Monday, December 21, 2015

Trouble With the Redesigned CPS

Not everyone is happy with the redesigned Current Population Survey. An Employee Benefit Research Institute report questions some of the new numbers emerging from the redesign.

First, some background. The Census Bureau redesigned the Current Population Survey's income questions to better capture retirement income. The new income questions were presented to a split CPS sample in 2014 (collecting data for 2013) and to the full sample in 2015 (collecting data for 2014). The new questions successfully captured more retirement income, long known to be underreported. But anomalies are emerging in other CPS data. In particular, EBRI is troubled by a drop in retirement plan participation. Among full-time workers aged 21 to 64 in 2013, the percentage who participated in a retirement plan was only 49.5 percent based on the new questions versus 53.0 percent based on the old questions. In 2014 (when the entire CPS panel was asked the new questions), participation fell to 46.6 percent. The redesigned CPS is not only showing lower participation, says EBRI, but also declining participation—a larger decline than ever recorded in CPS data going back to 1987.

What really bugs EBRI is this: the biggest decline is occurring in the segment most likely to participate in a retirement plan—full-time workers aged 21 to 64 with earnings of $75,000 or more. The 2013 new questions found their participation to be 63.4 percent versus 68.6 percent with the old questions. In 2014, their participation declined to 61.1 percent. These declines are questionable, says EBRI, because other surveys show rising retirement plan participation.

"While the redesign of the CPS questionnaire achieved one of its primary goals of capturing more income—especially pension income—it appears to have had a serious impact on the results of other variables within the survey," EBRI researcher Craig Copeland concludes. In the future, he says, researchers may have to turn to alternative sources—such as the National Compensation Survey—to accurately track retirement plan participation.

Source: Employee Benefit Research Institute, The Effect of the Current Population Survey Redesign on Retirement-Plan Participation Estimates

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