The reservation wage, or the lowest wage a person would accept for market work, continues to be an important concept in the theory of labor markets. Theoretically, it is viewed as the value of leisure when a person is not engaged in market work. An offer wage in excess of the reservation wage will result in a positive labor supply response.

The empirical measurement of the reservation wage, however, is problematic. It is a subjective value based on market as well as nonmarket factors. Unlike market determined values such as the nominal wage, the reservation wage is the result of an individual's cognitive process. Nevertheless, attempts to measure reservation wages have occurred from time-to-time in household surveys such as the Current Population Survey (CPS) and National Longitudinal Surveys (NLS). Economists have used the reservation wage data from these surveys to analyze such issues as the impact of unemployment insurance on the reservation wage (Feldstein and Poterba, 1984) and the unemployment experiences of white and black male youths (Holzer, 1986).

Given the usefulness of reservation wage data, the U.S. Bureau of the Census (BC) introduced some “reservation wage questions” in its Survey of Income and Program Participation (SIPP). This survey, which is a longitudinal survey of persons, was designed to monitor the economic well-being of persons and households across the country. The reservation wage questions were asked during the fifth interview of SIPP's 1984 panel.