Glossary
Allocation procedures.–The allocation procedures are used in the derivation of the estimates of state and county personal income, because the data that are available for many of the components of personal income at the state and county levels may not be as comprehensive or as reliable as the data that are available at the national level. The national estimate of a component is allocated to the states in proportion to the states' shares of an economic, or allocating, series that is a measure of the component or that is related to the component that is being allocated; the state estimates are then allocated to counties. For example, the national estimate of personal dividend income received by individuals is allocated to the states–and the state estimates are allocated to counties–in proportion to the series for dividends reported by individuals on their Federal income tax returns.
For additional information, see the "Overview."
Annual rates.–The quarterly estimates of state personal income are presented at annual rates, which show the value that would be registered if the seasonally adjusted rate of activity measured for a quarter were maintained for a full year. Annual rates are used so that periods of different lengths–for example, quarters and years–may be easily compared. See also Seasonal adjustment.
BEA economic areas.–A set of geographic areas, defined in terms of counties, that exhaust the area of the Nation.
See also Geographic areas.
Capital consumption adjustment (CCAdj).–The CCAdj is the difference between private consumption of fixed capital (CFC) and private capital consumption allowances. Private CFC is a charge for the using up of private fixed capital. It is based on studies of prices of used equipment and structures in resale markets.(1) Private capital consumption allowances consists of tax–return–based depreciation charges for corporations and nonfarm proprietorships and of historical–cost depreciation, calculated by BEA, for farm proprietorships, rental income of persons, and nonprofit institutions.
In personal income, CFC is used to measure the estimates of proprietors' income–both farm and nonfarm–and of rental income of persons.
Corporate business.–See Sectors and legal form of organization.
County.–Counties consist of the counties and county equivalents, such as the parishes of Louisiana and the boroughs and census areas of Alaska.
See also Geographic areas.
Disclosure–avoidance procedures.–See Disclosure–avoidance procedures" in the "Technical Notes."
Disposable personal income.–Disposable personal income is personal income less personal tax and nontax payments. It is personal income that is available for spending and saving.
See also Personal income and Personal tax and nontax payments.
Dual allocation.–See "Dual allocation" in the "Technical notes."
Earnings.–This aggregate is the sum of three components of personal income–wage and salary disbursements, other labor income, and proprietors' income. BEA presents earnings because it can be used in the analyses of regional economies as a proxy for the income that is generated from participation in current production.
"Net earnings" is also presented: This measure is calculated as earnings less personal contributions for social insurance plus an adjustment to convert it from a place of work to a place of residence basis. Net earnings is used in the presentation of state and local area personal income as the sum of net earnings, transfer payments, and personal dividend income, personal interest income, and rental income of persons.
See also Net labor earnings.
Employment.–The BEA employment series for states and local areas comprises estimates of the number of jobs, full–time plus part–time, by place of work. Full–time and part–time jobs are counted at equal weight. Employees, sole proprietors, and active partners are included, but unpaid family workers and volunteers are not included. See "Employment" in the "Technical Notes."
ES–202.–The source data series from the administration of the state unemployment insurance system originating from employers' quarterly contributions reports filed with the state employment security agencies. The data, which are provided to BEA by the Bureau of Labor Statistics, include quarterly number of establishments and wage and salary disbursements and monthly employment by county and industry.
See the section "Wage and Salary Disbursements".
Extrapolation.–See "Interpolation and extrapolation" in the "Technical Notes."
Fiduciary.–Fiduciaries are individuals or legal entities that serve as administrators or trustees of private trust funds (including estates) and are classified as persons in the NIPA's. A fiduciary is required to report the income that the private trust fund receives on behalf of the beneficiaries of the estate or trust on Internal Revenue Service form 1041. Data from form 1041 are used in the preparation of the state estimates of personal dividend income and personal interest income.
Geographic areas.–The estimates of personal income are prepared for the following geographic areas: Counties and county equivalents, metropolitan areas, BEA Economic Areas, states, and regions. County equivalents consist of the District of Columbia, the boroughs and census areas of Alaska, the parishes of Louisiana, and the independent cities of Maryland, Missouri, Nevada, and Virginia. The estimates for Kalawao County, Hawaii and the small independent cities of Virginia–generally those with fewer than 100,000 residents–are combined with those for adjacent counties.
The metropolitan areas are aggregations of the counties. The metropolitan area definitions are those issued for Federal statistical purposes by the Office of Management and Budget.(2) Metropolitan areas consist of metropolitan statistical areas, consolidated metropolitan statistical areas, primary metropolitan statistical areas, and New England county metropolitan areas.
Each of the BEA economic areas consists of one or more economic nodes–usually metropolitan areas–and the surrounding counties that are economically related to the node.(3) These economic areas encompass all counties and county equivalents in the Nation.
Estimates are prepared for all states and for the District of Columbia. In addition, the state estimates are aggregated to prepare the estimates for the following eight regions: Far West, Great Lakes, Mideast, New England, Plains, Rocky Mountain, Southeast, and Southwest. The regional classifications, which were developed in the mid–1950's, are based on the homogeneity of the states in terms of economic characteristics, such as the industrial composition of the labor force, and in terms of demographic, social, and cultural characteristics.(4)
In addition, estimates can be prepared for any area that can be defined either in terms of counties and county equivalents or in terms of states.
Government enterprise.–See Sectors and legal form of organization.
Income subject to adjustment.–See Net Labor earnings.
Imputation.–The imputations place a market value on certain transactions that do not occur in the market economy or that are not observable in its records. They are included in personal income and in other NIPA aggregates in most cases to keep the NIPA aggregates invariant to how certain activities are carried out.
See "Imputation" in the "Technical Notes."
Interpolation.–See "Interpolation and extrapolation"in the "Technical Notes".
Inventory valuation adjustment (IVA).–This adjustment is made in the estimation of nonfarm proprietors' income to reflect the difference between the cost of inventory withdrawals as valued in the source data used to determine profits and the cost of withdrawals valued at replacement cost. It is needed because inventories as reported in the source data are often charged to cost of sales (that is, withdrawn) at their acquisition (historical) cost rather than at their replacement cost (the concept underlying the NIPA's). As prices change, companies that value inventory withdrawals at acquisition cost may realize profits or losses. Inventory profits, a capital–gains–like element in profits, result from an increase in inventory prices, and inventory losses, a capital–loss–like element in profits, result from a decrease in inventory prices. Inventory profits or losses equal the IVA with the sign reversed. No adjustment is needed to farm proprietors's income because inventories reported in the source data are measured on a current–market basis that approximates current replacement cost.
Local areas.–Local areas consist of metropolitan areas, of BEA economic areas, and of counties and county equivalents.
See also Geographic areas.
Metropolitan areas.–Metropolitan areas are defined for Federal statistical purposes by the Office of Management and Budget. Generally, they are defined in terms of counties.
See also Geographic areas.
Net labor earnings.–This aggregate is the sum of wage and salary disbursements and other labor income less personal contributions for social insurance by employees. This measure and a slightly modified version–termed "income subject to adjustment"–are used in the residence adjustment procedure for both the annual and the quarterly estimates of state personal income and for the annual county estimates.
See also Earnings.
North American Industry Classification System (NAICS).– NAICS is an industry classification system that classifies economic units that have similar production processes in the same industry. This is a supply–based or production–oriented economic concept.
Statistics Canada, Mexico's Instituto Nacional de Estadistica Geografia e Informatica (INEGI), and the Economic Classification Policy Committee (ECPC) of the United States, acting on behalf of the Office of Management and Budget, created a common classification system that replaced the existing classification of each country, the Standard Industrial Classification (1980) of Canada, the Mexican Classification of Activities and Products (1994), and the Standard Industrial Classification (1987) of the United States.
NAICS is used in the presentation of state and local area estimates of earnings and employment by industry from the year 2001 forward. It is used by BEA for the estimates of the private sector only, although it is designed to cover both public and private earnings and employment activities.
See also Standard Industrial Classification.
Other labor income.–This component of personal income consists of employer payments to private and government employee retirement plans, private group health and life insurance plans, privately administered workers' compensation plans, and supplemental unemployment benefit plans; and of several other minor categories, including judicial fees to jurors and witnesses, compensation of prison inmates, and marriage fees to justices of the peace.
Other private business.–See Sectors and legal form of organization.
Partnership.–A partnership is an unincorporated business association of two or more partners.
See also Sectors and legal form of organization.
Pay–in–kind.–Pay–in–kind is an imputed component of wage and salary disbursements. The estimates of pay–in–kind reflect the value of the food, lodging, clothing, and miscellaneous goods and services that are received by employees from their employers as full payment or as partial payment for services performed.
See also "Imputation" in the "Technical Notes."
Per capita personal income.–This measure of income is calculated as the total personal income of the residents of an area divided by the population of the area. See also "Per capita personal income" in the "Technical Notes."
Per capita personal income is often used as an indicator of the character of consumer markets and of the economic well–being of the residents of an area.
Personal contributions for social insurance.–These contributions, which are subtracted in the calculation of personal income, consist of the contributions, or payments, by employees, by the self–employed, and by other individuals who participate in the following government programs: Old–age, survivors, and disability insurance (social security); hospital insurance; supplementary medical insurance; unemployment insurance; railroad retirement; veterans life insurance; and temporary disability insurance.
These contributions are excluded from personal income by definition, but the components of personal income upon which these contributions are based–mainly wage and salary disbursements and proprietors' income–are presented gross of these contributions.
See also Earnings, Net labor earnings, and Personal income.
Personal dividend income.–This component of personal income is the dividend income of persons. It consists of the payments in cash or other assets, excluding the corporation's own stock, made by corporations located in the United States or abroad to persons who are U.S. residents. It excludes that portion of dividends paid by regulated investment companies (mutual funds) related to capital gains distributions.
Personal income.–Personal income is the income that is received by persons from participation in production, from both government and business transfer payments, and from government interest (which is treated like a transfer payment). It is calculated as the sum of wage and salary disbursements, other labor income, proprietors' income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and transfer payments to persons, less personal contributions for social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.
See also Earnings; Net labor earnings; Other labor income; Personal contributions for social insurance; Personal dividend income; Personal interest income; Persons; Proprietors' income; Rental income of persons; Residence adjustment; Residence, place of; Transfer payments; and Wage and salary disbursements.
Personal interest income.–This component of personal income is the interest income (monetary and imputed) of persons from all sources.
Personal tax and nontax payments.–Personal tax and nontax payments is tax payments (net of refunds) by persons that are not chargeable to business expense and certain other payments that are made by persons to government agencies (except government enterprises) that are treated like taxes. Personal taxes includes taxes on income, including realized net capital gains, and on personal property.(5) Nontaxes includes donations and fees, fines, and forfeitures. Personal contributions for social insurance is not included.
Personal tax and nontax payments is used in the derivation of disposable personal income, which is calculated as personal income less personal tax and nontax payments.
Persons.–Persons consists of individuals and quasi–individuals that serve individuals or that act on behalf of individuals. Quasi–individuals consists of nonprofit institutions that primarily serve individuals, private noninsured welfare funds, and private trust funds.
Proprietors' income with inventory valuation and capital consumption adjustments.–This component of personal income is the current–production income (including income in kind) of sole proprietorships and partnerships and of tax–exempt cooperatives. Corporate directors' fees and the imputed net rental income of owner–occupants of farm dwellings is included in proprietors' income, but the imputed net rental income of owner–occupants of nonfarm dwellings is included in rental income of persons. Proprietors' income excludes dividends and monetary interest received by nonfinancial business and rental incomes received by persons not primarily engaged in the real estate business; these incomes are included in dividends, net interest, and rental income of persons, respectively.
See also Capital consumption adjustment and Inventory valuation adjustment.
Quasi–individuals.– SeePersons.
Region.– See Geographic areas.
Rental income of persons with capital consumption adjustment.–This component of personal income is the net income of persons from the rental of real property except for the income of persons primarily engaged in the real estate business; the imputed net rental income of the owner–occupants of nonfarm dwellings, and the royalties received by persons from patents, copyrights, and rights to natural resources. The imputed net rental income of owner–occupied farm dwellings is included in farm proprietors' income because much of the expenses of operating the housing cannot be distinguished from the production expenses of farming operations.
See also Capital consumption adjustment and Proprietors' income.
Residence adjustment.–The residence adjustment is the net inflow of the net labor earnings of interarea commuters.
The state and county estimates of personal income are presented by the state and county of residence of the income recipients. However, the source data for most of the components of wage and salary disbursements, other labor income, and personal contributions for social insurance by employees are on a place–of–work basis.(6) Consequently, a residence adjustment is made to convert the estimates based on these source data to a place–of–residence basis.(7)
See Net labor earnings. See also the section "Geographic characteristics of the source data" in the "Overview."
Residence, place of.–The place of residence of individuals is the state and county in which they live. The residence of military personnel is the state and county in which they live while they are on military assignment, not their permanent or legal state and county of residence, and the residence of seasonal migrant workers except those working in Alaska is the state and county in which they live while they are working, not their usual state and county of residence.
These definitions of residence are not fully consistent with the population statistics prepared by the Census Bureau; for example, on their census forms, some seasonal migrant workers report their usual state and county of residence rather than the state and county in which they are living and working when the decennial census of population is taken. The Census Bureau's annual estimates of population by state and county, which are used by BEA to calculate per capita personal income, reflect this reporting anomaly.
See also Personal income, Persons, and Residence adjustment.
Seasonal adjustment.–The quarterly estimates of state personal income are adjusted, where appropriate, to remove from the time series of the source data the average effect of variations that normally occur at about the same time and in about the same magnitude each year–for example, weather and holidays. After seasonal adjustment, cyclical and other short–term changes in the economy stand out more clearly. For the income components for which no state–level quarterly source data are available, the quarterly series are estimated from the trend in the annual state estimates, and the resulting estimates are on a seasonally adjusted basis.
See also Annual rates.
Sectors and legal form of organization.–In the national income and product accounts (NIPA's), gross domestic product and other major aggregates are presented in terms of three economic sectors: Business, households and institutions, and general government.
Businesses are classified into five categories, generally according to legal form of organization: Corporations, sole proprietorships, partnerships, "other" private business, and government enterprises.
Corporate business consists of entities required to file Federal corporate tax returns (Internal Revenue Service (IRS) form 1120 series) and the following entities: Mutual financial institutions and cooperatives subject to Federal income tax, private noninsured pension funds, nonprofit organizations that primarily serve businesses, Federal Reserve banks, and federally sponsored credit agencies.
Sole proprietorships are all entities that are required to file IRS Schedule C (Profit or Loss from Business) or Schedule F (Farm Income and Expenses).(8)
Partnerships are all entities required to file Federal partnership income tax returns, IRS Form 1065 (U.S. Partnership Return of Income).
Other private business consists of all entities that are required to report rental and royalty income in IRS Schedule E (Supplemental Income and Loss), tax–exempt cooperatives, owner–occupants of nonfarm housing, and the services of buildings and equipment owned and used by nonprofit institutions that primarily serve individuals.(9)
Government enterprises are government agencies that cover a substantial portion of their operating costs by selling goods and services to the public and that maintain separate accounts.(10)
Sole proprietorship.–A sole proprietorship is an unincorporated business owned by a person.
See also Sectors and legal form of organization and Proprietors' income.
Standard Industrial Classification (SIC).–The SIC is an establishment–industry classification system that is prepared by the Office of Management and Budget for use by all federal statistical agencies.(11) The SIC is used in the presentation of the state and local area estimates of earnings by industry through 2001 for states and 2000 for counties. It is used by BEA for the estimates for the private sector only, although it is designed to cover both public and private economic activities.
In the SIC, establishments are classified by the primary activity in which they are engaged, and each establishment is assigned an industry code.(12)
See also North American Industry Classification System.
State.–See Geographic areas.
Tax–exempt cooperative.–A tax–exempt cooperative is a nonprofit business organization that is collectively owned by its members. Although tax–exempt cooperatives are incorporated, in the NIPA's these institutions are classified in the other private business sector, and their income is classified as part of proprietors' income.
See also Sectors and legal form of organization.
Transfer payments.–This component of personal income is payments to persons for which no current services are performed. It consists of payments to individuals and to nonprofit institutions by Federal, state, and local governments and by businesses.
Government transfer payments to individuals includes retirement and disability insurance benefits, medical payments (mainly medicare and medicaid), income maintenance benefits, unemployment insurance benefits, veterans benefits, and Federal grants and loans to students. Government transfer payments to nonprofit institutions excludes payments by the Federal Government for work under research and development contracts. Business transfer payments to persons consists primarily of liability payments for personal injury and of corporate gifts to nonprofit institutions.
Wage and salary disbursements.–This component of personal income consists of the monetary remuneration of employees, including the compensation of corporate officers; commissions, tips, and bonuses; and receipts in kind, or pay–in–kind, such as the meals furnished to the employees of restaurants.(13) It reflects the amount of wages and salaries disbursed, but not necessarily earned, during the year.
This component is measured before deductions, such as social security contributions and union dues.
See also Earnings, Net labor earnings, Pay–in–kind, and Other labor income.
Footnotes
1. For further information, see Arnold J. Katz and Shelby W. Herman, "Improved Estimates of Fixed Reproducible Tangible Wealth," Survey of Current Business 77 (May 1997): 69–92; and Barbara M. Fraumeni, "The Measurement of Depreciation in the U.S. National Income and Product Accounts," Survey 77 (July 1997): 7–23.
2. For the New England region, OMB's preferred definitions of the metropolitan areas are in terms of cities and towns, but the available data for cities and towns are not sufficient to prepare estimates of personal income.
The list of the metropolitan areas and their constituent counties and county equivalents is available on BEA's Web site at www.bea.gov and from the National Technical Information Service, Document Sales, 5205 Port Royal Road, Springfield, VA 22161 (1–800–553–6847)(Accession No. PB99–132698).
3. For a description of the economic areas and the methodology used to define them, see "Redefinition of the BEA Economic Areas," Survey of Current Business 75 (February 1995): 75–81. This article and a list of the economic areas and their constituent counties and county equivalents are available on BEA's Web site.
4. For a brief description of the regional classification of states used by BEA, see U.S. Department of Commerce, Bureau of the Census, Geographic Areas Reference Manual, Washington, DC, U.S. Government Printing Office, November 1994, pp. 6–18–6–19.
5. Personal tax payments excludes payments of both real estate taxes and sales taxes. Real estate taxes are excluded because, in the calculation of the imputed rental income of owner–occupied housing, they are considered business expenses. Sales taxes are included in the selling price of the commodity and are treated as being paid by the seller.
6. See "Geographic characteristics of the source data" in the "Overview."
7. In the tables on this disc, each of the components of net labor earnings–wage and salary disbursement, other labor income, and personal contributions for social insurance–is presented by place of work. The residence adjustment is estimated for net labor earnings, and that statistic is presented by place of residence.
8. Also included in sole proprietorships are similar entities operated by individuals who do not meet the reporting requirements.
The operation of owner–occupied farm housing is reflected in the sole proprietorship category.
9. Also included in other private business are entities with rental and royalty income whose individual owners who do not meet the reporting requirements.
10. For further information, see U.S. Department of Commerce, Bureau of Economic Analysis, Methodology Paper Series MP–5, Government Transactions (Washington, DC: U.S. Government Printing Office, November 1988). This publication is available on BEA's Internet site: Go to www.bea.gov and select "Methodologies."
11. See Executive Office of the President, Office of Management and Budget, Standard Industrial Classification Manual, 1997, National Technical Information Service order no. PB 87–100012. The Manual is available on the Web site of the Occupational Safety and Health Administration: Go to www.osha.gov/oshstats/sicser.html.
12. Establishments, as defined in the SIC, are economic units, generally at a single physical location, where business is conducted or where services or industrial operations are performed.
13. Voluntary employee contributions to certain deferred compensation plans, such as 401(k) plans, are not deducted. (Employer contributions to deferred compensation plans are included in other labor income.)
