U.S. Bureau of Economic Analysis Glossary

Allocation procedure—The allocation procedure is 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 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.

Capital consumption adjustment (CCAdj)—The estimates of the rental income of persons and of nonfarm proprietors' income include the CCAdj because the depreciation of capital that the Bureau of Economic Analysis (BEA) uses to prepare the estimates differs from the depreciation that businesses use to determine the income that is reported on their tax returns, which are the sources of the data on which the estimates are based.

The CCAdj is the difference between depreciation as valued in determining the income reported in the source data and what is referred to as "economic depreciation"—depreciation as valued on the basis of consistent accounting (economic service lives and straight-line depreciation) and at replacement cost. For example, if the reported depreciation is $1.1 million and the replacement cost of the capital used up—calculated with straight-line depreciation and the specified service life—is $1.3 million, then the CCAdj is -$0.2 million.

Corporate business—See 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 units.

Disposable personal income—Disposable personal income is the income that is available to persons for spending and saving. It is calculated as personal income less the sum of personal tax payments and personal nontax payments to Federal, State, and local governments. See also Personal tax and nontax payments.

Earnings—This measure is the sum of three components of personal income—wage and salary disbursements, other labor income, and proprietors' income.

Each of these components is measured before the deduction of personal contributions for social insurance, which is excluded from personal income. Therefore, the measure "net earnings" is calculated as earnings less personal contributions for social insurance, so that it can then be used in the computation of personal income as the sum of net earnings, transfer payments, and personal dividend income, personal interest income, and the rental income of persons.

Earnings is often used in the analyses of regional economies as a proxy for the income that is generated from participation in current production. See also Labor earnings.

Fiduciary—A fiduciary is an individual or a legal entity that serves as the administrator or trustee of an estate or of a private trust fund. A fiduciary is required to report the income that it receives on behalf of the beneficiaries of the estate or trust on Internal Revenue Service form 1041.

Geographic units—The estimates of personal income are prepared for the following geographic units: Counties and county equivalents, metropolitan areas, States, and regions. In addition, estimates can be prepared for any area that can be defined in terms of counties.

The estimates are prepared for most counties and for the following county equivalents: 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. However, the estimates for the following areas are combined with those for adjacent counties: Kalawao County, Hawaii; the Montana portion of Yellowstone National Park; Menominee County, Wisconsin; and the small independent cities of Virginia, generally those with fewer than 100,000 residents.

The estimates for metropolitan areas are aggregations of the county estimates. The county-based definitions of metropolitan areas are used; these definitions are issued for Federal statistical purposes by the Office of Management and Budget. Metropolitan areas consist of metropolitan statistical areas, consolidated metropolitan statistical areas, primary metropolitan statistical areas, and New England county metropolitan areas. A list of the metropolitan areas and their constituent counties is presented on this disc under "Documents."

The 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.

In addition, the State estimates are often aggregated to prepare estimates for the nine Census divisions that compose the four regions for which the Bureau of the Census publishes its regional data so that the estimates of personal income can be compared with the Census Bureau data.

Government enterprise—See Legal form of organization.

Imputation—Imputations are added to personal income so that a comprehensive account of total production and its distribution can be presented. An imputation is usually the value of nonmarket goods or services that is added to the value of marketed goods and services.

Specifically, five imputations are included in the estimates of personal income: Imputed wage and salary disbursements, the imputed value of owner-occupied farm housing and of food and fuel produced and consumed on farms, the imputed value of owner-occupied nonfarm housing, the net margins on owner-built housing, and the imputed interest income from financial intermediaries. The net value of these imputations accounts for about 10 percent of personal income at the national level.

Imputed wage and salary disbursements, or pay-in-kind, are added to the estimates of wages and salaries so that all the earnings of employees who receive part of their wages in pay-in-kind will be included in personal income. This imputation is an estimate of the value of the food, lodging, clothing, and other goods and services that are received by employees from their employers as full payment or as partial payment for their services.

The net imputed value of owner-occupied farm housing and of food and fuel produced and consumed on farms are part of farm proprietors' income. The gross imputed value of owner-occupied farm housing is an estimate of the gross rental value of the housing, and the gross imputed value of food and fuel is an estimate of the gross value of the food and fuel; these imputations are part of gross farm income, which includes production expenses. The production expenses are estimated from data for the actual expenses from sample surveys. However, the net contribution of the imputations to farm proprietors' income and to personal income is difficult to state exactly because the expenses are estimated as part of the total farm production expenses of the same type; for example, the mortgage interest expense for farm housing and the mortgage interest expense for farm land are estimated together.

The net imputed value of owner-occupied nonfarm housing is a component of the rental income of persons. It is calculated as an estimate of the imputed gross rental value of the housing less an estimate of the expenses associated with the housing, which are derived mainly from data for the actual expenses from censuses and sample surveys. The imputation is based on the assumption that the owner-occupants are in the rental business and that they are renting the houses in which they live to themselves: As tenants, they pay rent to the landlords (that is, to themselves); as landlords, they collect rent from their tenants (that is, from themselves), they incur expenses, and they may have a profit or a loss from the rental business.

The net margins on owner-built housing is part of proprietors' income, classified in the construction industry. It is the imputed net income of individuals from the construction or renovation of their own dwellings.

The imputed interest income from financial intermediaries is a part of personal interest income. The imputed interest consists of two components: The imputed interest income received by persons from investment companies and from depository institutions, that is, from commercial banks, mutual savings banks, savings and loan associations, and credit unions; and the imputed interest income received from life insurance carriers and from private noninsured pension funds.

The imputed interest income from investment companies and depository institutions is an estimate of the value of the services (such as checking) that these institutions provide to persons less the explicit charges made for the services.

The imputed interest income from life insurance carriers and private noninsured pension funds is not exactly an imputation, but an accounting entry. It is an estimate of the investment income that is earned on these institutions' financial reserves that is credited to the policyholders or the pension beneficiaries; the attribution of this income to persons is made so that the investment earnings of these intermediaries is included in personal income and saving.

Inventory valuation adjustment (IVA)—This adjustment is made to a component of proprietors' income—nonfarm proprietors' income—because the valuation of inventory withdrawals that is used in the national income and product accounts (NIPA's) differs from the valuation of withdrawals that nonfarm proprietors use to determine the income that is reported in the tax-return data on which the NIPA estimates of nonfarm proprietors' income are based. Businesses often value inventory withdrawals at their acquisition cost rather than at their replacement cost, which is the valuation that is used in the NIPA's.

Valuing inventory withdrawals at their acquisition cost results in the inclusion in business income of the capital gains or losses realized on sales out of inventory. These capital gains or losses must be removed from the estimates of this income so that the estimates will reflect income from current production.

The IVA is an estimate of the capital gains or losses with the sign reversed; adding this estimate to the source data for nonfarm proprietors' income removes the capital gains or losses. The IVA is calculated as the difference between the valuation of inventory withdrawals that is reported in the source data and the valuation of withdrawals that is used in the NIPA's. For example, if the acquisition cost of an item was $5,000 and if its replacement cost when it is withdrawn from inventory is $6,000, then the IVA is -$1,000.

Labor earnings—This measure of income is calculated as the sum of wage and salary disbursements and other labor income less personal contributions for social insurance by employees. This measure is used in the residence adjustment procedure for the quarterly estimates of State personal income. A slightly modified version of labor earnings—termed "income subject to adjustment"—is used in the residence adjustment of the annual estimates of State and county personal income. See also Earnings.

Legal form of organization—Businesses are classified into five categories according to their legal form of organization: Corporate business, government enterprises, partnerships, sole proprietorships, and "other" private business.

A corporate business is any entity that is required to file a Federal corporate tax return (Internal Revenue Service (IRS) form 1120 series). This classification includes mutual financial institutions and cooperatives that are subject to Federal income tax, private noninsured pension funds, nonprofit organizations that primarily serve businesses, Federal Reserve banks, and federally sponsored credit agencies.

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 their own separate accounts.

Partnerships and sole proprietorships are primarily classified according to the type of Federal income tax form that is filed with the IRS. Partnerships are legal entities that are required to file a U.S. Partnership Return of Income, IRS form 1065. Sole proprietorships are entities that would be required to file IRS Schedule C (Profit or Loss from Business) or Schedule F (Farm Income and Expenses) if the proprietor met the filing requirements for form 1040, together with owner-occupied farm housing.

Other private businesses consists of entities that would be required to report rental and royalty income on Schedule E (Supplemental Income and Loss) if the individual met the filing requirements for form 1040, tax-exempt cooperatives, owner-occupied nonfarm housing, and buildings and equipment owned and used by nonprofit institutions that primarily serve individuals.

Local areas—Local areas consist of metropolitan areas and of counties and county equivalents. See also Geographic units.

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 units.

Other labor income—This component of personal income consists of employer contributions to privately administered pension and profit-sharing plans, to private group health and life insurance plans, to supplemental unemployment insurance benefit plans, and to privately administered workers' compensation insurance; corporate directors' fees, and a miscellaneous component. The miscellaneous component consists of jury and witness fees, the compensation of prison inmates, and marriage fees to justices of the peace.

Other private business—See Legal form of organization.

Partnership—A partnership is an unincorporated business association of two or more partners. See also Legal form of organization.

Pay-in-kind—Pay-in-kind is a 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 and Wage and salary disbursements.

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. Per capita personal income is often used as an indicator of the quality of consumer markets and of the economic well-being of the residents of an area.

Personal contributions for social insurance—These contributions include the contributions, or payments, by employees, by the self-employed, and by other individuals to the following social insurance programs: Old-age, survivors, and disability insurance, which is also known as social security; hospital insurance; State and local government employee retirement insurance; Federal civilian employee retirement; railroad employee retirement; State unemployment insurance; temporary disability insurance; veterans life insurance; and supplementary medical insurance.

These contributions are excluded from personal income by definition, but the estimates of three components of personal income—wage and salary disbursements, other labor income, and proprietors' income—are presented before these contributions are deducted. Therefore, the estimates of these contributions are subtracted from the sum of the estimates of these three components in order to derive the estimates of personal income. See also Earnings, Labor earnings, and Personal income.

Personal dividend income—This component of personal income consists of the dividends that are received by individuals and by nonprofit institutions and the dividends that are retained and reinvested by fiduciaries. Dividends are payments in cash or other assets, excluding the corporation's own stock, made by corporations located in the United States or abroad to noncorporate stockholders who are U.S. residents. The State and local area estimates of this component are combined with the estimates of personal interest income and the estimates of rental income of persons. See also Fiduciary.

Personal income—The personal income of an area is defined as 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.

Personal income consists of the income that is received by persons from participation in production, from 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.

Personal interest income—This component of personal income is the interest income that is received by persons from all sources. The estimates of personal interest income consist of the estimates of both monetary interest and imputed interest. The State and local area estimates of personal interest income are combined with the estimates of personal dividend income and the estimates of rental income of persons.

Personal tax and nontax payments—Personal tax and nontax payments consists of the 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 and that are treated like taxes.

Personal taxes includes taxes on income, including realized net capital gains, on gifts and transfers of estates, and on personal property. (1) Nontaxes includes donations, fees, fines, and forfeitures.

The estimates of tax and nontax payments are used in the derivation of disposable personal income, which is calculated as personal income less personal and nontax tax payments.

1. Personal tax payments excludes payments of both real estate taxes and sales taxes. Real estate taxes are excluded because they are considered business expenses that are deducted from both gross monetary rental income and gross imputed rental income in order to obtain net rental income. Sales taxes on purchases by persons are included in personal consumption expenditures.

Persons—Persons is defined as 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 the income in kind) of sole proprietorships and partnerships and of tax-exempt cooperatives. It consists of nonfarm proprietors' income and farm proprietors' income.

Proprietors' income includes the imputed net rental income of the owner-occupants of farm dwellings, but it excludes both the imputed rental income of the owner-occupants of nonfarm dwellings and the monetary rental income that is received by persons who are not primarily engaged in the real estate business. It also excludes the dividends and the monetary interest that are received by proprietors of nonfinancial businesses. See also Capital consumption adjustment and Inventory valuation adjustment.

Quasi-individuals—See Persons.

Region—See Geographic units.

Rental income of persons with capital consumption adjustment—This component of personal income consists of the net current-production income of persons from the rental of real property; the imputed net rental income of the owner-occupants of nonfarm dwellings; and the royalties received by persons from patents, copyrights, and the rights to natural resources. It excludes the rental income of persons who are primarily engaged in the real estate business and the imputed net rental income of owner-occupied farm dwellings. See also Capital consumption adjustment.

The State and local area estimates of the rental income of persons are combined with the estimates of personal dividend income and the estimates of personal interest income.

Residence adjustment—Personal income is, by definition, a measure of the income that is received by persons; the State and county estimates of personal income are presented by the State and county of residence of the income recipients.

However, the initial estimates of 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, because these estimates are prepared from source data that are reported and recorded by the place of work of the recipients rather than by their place of residence. Consequently, these initial estimates are adjusted so that they will be on a place-of-residence basis and so that the income of the recipients whose place of residence differs from their place of work will be correctly assigned to their country, State, and county of residence. (2)

2. The estimates of the components that are derived from the place-of-work data are presented both by place of work and by place of residence.

See also the section "Residence Adjustment."

Residence, place of—The place of residence of individuals is the State and county in which they live. The place of residence of quasi-individuals is not defined; their income is measured according to the State and county of the residence of the individuals who benefit from the activities of the quasi-individuals or on whose behalf the income is received.

Consequently, 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. However, the residence of foreign citizens who live in the United States and who work for international organizations and foreign embassies and consulates in the United States is the country of which they are citizens.

These definitions of residence differ from some of those used 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 census is taken. See also Personal income, Persons, and Residence adjustment.

Sole proprietorship—A sole proprietorship is an unincorporated business owned by a person. See also Legal form of organization.

Standard Industrial Classification (SIC)—The SIC that is published in the Standard Industrial Classification Manual by the Office of Management and Budget is used in the presentation of the State and local area estimates of earnings by industry. It is only used for the estimates for the private sector, 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. (3) Industries are classified in the following four levels: The division or one-digit level, such as manufacturing; the major-group or two-digit level, such as food and kindred products; the industry-group or three-digit level, such as meat products; and the industry or four-digit level, such as meat packing plants.

3. An establishment is an economic unit, usually at one location, that conducts business, provides services, or performs industrial operations.

The estimates of earnings are presented at the division and two-digit levels.

State—See Geographic units.

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, their income is classified as part of proprietors' income. See also Legal form of organization.

Transfer payments—This component of personal income measures the payments to persons for which no current services have been performed. It consists of payments to individuals and to nonprofit institutions by Federal, State, and local governments and by businesses.

Wage and salary disbursements—This component of personal income measures the remuneration of employees; it includes the compensation of corporate officers; commissions, tips, and bonuses; voluntary employee contributions to certain deferred compensation plans, such as 401(k) plans; and receipts in kind, or pay-in-kind, that represent income to the recipient. 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, Labor earnings, and Pay-in-kind.