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Working Paper Number SEHSD-WP1996-20 or SIPP-WP-215
John Coder and Lydia Scoon-Rogers
Component ID: #ti1791295130

Introduction

The Bureau of the Census conducts two surveys that focus on measuring the economic resources of American households. These are the annual income supplement to the March Current Population Survey (CPS) and the Survey of Income and Program Participation (SIPP). A major focus of both of these surveys is collection of detailed information about the sources and amount of income received by the population. The annual supplement to the March CPS has been the "official" source of income and poverty estimates for the United States since 19471, while SIPP emerged in 1984 as an alternative to the March CPS, offering the hope of more accurate and more comprehensive information concerning household income, labor market activity, and related topics.

The March CPS has been the mainstay of income measurement in the United States since its initiation in 1947. It has provided a time series of annual income estimates covering a span of 35 years. While the March CPS supplement data continue to be the official source of income and poverty estimates today, the survey has long been criticized for both the quality of its data and inherent limitations imposed by its ties with the CPS, whose main focus is measurement of monthly unemployment.

The SIPP was conceived as a survey that would overcome the shortcomings of the March CPS. It was designed to improve the quality of income data and to expand the amount of information collected so that complex issues related to government tax and transfer policy could be examined.

An assessment of the SIPP income data carried out by Vaughan (1989) has indicated that the quality of these data for 1984 was higher than the quality of the data collected in the March CPS for most, but not all, income sources2. His examination was based on comparisons at the aggregate level using calendar-year 1984 as the accounting period. The monthly amounts recorded in SIPP for each month of 1984 were summed to arrive at annual aggregate estimates that corresponded to the estimates available from the March CPS which asks questions about the amount of income received during the previous calendar year.

In addition to making comparisons of SIPP and March CPS income estimates, Vaughan compared both survey results to independent "benchmark" estimates derived from the National Income and Product Accounts (NIPA) and various other program and administrative sources. Comparisons of this nature provided an indication of how the surveys were performing relative to independently derived measures of "truth.”

This paper presents a follow-up to Vaughan's work by comparing 1990 SIPP, CPS, and benchmark estimates of aggregate income and recipiency, with attention given to refining the comparability between surveys and between surveys and independent estimates. This paper begins with a comparison of SIPP and March CPS data collection and processing procedures as a basis for comparability, highlighting main sources of nonsampling error. The next sections explain the derivations of survey and independent estimates of aggregate income used in the comparisons, with alternate SIPP estimates offered. The major part of the paper is devoted to presenting comparisons of SIPP, March CPS, and independent aggregate income estimates by source of income, including tabular comparisons of survey and independent estimates. The last appendix section contributed by Denton Vaughan provides a response to the paper presented here and suggests future research directions.

Our working definitions of quality in this analysis are indicated by one survey's relative standing to the other survey or to independent/administrative data regarding aggregate income, mean income and income recipiency.

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