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through membership on the interagency policy advisory groups in these areas and through the Interagency Committee on Income Distribution.

The techniques employed to provide data concerning the economic status of households will involve the integration of separate surveys, and of survey data with data obtained from administrative records. The need for integration of different data bases derives from considerations of efficiency, respondent burden, accuracy and completeness of data. For example, the use of tax records in conjunction with household survey data can provide more accurate data at the upper end of the income scale. At the lower end records obtained in the course of eligibility determination for programs such as the Supplementary Security Income and Aid to Families with Dependent Children programs will improve the accuracy of income estimates. Under favorable circumstances, the merging of survey and administrative record sets provide the improved accuracy of administrative data with the flexibility in data content obtainable in household surveys.

At best, matching of administrative and survey data files is a difficult procedure which should be employed selectively. However, in order for file matching to be possible in those cases where it is the preferred approach, it is necessary to include provision for matching in the basic survey design. It would also be helpful to modify administrative data records in anticipation of matching requirements to the extent that this is feasible. The design requirements for statistical matching are particularly stringent in that there frequently is a need to have many identical data items for purposes of matching.

that the Current Consumer Expenditure Survey will employ standard CPS questions on income.)

For many uses, the inclusion of a basic set of income, wealth or consumption questions on surveys devoted to detailed data collection on another aspect of economic well being would be sufficient. It would also permit more direct comparisons with results obtained from the more detailed surveys in other areas. The use of abbreviated data sets are closely related to file matching which would be greatly improved through the use of such sets.

Abbreviated data sets should be employed to improve the description of economic status and to improve the results of file matches. For example, a summary set of questions from

the Current Consumer Expenditure Survey should be seriously considered for inclusion in the Survey of Income and Program Participation.

Income

Use of existing administrative and survey files should be made to improve the accuracy of estimates and to provide a more complete assessment of economic well being than can be provided through a single data set. Survey and administrative files should be designed to facilitate matching which can be accommodated within limitations required to protect confidentiality.

The quality of current data on money income has gradually improved over the last decade. The improvement is particularly evident with respect to the annual money income series produced by the Bureau of the Census. Identification of source of income has become more detailed, improved methods for imputation of missing data have been developed and a more thorough analysis has been conducted concerning the extent to which money income falls short of aggregate totals developed by the Bureau of Economic Analysis.

However, serious problems remain. In the area of income estimation, income other than wage and salaries is seriously underreported with as much as 71% of interest income, 64% of workman's compensation and 57% of farm income not reported for 1975. Another shortcoming is the exclusion of almost all forms of income in kind. Such income is particularly important for the lower income families. There is also believed to be a significant amount of in-kind income received by higher income families in the form of employee paid health care, pensions, use of company property, and so forth. Families at all income levels received significant income in kind from occupancy of their own homes.

A third area of difficulty concerns the period for which household income is collected. The current series measures annual income, but income is not always received uniformly throughout the year. Eligibility for income maintenance programs is

Data users with increasing frequency require data relating income, wealth or consumption data on the level of the individual household. Yet to a large extent available data sources do not provide for the joint collection of these data, or if they do, the data which is an adjunct to the main purpose of the survey is either not directly comparable or it is too summary. For example, the Current Population Survey (CPS) which is currently the best source of household survey data provides no link with the Consumer Expenditure Survey through the inclusion of a set of expenditure questions. (However, it should be noted

’U.S. Department of Commerce, Bureau of the Census, "Consumer Income," Current Population Reports, Series P-60, No. 105, June 1977, p. 277.

frequently tied to income received during a fraction (BEA). Besides being of value in the preparation of of a year. Moreover, the annual income data col improved income size estimates in the economic aclected for a household in the Current Population counts, these BEA estimates provide control totals Survey (CPS) does not always correspond to the for the data collected in the CPS. The estimates of household composition or income of the unit during personal income include the distribution of food the preceding year.

stamps, Medicare, renter versus owner occupied

housing, food and lodging furnished employees, food Improvement of income estimates is being ap

and fuel produced and consumed on farms, selected proached through improved survey data collection

categories of interest and imputed interest from life including selective estimates of in-kind income, the

insurance policies. These estimates are based on use of administrative records and through improved

administrative records of government programs, estimating procedures for imputing income not re

available survey data and other relevant information. ported. The development effort for the Survey of

They also represent a matching of IRS tax return and Income and Program Participation (SIPP) is the

CPS household data as a method of cross-checking major current activity for the improvement of the

similar information reported in the two sources and measurement of income.

for deriving estimating factors in allocating different The four-year SIPP development effort sponsored sources of income by income size and demographic by DHEW will involve all of the enumerated ap (age, sex, race, etc.) groups. proaches. A series of tests will be conducted to

The Bureau of Economic Analysis measures of attempt to determine the effect of improved methods

personal income by size and class should be expanded of asking questions. Comparisons will be made with

initially to include income after the payment of administrative records to check the survey results, fill in missing data, and correct survey answers.

personal income and social insurance taxes:

subsequently they should be broadened further to inHowever, according to present plans the improved estimates anticipated from the SIPP will not be

clude disposable personal income, consumer available before 1981. In the interim there will be a

expenditures, and personal savings. need for improved estimates of income for direct The introduction of in-kind income into statistics input into policy formation.

of household income permits a more complete

assessment of household well being. However, the As the major survey from which estimates of the

identification of what should be counted as in-kind distribution of household income are currently

income is a difficult one. For example, choices need derived, the CPS will be the principal vehicle

to be made as to whether income in kind should be available to fill the need for improved income data

defined to include the monetary value of property during the interim. Preliminary testing in a CPS test

rights, the receipt of gifts, the monetary equivalent of panel of selected improvements in income

leisure time, and child care expenses. The inclusion or measurement developed for the SIPP could be

exclusion of these and other forms of income could employed to ensure that modifications in the annual

materially affect comparisons of income income questions would not significantly affect the

distributions. measurement of employment or unemployment for the month of March, which is the month annual The valuation of in-kind income is at least as income is collected. Early introduction of improved difficult as deciding what should be counted and will measures of annual income into the CPS program itself affect the inclusion or exclusion of particular would facilitate comparisons with data from the SIPP types of income. The most general problem of program when it becomes operational.

valuation is whether in-kind transfer income should

be valued at the cost to the donor or at its worth to Selected improvements in the measurement of

the recipient. The differences between donor and income which are successfully tested for the Survey of recipient valuations of in-kind income can be Income and Program Participation should be incorpo

significant. One analyst described the valuation rated into the Current Population Survey. The integrity

problem as follows: of the employment and unemployment estimates derived from the CPS should be protected by use of a

It is usually assumed that a household CPS test panel to determine the effect of additional

receiving income in the form of cash will spend that questions.

income on a bundle of goods (including savings) in

the manner that is most desirable from its own Another way in which income estimates have im perspective. In technical terms, it is assumed to proved is through the personal income estimates maximize utility given a budget or income prepared by the Bureau of Economic Analysis constraint. In-kind income, however, is provided in

the form of a particular good or set of goods. After receipt of the in-kind income, then, the household's bundle of goods may include more (or in some cases less) of the particular good than it would choose if given cash. Because the household is not permitted to exercise complete freedom in its choice of a bundle of goods, that bundle with the in-kind component may be worth less to the household than if it had been given cash. For example, a family that is temporarily housed for a month in a hotel costing the government $50 a day can in no case be said to have $1500 of income for the month; clearly, if provided with $1500 in cash, the family would not have chosen to spend all of the $1500 on housing..

3 Further discussion of the problem of defining and valuing in-kind income is given in Technical Paper VII of The Measure of Poverty and in a study entitled “The Cash Equivalent of In-kind Income Study" which was sponsored by the SIPP development program.

Preparing distributions of in-kind income is both important and difficult to accomplish. The many conceptual and measurement problems make it unlikely that general agreement can be reached concerning the best approaches to take. Under these circumstances, Federal efforts should be directed to providing statistics on the major sources of in-kind income, including data which will enable analysts to choose alternative ways of valuing individual sources. The substantial exploratory work being conducted as part of the SIPP development program should be continued as an integral part of the ongoing operation of the SIPP. Advice on priorities and practical approaches to the problem of measurement should be provided by producers and users of income statistics.

such as the distributional impact of taxes, the evolution of the Social Security trust fund, pension reform, income maintenance programs, and personal savings. Each of these areas has important ramifications. For example, personal savings affect investment behavior and capital formation, two factors which are crucial to the general performance of the Nation's economy. Most of the advances that have been made in statistics concerning the economic status of households have been directed to the improvement of the measurement of income and expenditures. Some improvements in the provisions of current data on household wealth have been in support of individual program areas such as housing. For example, in the last few years the HUDsponsored Annual Housing Survey has provided current estimates of the value of owned homes.

In spite of data improvements in response to the needs of individual programs, current data are not available from which an assessment can be made of the distribution of household wealth and its contribution to well being. Much that is known about the distribution of personal wealth is due to the major effort embodied in the Survey of Financial Characteristics of Consumers sponsored by the Federal Reserve Board in 1962, a survey which was drawn from the Census sampling frame and IRS tax records. In the absence of continuing government sponsorship, this survey has been updated on a number of occasions by the University of Michigan. However, it has not been possible to conduct a survey on the scale of the 1962 efforts.

A brief summary of Federal statistical programs will reveal the paucity and unevenness of data concerning the distribution of wealth among households. With respect to physical wealth, ownership of real estate is the major component of wealth. Data giving the owner's estimate of current value of his own residence are available yearly from the Annual Housing Survey. Other information obtained from this survey permits cross-tabulations of value with (1) income and other household characteristics, (2) condition of the housing unit, (3) vacancy status, and (4) many other factors. These data are also available every fourth year for selected Standard Metropolitan Statistical Areas. On a periodic basis, the decennial census program provides estimates of housing value for all communities in the country and for blocks and census tracts within communities. Cross-tabulations of value data are available by many of the other characteristics collected in a decennial census.

An interagency task force should identify practical methodologies for measuring the distribution of income in kind. The study should evaluate the alternative methodologies of collecting direct survey data and using indirect estimating procedures for selected components.

Wealth

In recent years, the need for information on wealth has grown with respect to Federal policies in areas

'Janice Peskin, Technical Paper VII, “In-Kind Income and the Measurement of Poverty," of The Measure of Poverty, U.S. Department of Health, Education and Welfare, p. 9.

Ibid.

'Unpublished, Office of the Assistant Secretary for Planning and Evaluation, Department of Health, Education, and Welfare, 1978.

The other principal source of estimates of the value of housing is the Consumer Expenditure Survey

conducted by the Bureau of Labor Statistics every ten years for the purpose of updating the Consumer Price Index. The most recent survey, which was conducted in 1972-73, provides extensive detail permitting the calculation of the owners' equity in his home. In addition, the survey provides data on the holdings of other property, including second homes and real estate used for business purposes. Since extensive data on many aspects of consumption, income, liabilities, and other wealth components are collected, the survey provides data for detailed analysis of household wealth. These data are available for the national level and to a lesser extent for regions.

Other existing data on the value of housing relate to aggregate estimates or provide insight into the current operation of the housing market. To summarize, detailed data on the national level of the value of housing is available annually, but coverage of all real estate owned by household members and data from which equity can be calculated are obtained only at ten-year intervals.

Motor vehicles are the second largest component of physical household wealth. There are no generally available current data on the distribution of household ownership of this asset. The Consumer Expenditure Survey provides an estimate of the current value of new and used vehicles owned for personal use. One major omission, which is important for some analyses, is the lack of data concerning personal use of vehicles registered by businesses. The 1980 decennial census will contain a question on the number of vehicles available for the personal use of members of the household, which will be of value for transportation analyses as well as for analyses of wealth.

With respect to major household appliances and other consumer durables, the Consumer Expenditure survey obtains extensive data which make possible estimates of the current market value of appliances purchased within specified recent periods. Data on clothing are limited to recent purchases and no attempt has been made to obtain estimates of personal wealth holdings such as jewelry, antiques, art collections and other miscellaneous wealth components.

Data on the distribution of financial wealth are limited to the Consumer Expenditure Survey and the Estate Tax Returns of the Internal Revenue Service. The Consumer Expenditure Survey contains data on the ownership of assets in bank accounts, United States Savings Bonds, and life insurance policies. It involves an overall estimate of ownership of corporate stocks and bonds, but no detail is obtained. The Consumer Expenditure Survey provides no data

on rights to private pension or retirement funds. The Estate Tax Returns have provided insight concerning the share holdings of top wealth holders in national wealth. However, as revisions to the estate tax become effective in 1978 and 1979, the number of persons required to file returns will be reduced to a small fraction of the present level.

Some improvements in the measurement of household wealth are being tried in the development program for the SIPP. To the extent feasible, those which show promise should be incorporated into continuing operational programs. Provision should also be made for the inclusion of measures of wealth in the Current Consumer Expenditure Survey under development at the Bureau of Labor Statistics. While a significant amount of work is planned, progress in the measurement of wealth would benefit greatly from the establishment of a lead agency which would provide a focal point as described in the beginning of the section of this chapter on adequacy.

The extent of need and the complexity of measurement for data on the distribution of household wealth would easily outrun resources available for statistics. Consequently, it is important that a study of agency requirements for wealth data be conducted to provide guidance in determining priorities in this area.

The Interagency Committee on Income Distribution should prepare a report on Federal requirements for data on the distribution of household wealth. The report should provide a basis for the development of wealth statistics pending the establishment of a continuing developmental program within the Bureau of Economic Analysis.

Consumption

Data on consumption fill an essential role in the assessment of the economic well being of households in that consumption measures the actual using up of goods and services to meet human needs. Data on current consumption thus explain the level of living supported by any given combination of household income and wealth. Data on consumption are of special significance in the area of nutrition in which detailed information on individual intake is needed to assess the role of human nutrition in maintaining good health.

Data on household consumption are difficult to measure. If consumption is measured on a current basis, the act of measurement is likely to have a significant effect on the measure itself. If the household is asked to recall consumption in some recent period, errors of memory will produce Summary of Recommendations

uncertainty concerning the true level. Fortunately, for many applications expenditures serve as a useful approximation for consumption as well as being of direct interest in themselves.

A strong program for consumer expenditure data has evolved at the Bureau of Labor Statistics for which the Current Consumer Expenditure Survey is the most recent data source. In addition to providing current data on expenditure patterns, the survey should provide the opportunity to respond rapidly to emerging policy needs such as the need at the time of the oil embargo in 1973-74 for improved data on expenditures on energy. Moreover, the continuing nature of the survey should make it possible to refine measures of expenditure and to a lesser extent to experiment with improvements in data on wealth.

1. A developmental program for the

measurement of household income should continue in the Bureau of the Census with joint funding by the Bureau and agencies having a major interest in the improvement of income statistics. Provision for input from the principal agencies engaged in the production or analysis of income data should be made through the establishment of a policy group to advise on priorities.

There are several areas in which improvement is needed in addition to the need for improved coordination which was mentioned at the beginning of the section on adequacy. There should be a sustained effort to measure consumption and to analyze the relationship of consumption to expenditures in some detail. Such analyses might make it possible to use the expenditure survey to update food consumption data between periodic large scale surveys of food consumption. Joint analyses of consumption and expenditures should also aid in predicting consumer expenditure patterns.

2. The Department of Health, Education and

Welfare should continue to provide for an analytical program and a modest developmental effort focusing on the measure of income, wealth and consumption, in order to ensure the sensitivity of data collection

efforts to emerging policy concerns. 3. A continuing developmental program for the

measurement of household wealth should be established in the Bureau of Economic Analysis. Provision for input from the principal agencies engaged in the production or analysis of wealth data should be made through the establishment of a committee to advise on priorities.

A continuing developmental program for the measurement of consumption should be added to the existing program for expenditure statistics in the Bureau of Labor Statistics. Provision for input from the principal agencies engaged in the production or analysis of consumption and expenditure data should be made through the establishment of a committee to advise on priorities.

Another general area which should be carefully considered concerns the establishment of an expenditure panel large enough to permit detailed analysis of the expenditure patterns of low income households of different types. A panel of low income households could provide a detailed description of expenditure patterns of the poor and improved understanding of the effect of Federal income transfer payments on the poor. These and similar analyses would help provide the basis for determining the composition of a family budget for the poor and the extent to which certain segments of the poor pay more for comparable goods and services than other segments of the population.

5. Data users should be consulted at an early

stage in the development of major household surveys focusing on wealth. Early consultation will reveal the preference of users for specific data items to be collected jointly in the same survey vehicle and identify those which might be approximated through matching files from other surveys and administrative records.

A study should be made of the relationship of household food consumption and expenditures to determine the extent to which the Current Consumer Expenditure Survey might provide current data on trends in food consumption. Consideration should also be given to development of a survey panel to permit detailed analysis of the expenditure patterns of low income households.

6. Survey vehicles for the collection of data on

the economic status of households should be sufficiently flexible to be able to respond to changing data requirements for policy analysis. Use of a relatively stable set of core data items should permit timely release of continuing series while additional modules are processed separately.

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