The Transformation of the American Pension System: Was It Beneficial for Workers?

Appendix A: Sources and Methods Used for the Survey of Consumer Finances Data

273 Appendix A Sources and Methods Used for the Survey of Consumer Finances Data CHOICE OF WEIGHTS In some years, the SCF supplied alternative sets of weights. For the 1983 SCF, I use the “Full Sample 1983 Composite Weights” because this set of weights provides the closest correspondence between the national balance sheet totals derived from the sample and those in the Federal Reserve Board Flow of Funds. For the same reason, results for the 1989 SCF are based on the average of SRC-Design-S1 series (X40131 in the database itself) and the SRC design-based weights (X40125). Results for the 2001 and 2007 SCF rely on the Designed-Base Weights (X42001)—partially design-based weights that are constructed on the basis of original selection probabilities and frame information and adjusted for nonresponse and that account for the systematic deviation from the CPS estimates of homeownership rates by racial and ethnic groups. ALIGNMENT WITH THE FLOW OF FUNDS DATA The Federal Reserve Board imputes information for missing items in the SCF. However, despite this procedure, there still remain discrepancies for several assets between the total balance sheet value computed from the survey sample and the Flow of Funds data. Because of this, the results presented in Table A.1 are based on my adjustments to the original asset and liability values in the surveys. This takes the form of the alignment of asset and liability totals from the survey data to the corresponding national balance sheet totals. In most cases, this entails a proportional adjustment of reported values of balance sheet items in the survey data (see Wolff [1987a, 1994, 1996, 1998] for details). The adjustment factors by asset type and year are as follows: No adjustments were made to other asset and debt components, or to the 2001 or 2007 SCF. It should be noted that the alignment has very little effect on the measurement of wealth inequality—both the Gini coefficient and the quantile shares. Wolff.indb 273 Wolff.indb 273 11/21/2011 9:19:47 AM 11/21/2011 9:19:47 AM 274 Wolff However, it is important to make these adjustments when comparing changes in mean wealth, both overall and by asset type. CHOICE OF PRICE INDEX I use the standard price deflator, the CPI-U, which the BLS has been computing since 1947, to deflate wealth values. The CPI-U has been criticized for overstating the rate of inflation. As a result, the BLS also provides an alternative consumer price series called the CPI-U-RS (the RS stands for research series). The CPI-U-RS series makes quality adjustments for housing units and consumer durables such as automobiles and personal computers and employs a geometric mean formula to account for consumer substitution within CPI item categories. As a result, the CPI-U-RS deflator is not subject to the same criticisms as the CPI-U series. Indeed, the CPS data are now normally deflated to constant dollars by the U.S. Census Bureau using the CPI-U-RS price index. While the CPI-U-RS deflator incorporates quality and other adjustments, the adjustments are made only from 1978 to the present. The CPI-U index is used for years prior to 1978. The CPI-U-RS shows a much slower rate of inflation after 1973 than the CPI-U: 288 versus 238 percent. If we use the CPI-U-RS deflator, then constant dollar median family income would show a 22 percent growth between 1973 and 2000, in comparison to the 6 percent growth rate on the basis of the CPI-U deflator. While the use of the CPI-U-RS will show a higher growth in real incomes (and wealth) since 1978, it is not clear that the degree of bias in the CPI has risen in recent years. If similar adjustments were made on the pre-1978 price data, it is possible that the inflation rate over the 1947–1978 period would be 1983 SCF 1989 SCF Checking accounts 1.68 Savings and time deposits 1.50 All deposits 1.37 Financial securities 1.20 Stocks and mutual funds 1.06 Trusts 1.66 Stocks and bonds Nonmortgage debt 1.16 Table A.1 Asset Adjustment Factors by Asset Type and Year NOTE: Blanks = not applicable. Wolff.indb 274 Wolff.indb 274 11/21/2011 9:19:48 AM 11/21/2011 9:19:48 AM Appendix...