1. What’s 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

2. www.bea.gov 2 Overview ▪Personal income & its chief alternatives ▪Revision schedule ▪Sources of personal income by component ▪Employment and why BLS & BEA job counts differ

3. www.bea.gov 3 Alternative Incomes

4. www.bea.gov 4 Per Capita Income Change 2000-01 (Dollars)

5. www.bea.gov 5 Per Capita Income, 2004, dollars Adjusted Gross Income (IRS) Money Income (Census) Personal Income (BEA) California24,60123,25035,219 Nevada27,01622,36033,787 Oregon20,54421,38630,561 Utah18,57818,59226,603

6. www.bea.gov 6 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

7. www.bea.gov 7 Revision Schedule

8. www.bea.gov 8 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

9. www.bea.gov 9 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

10. www.bea.gov 10 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

11. www.bea.gov 11 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

12. www.bea.gov 12 Sources of Data Personal Income BLSIRSSSACMSOther 60% 23% 6% 5%

13. www.bea.gov 13 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

14. www.bea.gov 14 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 defined compensation plans

15. www.bea.gov 15 Real Wages – Nevada & US

16. www.bea.gov 16 Supplements to Wages & Salaries ▪13% of personal income ▪Employer contributions to:  Pension & private insurance funds (9%)  Govt. social insurance funds (4%)

17. www.bea.gov 17 Supplements as a % of Compensation, Nevada 2005 0 10 20 30 40 50 Social Assistance Private Sector Avg Arts, entertainment & recreation Federal, civilian Military 2005 data

18. www.bea.gov 18 Real Compensation & Wages per Worker, U.S., 2000=1.00

19. www.bea.gov 19 Real Compensation & Wages per Worker, Nevada, 2000=1.00

20. www.bea.gov 20 Real Compensation & Wages per Worker, California, 2000=1.00

21. www.bea.gov 21 Proprietors’ income ▪9.2% of personal income (farm 0.4%, nonfarm 8.8%) ▪Accounting framework ▪Nonfarm: Based on tabulations of IRS tax returns—Schedule C & Form 1065 ▪Farm: Based on USDA data ▪Adjusted for misreported income

22. www.bea.gov 22 Contributions to Nevada Earnings Growth, 2006:3

23. www.bea.gov 23 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

24. www.bea.gov 24 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

25. www.bea.gov 25 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:  College students  Migratory workers

26. www.bea.gov 26 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

27. www.bea.gov 27 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

28. www.bea.gov 28 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

29. www.bea.gov 29 CA30 Regional Economic Profiles Washoe, NV

30. www.bea.gov 30 Nevada Per Capita Dividends, Interest, Rent

31. www.bea.gov 31 CA35 Personal Current Transfer Receipts— Nye, NV

32. www.bea.gov 32 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

33. www.bea.gov 33 State & Local Personal Taxes as a % of 2005 Personal Income: US=2.7%

34. www.bea.gov 34 Federal Personal Taxes as a % of Personal Income: US=9.1%

35. www.bea.gov 35 Personal Income ▪Comprehensive ▪Timely  Quarterly income by sector is available 3 months after end of period ▪Historical Comparability ▪County-based local areas

36. www.bea.gov 36 Caveats ▪Extreme per capita income  Unusual conditions such as bumper crop, drought, or hurricane  Special populations such as college students, prisoners  Major construction projects

37. www.bea.gov 37 Employment Data ▪Total employment:  Wage & salary jobs  Sole proprietorships  General partners ▪Job Count not Worker Count  Earnings and employment are consistent  Earnings per job

38. www.bea.gov 38 BEA vs. BLS Employment

39. www.bea.gov 39 MSA Income and Employment Growth (% change 2002-03)

40. www.bea.gov 40 For Further Information Working papers available at http://www.bea.gov/bea/regional/articles.cfm?section=papers  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=methods

41. www.bea.gov 41 Questions/Comments Robert.Brown@bea.gov (202) 606-9246