Whats Behind the Regional Personal Income Statistics Robert

Whats Behind the Regional Personal Income Statistics Robert

Whats Behind the Regional Personal Income Statistics Robert L. Brown Calibrating the Nevada Economy: Data and Tools for Assessing Our State and Local Economies Reno, Nevada February 2, 2007 Overview Personal income & its chief alternatives Revision schedule Sources of personal income by component Employment and why BLS & BEA job counts differ www.bea.gov 2

Alternative Incomes Per Capita Income (dollars), Nevada, 2004 40,000 30,000 20,000 10,000 0 Adjusted Gross Money Income Income (IRS) (Census) www.bea.gov Personal Income (BEA) 3 Per Capita Income Change 2000-01 (Dollars) Nevada

1,500 1,000 500 0 -500 -1,000 -1,500 -2,000 Adjusted Gross Money Income Income (IRS) (Census) www.bea.gov Personal Income (BEA) 4 Per Capita Income, 2004, dollars Adjusted Gross

Income (IRS) Money Income (Census) Personal Income (BEA) California 24,601 23,250 35,219 Nevada 27,016 22,360

33,787 Oregon 20,544 21,386 30,561 Utah 18,578 18,592 26,603 www.bea.gov 5 Some differences between BEA, Census, &

IRS Definitional differences Transfers, in cash, in kind Capital gains Pension benefits FICA taxes Misreporting Production of the estimates Revisions www.bea.gov 6 Revision Schedule Misc. late or revised

quarterly data Jobs for 2005:Q1 JUNE SEP MAR 2005 JUNE SEP MAR Wages for 2005:Q1 www.bea.gov Misc. late or revised data for 2005

JUNE SEP MAR 2006 JUNE Misc. late or revised data for 2005 JUNE SEP MAR 2007 SEP

MAR USDA, Transfers for 2005 JUNE Benchmark revision, all years JUNE SEP 2008 SEP MAR SOI Dividends, interest & rent

for 2005 JUNE MAR 2009 SEP MAR SOI Proprietors income for 2005 7 Revisions Regular revision schedule to incorporate data that are: More complete More detailed More appropriate

Comprehensive revisions every 5 years Definitional changes Statistical changes Presentational changes www.bea.gov 8 Personal Income: income from all sources Income from labor services Compensation Income from household enterprises Proprietors income Net rent Income from ownership of capital Dividends Interest Taxes and transfers

www.bea.gov 9 Derivation of Disposable Personal Income Wage and salary disbursements + Supplements to wages and salaries = Compensation + Proprietors income = Earnings (pow) Contributions for govt. social insurance + Adjustment for residence = Earnings (por) + Dividends, interest, and rent +

Personal current transfer receipts = Personal income Personal current taxes = Disposable personal income www.bea.gov 10 How We Produce the Estimates Administrative record information Advantage--provides detailed information at low cost Disadvantage--does not precisely match what is being estimated Adjustments made to compensate for differences in definition, coverage, and geographic detail Some census data--quinquennial Agriculture and decennial Population and Housing Very little from survey information www.bea.gov

11 Sources of Data 60% BLS 5% 23% Other IRS Personal Income CMS 6% www.bea.gov SSA

6% 12 Wage & Salary Disbursements 55% of personal income (2005) Based primarily on edited ES 202 report (QCEW) Excellent quality--Most workers are covered by UI Data adjusted upward by ~6% for uncovered workers & under-reported wages & tips Data are by place of work www.bea.gov 13 Wage & Salary Disbursements Includes:

www.bea.gov Salaries of corporate officers Bonuses and incentive pay Pay in kind (meals, lodging, clothing) Commissions & Tips Stock options Severance pay Employee contributions to defined compensation plans 14 Real Wages Nevada & US 2.7 2.5 2.3 2.1 1.9

Nevada 1.7 1.5 1.3 US 1.1 0.9 1990 www.bea.gov 1992 1994 1996 1998 2000

2002 2004 2006 15 Supplements to Wages & Salaries 13% of personal income Employer contributions to: Pension & private insurance funds (9%) Govt. social insurance funds (4%) www.bea.gov 16 Supplements as a % of Compensation, Nevada 2005 50

2005 data 40 30 20 10 0 Social Assistance www.bea.gov Private Sector Avg Arts, entertainment & recreation Federal, civilian

Military 17 Real Compensation & Wages per Worker, U.S., 2000=1.00 1.10 1.08 Compensation 1.06 1.04 Wages 1.02 1.00 2000 www.bea.gov

2001 2002 2003 2004 2005 18 Real Compensation & Wages per Worker, Nevada, 2000=1.00 1.10 Compensation 1.08 1.06 Wages 1.04 1.02

1.00 2000 www.bea.gov 2001 2002 2003 2004 2005 19 Real Compensation & Wages per Worker, California, 2000=1.00 1.10 1.08 1.06 Compensation

1.04 1.02 1.00 Wages 0.98 0.96 2000 www.bea.gov 2001 2002 2003 2004 2005 20

Proprietors income 9.2% of personal income (farm 0.4%, nonfarm 8.8%) Accounting framework Nonfarm: Based on tabulations of IRS tax returnsSchedule C & Form 1065 Farm: Based on USDA data Adjusted for misreported income www.bea.gov 21 Contributions to Nevada Earnings Growth, 2006:3 Farm Forestry, fishing, related Mining Utilities Construction Durable goods Nondurable goods Wholesale trade

Retail trade Transportation, w arehousing Information Finance and insurance Real estate, rental, leasing Professional, technical Mgt of companies, enterprises Administrative, w aste Educational services Health care, social assistance Arts, entertainment, recreation Accommodation, food Other services Federal, civilian Military State and local 0 -0.05 0.00 www.bea.gov

0.05 0.10 0.15 0.20 0.25 0.30 0.35 22 Contributions for Govt. Social Insurance 8% of personal income This is a deduction in the derivation of personal income Mostly contributions for Social Security & Medicare

Contributions from Employers, Employees, & the Self-Employed www.bea.gov 23 Major Social Insurance Programs OASDI (Social Security) Health Insurance (Medicare) Unemployment Insurance Workers Compensation Supplementary Medical Insurance Temporary Disability Insurance Veterans Life Insurance Pension Benefit Guaranty Corporation Railroad Employee Retirement Insurance www.bea.gov 24 Adjustment for Residence

<0.5% of personal income nationally Nevada: -0.6% Clark, NV -1.1% Washoe, NV -1.6% Oregon: -2.0% California: >-0.1% San Francisco -30.0% Utah: <0.1% Inter-county commuters Based on Census Journey to Work data & updated

with IRS wages (por) Border commuters Based on BEA Balance of Payments data Exceptions: www.bea.gov College students Migratory workers 25 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 www.bea.gov 26 Dividends, Interest, & Rent 16% of personal income Almost half of interest is received by pension funds and life insurance carriers on behalf of persons About 20% of interest is an imputation for banking and other services National estimate is distributed regionally on the basis of tabulations of income tax returns and Census housing statistics www.bea.gov 27 Personal Current Transfer

Receipts 15% of personal income Includes in-kind transfers such as Medicare & Medicaid Excludes in-kind transfers such as housing and public schools Based on primary data tabulated by state or county www.bea.gov 28 CA30 Regional Economic Profiles Washoe, NV www.bea.gov 29 Nevada Per Capita Dividends, Interest, Rent www.bea.gov

30 CA35 Personal Current Transfer ReceiptsNye, NV www.bea.gov 31 Personal Current Taxes 11% of personal income Mostly income taxes Property taxes deducted in derivation of rental income Sales taxes are considered part of personal consumption expenditure www.bea.gov 32 State & Local Personal Taxes as a % of 2005 Personal Income: US=2.7%

5 4 3 2 1 0 CA www.bea.gov NV OR UT 33 Federal Personal Taxes as a % of Personal

Income: US=9.1% 12 10 8 6 4 2 0 CA www.bea.gov NV OR UT

34 Personal Income Comprehensive Timely Quarterly income by sector is available 3 months after end of period Historical Comparability County-based local areas www.bea.gov 35 Caveats Extreme per capita income Unusual conditions such as bumper crop, drought, or hurricane Special populations such as college students, prisoners Major construction projects www.bea.gov

36 Employment Data Total employment: Wage & salary jobs Sole proprietorships General partners Job Count not Worker Count Earnings and employment are consistent Earnings per job www.bea.gov 37 BEA vs. BLS Employment QCEW and BEA employment estimates, 2003 US, millions of jobs Total Employment, QCEW Misreporting adjustment

Exempt employment Other employment W&S Employment, BEA Proprietors employment Total Employment, BEA www.bea.gov 127.8 2.8 3.4 3.1 137.1 29.9 167.0 38 MSA Income and Employment Growth (% change 2002-03) 10.0 Personal Income, % change

8.0 6.0 4.0 2.0 inflation rate, 1.9% 0.0 -2.0 -6.0 -4.0 -2.0 0.0 2.0 4.0

6.0 8.0 10.0 12.0 Wage and Salary Employment, % change www.bea.gov 39 For Further Information Working papers available at http://www.bea.gov/bea/regional/articles.cfm?section=p apers Alternative Measures of Household Income: BEA Personal Income, CPS Money Income and Beyond by John W. Ruser, Adrienne T. Pilot, and Charles Nelson Reliability of the State Personal Income Estimates by Robert L. Brown, Bruce T. Grimm, and Marian B. Sacks Using Efficiency Tests to Reduce Revisions in Panel Data:

The Case of Wage and Salary Estimates for U.S. States by Jeremy J. Nalewaik State Pension Benefit Estimates Methodologies available at http://www.bea.gov/bea/regional/articles.cfm?section=met hods www.bea.gov 40 Questions/Comments [email protected] (202) 606-9246 www.bea.gov 41

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