To assess the impact of the timing of family composition in relation to the income reference period net of other survey design features, we used the SIPP to perform a set of simulations using sample members who were present for all of calendar years 2001 and 2002. Persons were included in this subsample if they had data for all 24 months and a longitudinal weight greater than zero.47 Weighted, the sample members who met these criteria summed to 267.9 million or 95 percent of the population represented in the SIPP comparative income estimates in Chapter IV.
For this fixed sample of individuals we calculated family income in relation to the poverty threshold for 14 alternative scenarios that reflect family composition measured at different times relative to a 2001 income reference year.48 The first scenario represents a contemporaneous measurement of family income and family composition, which is what the PSID obtains. For this scenario we defined each sample member's 2001 annual family income as the sum of that individual’s 12 monthly family incomes for the year. Monthly family incomes appear on each sample person’s record for the months that they are present. For a given month, the sample member’s family income is the sum of the incomes (in that month) of everyone living with the sample member in that month. The corresponding annual poverty threshold is the sum of 12 monthly poverty thresholds that reflect family composition in each month.49 While family income may include the incomes of persons outside of our fixed sample (the sample members not utilized because they lack the third longitudinal weight or have no data for one or more months of 2001 or 2002), our simulations tabulate only the fixed sample members. It is their poverty status, calculated to reflect differential timing of family composition relative to the reference year, that we seek to compare.
In contrast to this first scenario, which reflects each fixed sample member’s actual family composition over the 12 months of the income reference year, the next 13 scenarios employ a fixed family composition, which is defined, in turn, for each of the 13 months from December 2001 through December 2002. For example, to construct each sample member’s annual family income based on a fixed family composition for December 2001, we first determined who was in a sample member’s family in that month. This may have included other members of our fixed sample as well as additional persons who were outside the fixed sample. We then summed the monthly personal income of each family member over the 12 months of calendar year 2001 to obtain an annual total for every family member. By definition, members of our fixed sample will have had complete data for calendar year 2001, but this may not have been true of the additional sample members (people with longitudinal weights of zero or missing data for one or more months of 2001 and 2002). If a family member had missing data for one or more months of 2001, we created an annual total using a simple ratio adjustment based on the number of months (out of 12) with reported income and the sum of reported income over those months.50
The 2001 annual family income for this family was then calculated by summing the annual incomes of all the family members. The annual poverty threshold for this scenario was determined from the family composition in December 2001.51 Both the annual family income and the annual poverty threshold for this family were applied to every member of our fixed sample.
We followed the same procedures to construct annual family incomes and poverty thresholds for each fixed sample member based on that sample member’s family composition in each of the 12 months of 2002. For example, to construct family incomes and poverty thresholds for June 2002, we determined who was in each fixed sample member’s family in that month and then summed their monthly incomes for calendar year 2001. In doing so, there was one additional wrinkle that we had to address. For families defined in any month of 2002, a family member who was outside the fixed sample may have had missing data for one or more months of 2001 but reported data for one or months of 2002. Rather than discard the 2002 income data—particularly when we may have had no data at all for 2001—we did the following. If a month of data for 2001 was missing but we had a reported income for the corresponding month in 2002, we substituted the 2002 data (deflated by the increase in the CPI-U between those two months) before applying the ratio adjustment.