2002 Economic Census: Methodology

Methodology

SOURCES OF THE DATA

In the economic census, large- and medium-size firms, plus all firms known to operate more than one establishment, were sent questionnaires to be completed and returned to the Census Bureau by mail. For most very small firms, data from existing administrative records of other federal agencies were used instead. These records provide basic information on location, kind of business, sales, payroll, number of employees, and legal form of organization.

Firms in the 2002 Economic Census are divided into those sent report forms and those not sent report forms. The coverage of and the method of obtaining census information from each are described below. (For manufacturing, mining, and construction, see the sector-specific links above.)

1. Establishments sent a report form:
1. Large employers, i.e., all multiestablishment firms, and all employer firms with payroll above a specified cutoff. (The term ''employers'' refers to firms with one or more paid employees at any time during 2002 as shown in the active administrative records of other federal agencies.)
2. A sample of small employers, i.e., single-establishment firms with payroll below a specified cutoff in classifications for which specialized data precludes reliance solely on administrative records sources.
2. Establishments not sent a report form:
1. Selected small employers, i.e., single-establishment firms with payroll below a specified cutoff. Although the payroll cutoff varies by kind of business, small employers not sent a report form generally include firms with less than 10 employees and represent about 10 percent of total sales of establishments covered in the census. Data on sales, payroll, and employment for small these employers were derived or estimated from administrative records of other federal agencies.
2. All nonemployers, i.e., all firms subject to federal income tax with no paid employees during 2002. Sales or receipts information for these firms was obtained from administrative records of other federal agencies. Although consisting of many firms, nonemployers account for less than 10-percent of total sales or receipts of all establishments covered in the census. The census includes only those nonemployer firms which report a sales/receipts volume of $1,000 or more during 2002. Establishments with no paid employees are excluded as in previous censuses. Data for nonemployers are not included in this report, but are released in the annual Nonemployer Statistics series.

A more detailed examination of census methodology is presented in the History of the Economic Census at www.census.gov/econ/www/history.html.

INDUSTRY CLASSIFICATION OF ESTABLISHMENTS

The classifications for all establishments are based on the North American Industry Classification System, United States, 2002 manual. Changes between 1997 and 2002 affect only the construction, wholesale trade, retail trade and information sectors. Tables at www.census.gov/epcd/naics02/ identify those industries that changed between the 1997 NAICS and 2002 NAICS classification systems.

The method of assigning classifications and the level of detail at which establishments are classified depends on whether a report form was obtained for the establishment.

1. Establishments that returned a report form were classified on the basis of their self-designation, sales of merchandise lines, and other industry-specific inquiries.
2. Establishments without a report form:
1. Small employers not sent a form are, where possible, classified on the basis of the most current kind-of-business classification available from one of the Census Bureau's current sample surveys or the 1997 Economic Census. Otherwise, the classification was obtained from administrative records of other federal agencies. If the census or administrative record classifications proved inadequate (none corresponded to a 2002 Economic Census classification in the detail required for employers), the firm was sent a brief inquiry requesting information necessary to assign a kind-of-business code.
2. Nonemployers were classified on the basis of information obtained from administrative records of other federal agencies.

METHOD OF ASSIGNING TAX STATUS

For kind-of-business classifications where there were substantial numbers of taxable and tax-exempt establishments, establishments were classified based on the federal income tax filing requirement for the establishment or organization. This classification was based primarily on the response to an inquiry on the census questionnaire. Establishments that indicated that all or part of their income was exempt from federal income tax under provisions of section 501 of the Internal Revenue Service (IRS) code were classified as tax-exempt; establishments indicating no such exemption were classified as taxable. All government-operated hospitals were classified as tax-exempt. For establishments without a report form, the tax status classification was based upon the type of tax return filed by the firm or organization.

For selected kind-of-business classifications that are comprised primarily of tax-exempt establishments, all establishments in those classifications were defined as tax-exempt. All establishments in the remaining kind-ofbusiness classifications (comprised primarily of taxable establishments) were defined as taxable

RELIABILITY OF DATA

All data compiled in the Economic Census are subject to nonsampling errors. Nonsampling errors can be attributed to many sources during the development or execution of the census:

• inability to identify all cases in the actual universe;
• definition and classification difficulties;
• differences in the interpretation of questions;
• errors in recording or coding the data obtained; and
• other errors of collection, response, coverage, processing, and estimation for missing or misreported data.

Data presented in the Miscellaneous Subjects and the Product Lines reports for most sectors, data designated as based on the annual survey of manufactures, and all data for the construction sector are subject to sampling errors as well as nonsampling errors. Specifically, these data are estimated based on information obtained from census questionnaires mailed to all large employers and to a sample of small employers in the universe. Sampling errors affect these estimates insofar as they may differ from results that would be obtained from a complete enumeration.

The accuracy of these tabulated data is determined by the joint effects of the various nonsampling errors or by the joint effects of sampling and nonsampling errors. No direct measurement of these effects has been obtained except for estimation for missing or misreported data; however, precautionary steps were taken in all phases of the collection, processing, and tabulation of the data in an effort to minimize the effects of nonsampling errors.

The Census Bureau obtains limited information extracted from administrative records of other federal agencies, such as gross receipts from federal income tax records and employment and payroll from payroll tax records. This information is used in conjunction with other information available to the Census Bureau to develop estimates for nonemployers, small employers, and other establishments for which responses were not received in time for publication.

Key tables in this report include a column for “Percent of receipts from administrative records”. This includes revenue information obtained from administrative records of other federal agencies. The “Percent of receipts estimated” includes revenue information which was imputed based on historic company ratios or administrative records, or on industry averages.

The Census Bureau recommends that data users incorporate this information into their analyses, as nonsampling error and nonsampling error could impact the conclusions drawn from the results.

TREATMENT OF NONRESPONSE

Census report forms included two different types of inquiries, “basic” and “industry-specific.” Data for the basic inquiries, which include location, kind of business or operation, receipts or revenue, payroll, and number of employees, were available from a combination of sources for all establishments. Data for industry-specific inquiries, tailored to the particular kinds of business or operation covered by the report, were available only from those establishments sent a report form that completed the appropriate inquiries on the questionnaire.

Data for industry-specific inquiries were expanded in most cases to account for establishments that did not respond to the particular inquiry for which data are presented. Data presented for industry-specific inquiries based on a December 31 reference date were expanded in direct relationship to total receipts or revenue of only those establishments in business at the end of the year. Unless otherwise noted in specific reports, data for other industry-specific inquiries were expanded in direct relationship to total receipts or revenue of all establishments included in the category. In a few cases expansion on the basis of the receipts or revenue item was not appropriate, and another basic data item was used as the basis for expansion of reported data to account for nonrespondents.

Reports in which data were expanded to account for employers not sent a report form and for nonrespondents include a coverage indicator for each publication category, which shows the receipts or revenue of establishments responding to the industry-specific inquiry as a percent of total receipts or revenue for all establishments for which data are shown. For some inquiries, coverage is determined by the ratio of total payroll or employment of establishments responding to the inquiry to total payroll or employment of all establishments in the category.

DISCLOSURE

In accordance with federal law governing census reports (Title 13 of the United States Code), no data are published that would disclose the operations of an individual establishment or business. However, the number of establishments in a kind-of-business classification is not considered a disclosure; therefore, this information may be released even though other information is withheld. Techniques employed to limit disclosure are discussed at www.census.gov/epcd/ec02/disclosure.htm.

Additional factors governing disclosure in manufacturing, mining, and construction are discussed in the documents linked at the top of this page.

Source: U.S. Census Bureau, 2002 Economic Census

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Page Last Modified: February 09, 2006