Estimates of median four-person family income, by state, 1974-89 / by Charles Nelson and Leon Litow

28 Pages·1992·1.6 MB·English

by  Nelson, Charles

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PENNSYLVANIA
STATE CURRENT POPULATION REPORTS
UNIVERSITY
Technical Paper 61
APR2
11992
TP-61
DOCUMENTS
COLLECTION
U.S Depository Copy
by
Charles Nelson
and Estimates of Median
Leon Litow
Four-Person Family
Income, by State:
1974-89
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U.S. Department of Commerce
Economics and Statistics Administration
BUREAU OF THE CENSUS
Acknowledgments
This report was prepared by Charles Nelson, Assistant Division Chief (Economic
Characteristics), Housing and Household Economic Statistics Division, and Leon
Litow, Division of Energy Assistance, Office of Community Services, Administration for
Children and Families, Department of Health and Human Services.
The model for estimating State median incomes was developed by Robert Fay,
Senior Mathematical Statistician, Office of the Director. Helen Ogle and Rose Mary
Schade provided statistical assistance. Shirley Smith and Deborah Largent provided
word processing assistance.
Data collection was conducted by Bureau of the Census field representatives, under
the overall direction of Joseph S. Harris, Chief, Field Division.
The staff of Administrative and Publication Services Division, Walter C. Odom,
Chief, provided publication planning, editorial review, design, composition, and printing
planning and procurement.
For further information on the Low Income Home Energy Assistance Program
(LIHEAP) and its eligibility requirements, contact Leon Litow, 202-401-5304.
For further information on the four-person family income estimates methodology,
contact Charles Nelson, 301-763-8029.
#•
CURRENT POPULATION REPORTS
Technical Paper 61
TP-61
Issued January 1992
by
Charles Nelson
and Estimates of Median
Leon Litow
Four-Person Family
Income, by State:
1974-89
4
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U.S. Department of Commerce
Robert A. Mosbacher, Secretary
Rockwell A. Schnabel, Deputy Secretary
Economics and Statistics Administration
BUREAU OF THE CENSUS
Barbara Everitt Bryant, Director
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Economics and Statistics BUREAU OF THE CENSUS
Administration Barbara Everitt Bryant, Director
Michael R. Darby, Under Secretary C.L. Kincannon, Deputy Director
for Economic Affairs and Administrator
William P. Butz, Associate Director
for Demographic Programs
HOUSING AND HOUSEHOLD
ECONOMIC STATISTICS DIVISION
Daniel H. Weinberg, Chief
SUGGESTED CITATION
U.S. Bureau of the Census, Current Population Reports, Technical Paper No. 61.
Estimates ofMedian Four-Person Family Income, by State: 1974-89.
U.S. Government Printing Office, Washington, DC, 1991.
For sale by Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
Ill
Contents
Page
Introduction 1
Methodology 2
Estimation Models 2
Time Frame 3
Household and Family Income Measures 3
TABLE
1. Median Income for Four-Person Families, by State and Year 5
APPENDIXES
A. Definitions, Explanations, and Comparability of Data A-1
B. Multivariate Components of Variance Models as Empirical Bayes Procedures for
Small Domain Estimation B-1
APPENDIX TABLES
B-1. Comparison of 1979 Estimates of Median Income of Four-Person Familes B-7
B-2. Estimates of Median Income of Four-Person Families, Using Projected Census
Components of Variance B-8
B-3. Estimates of Median Income of Four-Person Families, Using Estimated
Components of Variance From CPS B-9
B-4. Comparison of Projected Components and MLE's, by Year B-1
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Estimates of Median Four-Person Family Income,
by State: 1974-89
INTRODUCTION Calendar year
of income
FY Vol. No. Date estimates
The Low Income Home Energy Assistance Program 1984 48 222 11/16/83 1981
1985 49 236 12/06/84 1982
(LIHEAP) is one of six block grant programs authorized
1986 50 232 12/03/85 1983
by the Omnibus Budget Reconciliation Act of 1981 1987 51 213 11/04/86 1984
(Public Law 97-35) and administered within the Depart- 1988 52 160 08/19/87 1985
ment of Health and Human Services (HHS). LIHEAP is 1989 53 64 04/04/88 1986
administered by the Division of Energy Assistance, 1990 54 50 03/16/89 1987
Office of Community Services within HHS' Administra- 1991 55 71 04/12/90 1988
1992 56 46 03/08/91 1989
tionforChildren and Families. The Augustus F. Hawkins
Human Services Reauthorization Act of 1990 (Public
The method for adjusting median income for families
Law 101-501) reauthorized LIHEAP through fiscal year of different sizes is specified in 45 CFR 96.85(b), which
(FY) 1994.
was published in the Federal Register on March 3,
States and the District of Columbia, Indian tribes and 1988, at 53 FR 6824. According to this method, each
tribal organizations, and territories that wish to assist State's estimated median income for a four-person
low-income households in meeting the costs of home family is multiplied by the following percentages to
energy may apply for a LIHEAP block grant. "Home adjust for family size: 52 percent for one person, 68
energy" is defined by the LIHEAP statute as "a source percent for two persons, 84 percent for three persons,
of heating or cooling in residential dwellings." 100 percent for four persons, 116 percent for five
persons, and 132 percent for six persons. For family
Section 2605(b)(2)(B)(ii) ofTitle XXVI ofthe Omnibus sizes greater than six persons, 3 percent is added to
Budget Reconciliation Act of 1981 provides that 60 132 percent for each additional family member.1
percent of the median income for each State, as
In addition to their use as an eligibility criterion, the
annually established by the Secretary of Health and
annual four-person family income estimates are impor-
Human Services, is one of the income criteria that
tant to data users in general in that they represent the
States can use in determining a household's eligibility only source of intercensal State-specific family income
for LIHEAP.
estimates produced by the Census Bureau. As a result,
Under the provisions of section 2603(7) of the stat- theestimatesarewidelyused byanalystsand research-
ute, HHS publisheseach yearin theFederalRegisteran ers. However, since State family income estimates are
announcement of the estimated median income of a not published in a regular Census Bureau series, ana-
four-person family for each State and the District of lysts often usethesefigureswithout aclear understand-
Columbia in advance of the Federal FY that begins on ing of their derivation. The purpose of this technical
October 1 and ends on September 30. paper is to (1) provide a brief overview of the method-
ology used to calculate State four-person family income
Priorto the FY 1983 State median income estimates, estimates and to summarize the ways in which the
the Bureau of the Census developed State median calculation has changed over time; (2) describe how
income estimates for use in the former Title XX Pro- these estimates are used for program purposes; and (3)
grams of the Social Security Act which was adminis- provide the entire set of estimates that are available at
tered by the HHS Office of Human Development Ser- this time—calendar years 1974 to 1989.
vices. Since FY 1983, the Bureau of the Census has
developed the State median income estimates for use
in LIHEAP. Beginning with the FY 1984 estimates, HHS 1The adjustment of median income according to family size is
has published State median income estimates as fol- befafseectdfoonrtthheesfaormmeeradTjiutlsetmXeXntpcroongtraaimn.edThines4e5fCaFctRor1s39a6r.e60s(hd)o(w2n) iinn
lows in the FederalRegister. appendix A ofthis report.
METHODOLOGY BEA.The BEA produces a personal per capita income
series. The main difference between the BEA and CPS
incomeconcepts isthat BEA personal income relatesto
Data Sources income from all sources, while CPS income relates only
to money income. The BEA series is developed from a
Estimates of four-person median family incomes by variety of government statistics, the most important
State utilize the most recent data available from the being the Federal tax records of the Department of
following three data sources: Treasury, the insurance files of the Social Security
Administration, and State unemployment records col-
• March Current Population Survey (CPS) from the lected by the U.S. Department of Labor. Personal
Bureau of the Census income comprises wages and salaries (including cash
and in-kind payments), other labor income such as
• Decennial census of population from the Bureau of
employercontributionsto private pensions, welfare, and
the Census
workers' compensationfunds, self-employmentincome,
• Percapitapersonal incomeestimatesfromthe Bureau rental income, dividends and interest, and government
of Economic Analysis (BEA) and business transfer payments (Social Security, food
stamps, corporate cash prizes, etc). Personal income is
CPS. The CPS is a monthly labor force survey of about equaltothesum ofall ofthese items minusthe amounts
paid by individuals for Social Security payroll taxes,
60,000 households acrossthe country. Each March, the
government retirement, and other social programs.
mhoounstehhloylsdurrevsepyoinsdsenutpsplaebomuetnttheedirwmiothneqyueisntcioomnesrtehcateiavsekd The BEA produces annual estimates of personal per
capita income based on this income concept for States
during the previous year. Survey results are published
and other geographic areas. The estimates provide an
annually by the Census Bureau.2
overall indication of relative incomes among States and
The CPS utilizes a money income concept. Total of change over time for particular States, even though
money income isthe sum ofthe amounts received from: personal per capita income is only indirectly related to
wages and salaries, self-employment income (including median incomes of four-person families.3 The BEA
losses), Social Security, Supplemental Security Income estimates, though conceptually different from census
(SSI), cash public assistance, interest, dividends, rents, income data, are essentially free from sampling error.
royalties, estatesand trusts, veterans' payments, unem-
ployment and workers' compensations, private and
government survivor, disability and retirement pensions, ESTIMATION MODELS
alimony, child support, and any other source of money
income that is regularly received. Capital gains (or Prior to 1984. Prior to 1984 the estimation procedure
losses) and lump-sums or one-time payments such as consisted of five main steps:
life insurance settlements are excluded. Noncash ben-
efits are also excluded from the money income defini- 1. State median family income estimates for four-
personfamiliesand respectivestandard errorswere
tion. Thus, the value of government noncash transfers directly calculated from CPS data.
(food stamps, Medicaid, Medicare, public and subsi-
dized housing, etc.) and private sector in-kind benefits 2. Anothersetof State estimatesoffour-person family
(employer-subsidized healthinsurance,etc.)areexcluded income was developed by carrying forward census
from the CPS money income definition. The CPS pro- median estimates using the percent change in
vides sample survey estimates of median incomes for State BEA per capita personal income.
four-personfamiliesannuallyatthenational level.Though
CPS data may also be tabulated at the State level, the 3. A regression estimate was then developed to pre-
sampling variability of State estimates from the CPS is dict the CPS estimates from the adjusted census
large enough to make their direct use inadvisable for medians from the preceding step.
program purposes. 4. A composite estimate was formed as a weighted
average of the regression and CPS sample esti-
Decennialcensus.Thedecennialcensusprovidesincome mates.
values for calendar years 1969 and 1979 that utilize the
same money income concept as the annual CPS esti- 5. Finally, the composite estimate for each State was
mates, with negligible sampling error at the State level. constrained to a range which was equal to the CPS
estimate, plus or minus one standard error.
2March 1990 CPS income estimates were published in a report
entitled, "Money Income and Poverty Status in the United States: 3FormoredetailsonthedifferencesbetweentheBEAandcensus
1989," Series P-60, No. 168. income concepts, see appendixA.
1984 to present. The methodology as summarized 3. The composite estimate in the revised model uti-
above was developed prior to the 1980 census. A lized both regression equations along with the CPS
comparison of estimates from the model for income sample estimates.
year 1979 with comparable estimates from the 1980 4. Since the revised methodology essentially doubled
census afforded an opportunity to assess the merits of the use of sample data in forming the composite
the estimation model. Thiscomparison wasthe basisfor
estimates, the standard error constraint of the
the modifications outlined below. The major impetus for original equation model was eliminated. The com-
the revisions was the year-to-year variability of some of parison to the census results suggested that the
the State estimates. As before, the revised methodol- estimates were more accurate, on the average,
ogy employed sample estimates of four-person median
without the constraint.
family income from the Current Population Survey.
Unlike the previous methodology, however, a second TIME FRAME
sample estimate was considered for each State. This
second variable is a weighted average of estimated In updatingthe State median income estimatesannu-
State median incomes for three- and five-person fami- ally, the Bureau of the Census uses the most recent
lies. The weights, .75 for the medians of three-person data available from its March CPS and BEA's per capita
families and .25 for the medians of five-person families, income estimates.5 However, the availability of such
were selected on the basis of the approximate 3 to 1 data results in a 3-year difference between the time-
ratio of the respective sample sizes. By introducing this frame of the March CPS and BEA income data and the
second variable into the estimation model, the amount fiscal year in which the estimates are in effect. For
of sample information reflected in the estimate of four- example, the State median income estimates for FY
person medians for each State was roughly doubled. 1992 were published in March 1991. The estimates are
Changes in the 1984-89 methodology are summa- based, in part, on 1989 family income from the March
rized below4 1990 CPS which became available in August 1990 and
:
BEA's 1989 State per capita income estimates which
1. As in the earlier methodology, a regression equa- became available in September 1990.
tion was fitted to the CPS four-person estimated Therefore, the State median incomeestimatesdo not
medians. In the new equation however, two vari- represent projected data for a fiscai year. Instead, the
ables were used: estimatesrepresentthe mostrecentestimatesavailable
for use in a fiscal year.
From the earlier methodology,
Table 1 can be used to identify State median income
X = (currentBEAPCI/1979BEAPCI)*censusmedian estimates for a fiscal year by adding 3 to any calendar
1
and year listed in the columns. For example, Alabama's
X2 = unadjusted census median State median income for a four-person family in 1989
was estimated to be $34,930. This is also the estimate
It was found that the inclusion of the unadjusted to be used for Alabama in FY 1992.
median improvedthe predictive poweroftheregres- HHS publishes the updated estimates in the Federal
sion. The variable X., proportionally adjusted the Register approximately 6 months before the beginning
census median for changes in BEA per capita of each fiscal year. This allows LIHEAP grantees suffi-
income. The inclusion of X2 permitted the adjust- cient lead time in determining their income eligibility
ment to be reduced in case of any "regression levels for the upcoming fiscal year.
toward the mean" which might arise if BEA per
capitaincomedid notperfectly measurethe propor- HOUSEHOLD AND FAMILY INCOME
tional changes in the income distribution. MEASURES
2. In the revised model, a second regression equation Annual State median income estimates provided by
was simultaneously fitted to the weighted average the Census Bureau for use in the Low Income Home
of three- and five-person medians. Energy Assistance Program are based on a family
income concept. A family consists of two or more
persons related by birth, marriage, or adoption who are
4Appendix B of this report contains a detailed explanation of the residing together. The Census Bureau also publishes
revised four-person family income estimate methodology which pre-
viously appeared in Proceedings of the Survey Research Methods estimates of income based on a household income
Section, American Statistical Association, Washington, DC, 1986. concept. A household simply consists of all persons
More recently, the problem was reviewed from a different technical
perspectivebyG.S. Datta,R.E.Fay,andM.Ghosh, "Hierarchicaland
Empirical BayesAnalysisin Small Area Estimation," presentedatthe 5lncome data from the 1990 Decennial Census for 1989 will be
1991 Annual Research Conference, U.S. Bureau of the Census, availablein1992forupdatingandevaluatingtheStatemedianincome
Alexandria, Virginia, March 1991. estimates.
who occupy a housing unit. Thus, a household may statistically significant difference between the median
consist of a family, several families residing together, a incomeofafour-personfamilyandafour-person house-
person living alone, a group of unrelated persons living hold. Thus, in the context of program eligibility, the use
together, or any combination of families and unrelated of a household or family income concept is not a
persons. A major difference between households and tremendously important issue, as long as size of unit is
families is that persons residing alone are included in also used in the eligibility criteria.
the household universe and are excluded from the Median Family and Household Income, by Size of
family universe. Since persons living alone have, on Unit: 1989
average, substantially lower incomesthan families, their
inclusion inthe household universe isamajorreasonfor Size of unit Families Households
the overall difference between median household and
Total $34,213 $28,906
family incomes. Asshown inthefollowing table, in 1989, 1 person (X) 14,829
median family income ($34,213) for the United States 2 persons 28,834 29,862
was 18 percent higher than median household income 3 persons 35,963 36,277
4 persons 40,763 40,744
($28,906). 5 persons 39,077 39,281
While the overall median incomes of households and 6 persons 35,801 35,305
families are different, by size of unit they are quite 7 persons or more 32,259 32,643
similar. As shown in the following table, there is no X Not applicable.