS
Average Per Worker
Earnings 35,591 34,279 30,899 32,813 35,707
Wages and Salaries 35,514 33,837 29,514 NA NA
Self-employment Income 24,670 26,893 30,755 NA NA

 

AVERAGE EARNINGS, WAGES AND SALARIES, AND SELF-EMPLOYMENT INCOME OF WORKERS: FIVE SURVEYS(continued)
Source of Income CPS ACS SIPP MEPS NHIS
Percent of CPS
Earnings 100.0 96.3 86.8 92.2 100.3
Wages and Salaries 100.0 95.3 83.1 NA NA
Self-employment Income 100.0 109.0 124.7 NA NA

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.

In contrast to SIPP, MEPS shows the impact of collecting annual income data separately from employment and without reference to reported work activity. With income questions designed around the tax return, MEPS obtains only $92.1 billion of business income compared to $617.6 billion for SIPP, $394.3 billion for ACS, and $334.7 billion for CPS (Table IV.16). Using the MEPS “JOBS” file, which contains the detailed employment data collected two to three times a year, we find that 16.5 million persons (weighted) who reported only self-employment as a work activity in 2002 reported only wage and salary earnings for the year. The wage and salary income for these persons totaled $620.2 billion. If this wage and salary income were reclassified as business income, then net self-employment income would reach $712.3 billion in MEPS, exceeding even SIPP by $95 billion and more than doubling the amount reported in the CPS. At the same time, the MEPS wage and salary income would drop to $4,551.5 billion, which is still more than $400 billion higher than SIPP but $475 billion below the CPS.

Estimates of persons with earnings are not affected by the reclassification of some earned income from wages and salaries to self-employment income. While the ACS and SIPP numbers suggest that the CPS may be underestimating the number of persons with annual earnings, the MEPS estimate of 160 million earners (reported in Table IV.14) lies well above these other surveys, exceeding the CPS by 10.0 million. Recalling from Chapter III that MEPS also finds 8.4 million more family heads than the CPS, one has to wonder if the two estimates are related. Going further, could both be an artifact of the post-stratification of MEPS person weights to the distribution of CPS persons by poverty status? This is an intriguing question, and we will return to the topic of post-stratification in Chapter 5, but providing an answer was not possible with available data. Another possible explanation for the substantially greater number of persons with earned income in MEPS versus the other surveys relates, again, to the separate collection of annual income and employment.  Perhaps some of the persons reporting wage and salary income in MEPS should have reported it as unearned income instead.  Evidence in support of this possibility is presented in Section G below, which compares reported employment and reported income in SIPP, MEPS, and NHIS.  Again, no resolution of these reporting issues was possible with the data available to us in this study, but highlighting the issues is informative about the complexity of measuring income in surveys. 

TABLE IV.16

AGGREGATE EARNED INCOME BY SOURCE: MEPS AND CENSUS BUREAU SURVEYS
Income Estimate CPS ACS SIPP MEPS
as
Reported
Alternate
MEPS1
Billions of Dollars
Earned Income 5,354.3 5,207.9 4,760.1 5,263.8 5,263.8
Wages and Salaries 5,026.3 4,817.2 4,142.5 5,171.7 4,551.5
Self-employment Income 328.0 390.7 617.6 92.1 712.3
Negative income -6.7 -3.6 0.0 -19.5 -19.5
Positive income 334.7 394.3 617.6 111.6 731.8

 

AGGREGATE EARNED INCOME BY SOURCE: MEPS AND CENSUS BUREAU SURVEYS(continued)
Income Estimate CPS ACS SIPP MEPS
as
Reported
Alternate
MEPS1
Percent of CPS
Earned Income 100.0 97.3 88.9 98.3 98.3
Wages and Salaries 100.0 95.8 82.4 102.9 90.6
Self-employment Income 100.0 119.1 188.3 28.1 217.2
Negative income 100.0 53.2 0.0 289.1 289.1
Positive income 100.0 117.8 184.5 33.3 218.6

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.

1.The alternative MEPS estimates were derived by moving $620.2 billion from wages and salaries to positive self-employment income.  This estimate is based on persons with only self-employment reported in the JOBS file and wages and salaries but no self-employment income.

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