We commonly receive comments that per capita and per household income in the IMPLAN data sets seem very high, especially when compared to the household income data reported by Census publications. The reason is that the two sources (IMPLAN and Census) are based on quite different data sources in terms of both definitions and methodology.
In IMPLAN, we base household income on the Bureau of Economic Analysis (BEA)'s "Personal Income" numbers controlled to current BEA National Income and Product Accounts (NIPA) for the nation. In contrast, per capita household income reported by the Bureau of the Census is "Money Income" based.
Table 1 shows the differences between the BEA's personal income and Census' money income for the nation. The IMPLAN average household income is often compared to local Census household income, and the Census number seems to be most often reported as "Median Household Income". For the US in 1998, median household income was $38,885. IMPLAN's average household income of $71,000 (using BEA's personal income) is 83% more than the Census median household income! If we were comparing apples to apples, this would be a significant discrepancy; however, this compares median household income to mean HH income, as well as, money income to personal income.
|Personal Income||Money Income||% Difference|
|2002 per capita Income||$31,46311||$22,79422||38%|
|Persons per Household3||2.60||2.60||-|
|2002 Calculated Average Household Income4||$81,804||$59,264||38%|
|2011 Median Household Income||-||$50,05455||-|
Median Household Income vs. Mean Household Income
With median household income there are as many households above that income as there are below. Average household income, on the other hand, is calculated as total household income divided by the number of households. While related, the two measures are not the same; thus, we cannot compare Census median household income ($50,054) to IMPLAN average household income ($81,804). To make the Census data comparable with the IMPLAN data, it is necessary to calculate average household income, which can be done by multiplying per capita money income by the average number of persons per household. As shown in Table 1, average Personal Income per household is 38% greater than the calculated Census mean household income ($). The difference rests in the definition of money income versus personal income.
1. BEA NIPA Table 2.1. Personal Income and Its Disposition
4. Calculated by multiplying the per capita income by the number of persons per household.
Note: the mean household income reported in Census table H-96 for 2002 is $57,852, which is not quite the same as the calculated value of $59,264. The difference lies in the Census definition of household members – it excludes "group quarters" and those who do not occupy a household unit. Per capita income is more inclusive as it includes all persons.
What is included in personal income is not the same as in money income as data collection methods and sources are entirely different.
Money income is collected on the decennial Census long form and updated annually based on household surveys. Money income is thus self-reported by households. The update process is described in the Current Population Report cited earlier.
Money income includes the following:
• Wages, salary, commissions, bonuses, or tips from all jobs – Reported amounts are before deductions for taxes, bonds, dues, or other items [note: instructions ask that military personnel should include additional income for cash received for housing and/or subsistence allowances, flight pay, uniform allotments, reenlistment bonuses, etc.]
• Self-employment income from owned nonfarm business, including proprietorship and partnership – Reported net income after business expenses
• Farm self-employment income – Reported net income after operating expenses. Includes earnings as a tenant farmer or sharecropper
• Interest, dividends, net rental income or royalty income, or income from estates and trusts – Reported even small amounts credited to an account
• Social Security or Railroad Retirement
• Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC), or other public assistance or public welfare payments
• Retirement, survivor, or disability pensions (other than social security)
• Any other sources of Income – Received regularly such as Veterans (VA) payments, unemployment
Personal income data is based largely on data collected from the payers of that income and is thus based on data collected from the records of business and governmental sources. A description of the data sources can be found in the BEA paper "Local Area Personal Income and Employment Methodology".
BEA Personal income includes the following:
• Wage and salary disbursements – Based on BLS QCEW data which includes wages and salaries, bonuses, tips, and the cash value of meals and lodging provided by employers and is adjusted with estimates for misreporting, underreporting, and for sectors not fully covered.
• Other Labor Income – represents contributions by employers to privately administered pension and welfare funds (e.g., unemployment, health plans, life insurance, and private savings), fees paid to corporate directors, and miscellaneous fees (fees paid to jurors, witnesses, compensation of prisoners and marriage fees paid to justices of the peace).
• Proprietor's Income (8% of total PI: 94.6% is non-farm, 5.4% is farm) – The current-production income of sole proprietorships and partnerships and of tax-exempt cooperatives. It includes imputed net rental income of owner-occupants of farm dwellings and an imputed value for farm products consumed on farm. Proprietor Income is adjusted for inventory valuation changes and capital consumption adjustments (which accounts for the difference between tax depreciation and actual wear and tear). An adjustment is also made for "misreporting" of non-farm income – which accounted for half of the 1997 non-farm proprietor income in the US.
• Personal contributions for social insurance – These payments are removed from total personal income and consist of payments by individuals for social insurance (e.g., social security and Medicare); railroad retirement; government employee retirement; state unemployment insurance; temporary disability insurance; and veteran's life insurance.
• Personal Dividend Income – Dividends received by individuals, by non-profit institutions and dividends retained by fiduciaries (on behalf of individuals)
• Personal Interest Income – Interest on bonds, and interest reported on income tax received by individuals, by non-profit institutions retained by fiduciaries (on behalf of individuals). It also includes imputed (non-cash) interest from life insurance carriers and private noninsured pension plans. Also imputed interest received by persons from banks, credit agencies and regulated investment companies, which represents the value of financial services for which persons are not explicitly charged.
• Rental Income of Persons – Net current-production income of persons from the rental of real property, except by persons primarily engaged in the real estate business, adjusted by capital consumption adjustment. Rental income also includes royalties from patents, copyrights, and rights to natural resources. Imputed rental income is income received by owner-occupants of nonfarm dwellings.
• Transfer Payments – Income payments to persons for which no current services are performed and include: old-age, survivors, and disability (social security); railroad retirement and disability; federal, state, and local governments retirement payments; workers compensation; other government benefits (e.g., black lung and pension benefit guaranty benefits); Medicare, military medical insurance, and federally assisted medical payments; Income maintenance payments (e.g., supplemental security, family assistance, and food stamps); unemployment compensation; payments to veterans; government education and training payments (e.g., fellowships, job corps, interest on guaranteed student loans); and other payments (e.g., to victims of crimes, Alaska permanent fund dividends and disaster relief). Businesses transfer payments to individuals primarily for personal-injury liability settlements. Transfer payments also include indirect transfers by government or private business to individuals through nonprofit institutions such as: foster care agencies; job training; and education assistance.
Table 2 displays some of the major definitional differences between personal income and money income.
|Personal Income||Money Income|
|Measures cash, benefits, non-cash payments, and imputed values received directly and indirectly by individuals.||Measures cash, benefits, non-cash payments, and imputed values received directly and indirectly by individuals|
|Government retirement benefits and social insurance transfers are counted net of employee and employer payments for social insurance and government retirement||Income includes payments by Government retirement plans and social insurance transfer payments. Income also includes portions of salary from which social insurance payments are deducted.|
|Private retirement income is measured as the increase of retirement plan receipts (regardless of ownership) either through payments into the plan by employers or employees, or from increase in value through plan investments.||Private retirement incomes are the actual receipts by individuals from private accounts.|
|Imputed transfer payments by businesses and government agencies through non-profit institutions serving individuals. Also includes any investment income received by non-profits and retained by fiduciaries on behalf of individuals.||No imputed income.|
|Imputed income for financial services for which individuals are not explicitly charged.||No imputed income.|
|Imputed net rental income on owner occupied homes.||No imputed income.|
|Adjustments for misreporting and under-reporting of income.||No adjustments.|
|Income includes employer paid benefits for health insurance, life insurance, and private savings plans.||No employer paid benefits (cash or non-cash).|
Why Does IMPLAN Use Personal Income?
The BEA is involved in estimation of the national wealth, specifically the NIPA tables. Income includes cash payments and estimated values of non-cash payments. The BEA input-output benchmark tables reflect all economic activity that results from the generation of this wealth. The IMPLAN input-output tables comply with BEA input-output conventions and definitions and the US IMPLAN model is consistent with the BEA NIPA tables. Household demands for goods and services, both cash and non-cash, are captured by the PCE (Personal Consumption Expenditure) component of final demand. Final demand whether cash or non-cash (and imputed) creates employment and income in the U.S. economy.