Whats Behind the Regional Personal Income Statistics, And What Lies Ahead

1
Whats Behind the Regional Personal Income
Statistics, And What Lies Ahead
Robert L. Brown Monitoring Montana Analyzing
Local Economies Through BEA Data Missoula,
Montana May 9, 2007
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Overview

• Personal Income
• Personal income its chief alternatives
• Revision schedule
• Sources of personal income by component
• Employment and why BLS BEA job counts differ
• Regional improvements
• Future directions

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Alternative Incomes
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Per Capita Income Change 2000-01(Dollars)
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Per Capita Income, 2004, dollars
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Why Personal Income?
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Derivation of Personal Income

• Wage and salary disbursements
• Supplements to wages and salaries
• Compensation
• Proprietors income
• Earnings (place of work)
• Contributions for govt. social insurance
• Adjustment for residence
• Net Earnings (place of residence)
• Dividends, interest, and rent
• Personal current transfer receipts
• Personal income
• Personal current taxes
• Disposable personal income

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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

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Revision Schedule
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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

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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

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Sources of Data
60
5
23
6
6
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Wage Salary Disbursements

• 55 of personal income (2005)
• Based primarily on Quarterly Census of Employment
  and Wages (QCEW) report
• Byproduct of Unemployment Insurance (UI) program
• 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

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Wage Salary Disbursements

• Includes
• Salaries of corporate officers
• Bonuses and incentive pay
• Pay in kind (meals, lodging, clothing)
• Commissions Tips
• Stock options
• Severance pay
• Employee contributions to deferred compensation
  plans

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Supplements to Wages Salaries

• 13 of personal income
• Employer contributions to
• Pension private insurance funds (9)
• Govt. social insurance funds (4)

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Real Compensation Wages per Worker,U.S.,
20001.00
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Real Compensation Wages per Worker, Montana,
20001.0
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Real Compensation Wages per Worker, Washington,
20001.0
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Proprietors income

• 9.2 of personal income (farm 0.4, nonfarm 8.8)
• Farm
• Based on US Department of Agriculture data
• Nonfarm
• Based on tabulations of IRS tax returnsSchedule
  C partnership Form 1065
• Adjusted for misreported income

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Contributions to Montana Earnings Growth, 20064
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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

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Major Social Insurance Programs

• OASDI (Social Security)
• Medical benefits (Medicare)
• Unemployment Insurance
• Workers Compensation
• Supplementary Medical Insurance
• Temporary Disability Insurance
• Veterans Life Insurance
• Pension Benefit Guaranty Corporation
• Railroad Employee Retirement Insurance

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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

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Adjustment for Residence

• lt0.5 of personal income nationally
• Montana 0.1
• Missoula, Mt -4.5
• Lake, Mt 5.1
• Washington 1.3
• King, Wa -13.2
• Skagit, Wa 2.9
• Whatcom, Wa 2.4
• California gt-0.1
• San Francisco -30.0
• Inter-county commuters
• Based on Census Journey to Work data updated
  with IRS wages (place of residence)
• Border commuters
• Exceptions
• College students
• Migratory workers

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Dividends, Interest, Rent

• 16 of personal income
• Nearly 1/2 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

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Personal Current Transfer Receipts

• 15 of personal income
• Social Security accounts for 1/3
• Includes in-kind transfers such as Medicare
  Medicaid40 of transfers
• Income maintenance, unemployment benefits,
  veterans benefits, etc.
• Based on primary data tabulated by state or county

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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

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State Local Personal Taxes as a of 2005
Personal Income US2.7
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Federal Personal Taxes as a of Personal Income
US9.1
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Personal Income

• Comprehensive
• Timely
• Quarterly income by sector is available 3 months
  after end of period
• Historical Comparability
• County-based local areas

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Caveats

• Extreme per capita income
• Unusual conditions such as bumper crop, drought,
  or hurricane
• Special populations such as college students,
  prisoners
• Major construction projects

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Employment Data

• Total employment
• Wage salary jobs
• Sole proprietorships
• General partners
• Job Count not Worker Count
• Earnings and employment are consistent
• Earnings per job

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BEA vs. BLS Employment
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BEAs Regional Accounts Initiatives

• Accelerated
• estimates
• New
• statistics
• Future
• improvements

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Accelerations
Metro-area personal income
16 months
9 months
Completed 2006
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New Statistics Local Area Compensation

• County estimates of compensation by industry,
  1998 forward
• Sum of Wages and salaries and supplements to
  wages
• Labor costs of production
• First released in 2005
• December release provides early indicator of
  economic activity for counties

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New Statistics More Local Area Data

• Metro area disposable personal income
• Researching the estimation of personal current
  taxes for metro areas
• Subtracted from personal income to derive DPI
• Some results from the prototype estimates
• Bridgeport, CT per capita personal current taxes
  16,15026.1 of personal income
• McAllen, TX per capita personal current taxes
  1,0827.4 of personal income

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New Statistics More Data on Tables

• New tablesCA04 summary and CA06 Compensation
• More Geography
• New Metropolitan area definitionsincluding
  micropolitan areas
• More detail on tables
• Since 1996 the amount of detail on tables has
  doubled
• 19960.9 million lines per year
• 20062.0 million lines per year

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New Statistics Longer Time Series

• Annual state earnings industry data now back to
  1990 on a NAICS basis
• Previously only 2001 forward
• GDP by state now available for 1963 forward on
  SIC basis
• Previously 1977 forward

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Future Improvements More Accelerations of
Releases

• GDP by state and sector
• 6 months after end of calendar year
• June 2007
• Personal income for metropolitan areas
• 8 months after end of calendar year
• August 2007

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Future Improvements More Local Area Data

• Gross metro product (GMP)
• Initial estimatestop-down approach
• Allocate state GDP by local area earnings data
• Research into bottom-up approach for non-labor
  part of GMP
• Taxes and gross operating surplus
• Research using sub-state Census Bureau data
• September 2007

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Future Improvements Alternative Estimates of
Regional Income

• Develop alternative household income measures
  that better meet user needs to
• Measure spending capacity
• Track tax base
• Research to be released this Summer

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Future Improvements Personal Income Mapping

• Interactive Web-based state and county personal
  income mapping
• Prototype this Spring

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Long Term Improvements

• FY 2009 Budget Initiative to
• Accelerate release of county personal income to
  10 months after end of year
• Fully fund the extension of geographic coverage
  of GDP to metropolitan areas
• Develop expenditure estimates of GDP by state
• Develop more accurate estimates of real GDP by
  state

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And Finally Comprehensive Revision

• Spring 2009every 5 years
• Definitional revisions
• Statistical and methodological revisions
• Presentational revisions

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Questions?

• Contact
• Robert L, Brown
• 202.606.9246
• Robert.brown_at_bea.gov