Compensation and Working Conditions Summer 1997 32

workers, the NCS would significantly move toward the BEA

definition.

Feasibility testing

BLS conducted a feasibility test in

New Orleans in the summer of 1996

to gather various kinds of information on tip income and excluded

workers. First, it determined the

incidence, dollar amount, and

accuracy of data on tips. Second, it

tested for the incidence and types of

workers currently being excluded

from Bureau compensation surveys.

All data were collected by trained

BLS field economists, principally

through face-to-face interviews with

employees.4

Overall, 77 percent of the

establishments sampled for this test

provided data. (See table 1.) Those

establishments not providing data

included refusals (15 percent) and

those out of business at the time of

collection (6 percent). The remainder of the establishments did not

provide data for a variety of reasons;

and they each accounted for less

than 1 percent of the total. Similar

response rates were found in

A

s part of the Bureau of Labor

Statistics’ (BLS) goal to

 improve the accuracy and

relevancy of its data, the National

Compensation Survey (NCS) team

recently tested the feasibility of

collecting data on: (1) employee tips

and (2) certain types of workers who

were previously excluded from BLS

compensation surveys.1 Specifically,

this test was the first step in reconciling the data collected in BLS

compensation surveys2 with the

income data used by the Bureau of

Economic Affairs’ (BEA) National

Income Accounts.3 Bringing these

two sources of earnings data into

closer harmony will provide economists with superior tools for analyzing developments in the economy.

A key component of BEA’s

measures is income received from

labor. BEA defines labor income as

income for work, regardless of its

source, whereas the BLS compensation data are limited to income

provided by the employer. One way

to bring the two measures closer

together would be for BLS to expand

its current definition of compensation. By collecting data on tips and

earnings from currently excluded

Hilery Simpson is an economist in the Division

of Compensation Data Analysis and Planning,

Bureau of Labor Statistics. Telephone (202) 606-

6207.

Tips and Excluded

Workers: The New

Orleans Test

Testing of data collection for gratuity income in New Orleans found tips

averaging $6.65 per hour worked for all sampled occupations and

industries. In addition, testing on the incidence of owners and other

workers excluded from the Bureau’s compensation surveys discovered

that 43 percent of establishments had at least one excluded worker.

Whether accurate data can now be collected for these workers, and on

tips, requires additional testing.

BY HILERY SIMPSON
33 Compensation and Working Conditions Summer 1997

establishments where tipped

occupations were expected.

Tip data

Employees receiving tips were

surveyed in just over 6 percent of the

participating establishments in the

New Orleans NCS test. 5 The

following information on tips was

collected: (1) The number of tipped

workers sampled during probability

selection of occupations6; (2) the

dollar amount of tips collected; (3)

the source of the tip data; and (4) the

confidence the field economist

placed in the data collected.

Regular NCS collection procedures were applied in the test of

employees receiving tips. In each

establishment, a designated number

of occupations (4 to 20) were

sampled.7 Then the occupation of

each sampled employee was determined and wage data were collected

for all employees in that occupation.

Data on tips, if applicable to the

occupation, were also sought.

There are several caveats associated with the tip data presented in

this article. First, actual tip amounts

were collected from 11 establishments, a relatively small number

from which to draw significant

results. The expected high variances

mean the results in table 2 may not

accurately reflect actual average tips

for the New Orleans MSA. Second,

of the eight tipped occupations

sampled, only four meet publication

criteria.8 Data from the remaining

tipped occupations are grouped

together under the category “Occupations not meeting publication

criteria.” Finally, these data were

collected as part of a feasibility test.

Normally, data collected in a test

survey have higher levels of

nonsampling errors than data

collected as part of a regular survey

program. As such, the information

presented in this article should be

considered preliminary. It is

presented only to provide a general

indication of the incidence and

characteristics of workers who

receive tips and the income derived

from tips. Because of the limitations

noted above, the tabulations presented should not be considered as

representative of such workers or

payments in the New Orleans labor

market.

 Tipped employees were sampled

in just over 6 percent of surveyed

establishments. They were concentrated in three industries: Casinos,

restaurants, and bars. The other

industries having employees who

receive tips were hotels, automobile

parking, and local passenger

transportation, such as limousine

services. Even though beauty salons

and barber shops were in the

sample, no tipped employees were

selected in those establishments.

Other industries that have tipped

employees but were not sampled

include passenger railroad service

and deep sea passenger service

(cruise lines).

Tip income

Sixty-one percent of the establishments with sampled tipped employees provided data on the dollar

amount of tips. Forty-four percent

provided actual or reported tip data

while 17 percent provided estimated

tip data.9 However, almost 40

percent of the establishments with

sampled tipped occupations did not

provide tip data. They cited either

excessive respondent burden or poor

record keeping as reasons for not

supplying this information. Even

with this nonresponse, individual tip

data were collected for 488 workers.

Tips averaged $6.65 per hour

worked for all sampled occupations

and industries. (See table 2.)

Differences in the average hourly

tips were found among industries

and occupations. Tips were above

average in the local passenger transportation industry and casinos, while

below average in eating and drinking establishments and in hotels. As

expected, industries with high average tips tended to have occupations

with above average tips. For example, the highest average hourly

tipped occupation was limousine

driver, followed by casino game

dealer. Hourly tips for waitstaff

ranged from $1.38 to $15.89 (the

highest rate collected in New Orleans)

and averaged $6.10. The occupations

with the lowest average hourly tips

were hotel bellmen and banquet

servers. These comparisons were not

tested for statistical differences.

Table 1. Questionnaire response rates, New Orleans NCS test, 1996

Number of Percent of

questionnaires total

returned by questionnaires

status returned

All questionnaires ............................................................................................. 359 100

Useable ............................................................................................................. 276 77

Non-useable ...................................................................................................... 83 23

Refusal ........................................................................................................ 55 15

Out-of-business ........................................................................................... 21 6

Merged unit.................................................................................................. 2 (Less than 1)

Out-of-scope ............................................................................................... 2 (Less than 1)

No matching jobs......................................................................................... 1 (Less than 1)

Duplicate schedule ...................................................................................... 1 (Less than 1)

Partial data collected ................................................................................... 1 (Less than 1)

Status of returned questionnaires
 Compensation and Working Conditions Summer 1997 34

Data quality

As part of the test, field economists were asked to describe the

collected tip data and the related

hours worked information for the 11

establishments as either “good,”

“acceptable,” “fair,” “poor,” or

“unacceptable.” As expected, good

quality hours data were easier to

collect than good quality tip data.

Field economists reported just over

80 percent of the hours worked data

for tipped employees were “good,”

the highest rating available. (See

table 3.) However, just over half

reported actual tip data as “good”

and 36 percent indicated the

collected data were either “fair” or

“poor.” No “unacceptable” data

were reported in either category.

There are two issues that must be

considered when examining data on

tips, regardless of sample size. The

first is the accuracy of tip data

collected. Survey respondents

repeatedly indicated that the only

figures they could provide for certain

occupations were those reported by

their employees. Although illegal,

there is an inherent benefit in

underreporting tips, specifically, a

reduced tax burden. The second

issue is seasonality. New Orleans

respondents indicated tipped

employees often will under report

tips during the high tourist/convention season and over report tips

during slower periods.10 This is

done to smooth out seasonal income

fluctuations. (Areas without high

and low tourist seasons might not

have this problem.)

Excluded workers

Currently, the Employment Cost

Index excludes the following

workers from wage data collection:

• Owners and partners

• Individuals who set their own

wages 11

• Students employed by the

institution they attend

• Workers paid a token wage 12

These workers are excluded for a

variety of reasons. Owners and

partners, other individuals who set

their own pay, and workers who are

paid a token wage are excluded

because their pay rates are not

determined by the labor market.

Owners and certain partners are

additionally excluded due to the

difficulty in separating income that

is a return to labor from income that

is a return to capital. Students

employed by the institution they

attend are excluded because their

compensation often reflects financial

aid as well as remuneration for work

performed.

Regular NCS collection procedures were modified for this test. In

addition to the occupations sampled

for the regular survey, BLS field

economists obtained incidence

information on all workers who were

excluded from the regular survey.

Overall, the test survey found

1,170 workers in categories that are

excluded from survey wage data

collection. Forty-three percent of

useable establishments had at least

one excluded worker. Data on the

incidence and the number of

individuals excluded in each

category were collected. (Pay rates

Table 2. Occupational incidence, average hourly tip income, and industries with tipped employees, New Orleans NCS test, 1996

Percent

of total Average

tipped hourly

employees tip

sampled

 Total .............................................................................. 488 100 $6.65

Waitstaff ......................................................................... 152 31 6.10 Eating and drinking establishments

Busser (Busboy) ........................................................... 19 4 4.86 Eating establishments

Hostess .......................................................................... 15 3 5.73 Eating establishments

Bartender ....................................................................... 13 3 3.70 Eating and drinking establishments

Occupations not meeting publication criteria ................. 289 58 7.85 Amusement, passenger

transportation, and hotels

Occupation Industries with selected

occupation

Number

of

employees

sampled

Confidence in data collected Tip data Hours worked data

Good .................................................................................... 55 82

Acceptable ........................................................................... 9 9

Fair ....................................................................................... 9

Poor...................................................................................... 27 9

Unacceptable .......................................................................

(No responses)

(No responses) (No responses)

Table 3. Reported field economist confidence in data collected by percent, New Orleans NCS test, 1996
35 Compensation and Working Conditions Summer 1997

were not compiled.)

Owners were excluded from 36

percent of the participating establishments and accounted for 15

percent of all excluded individuals.

(See tables 4 and 5.) In contrast,

student workers employed in a

college or university establishment,

were found in only 3 percent of

establishments but accounted for

over three-fourths of all excluded

workers.

Owners, token wage earners, and

individuals who set their own wages

were concentrated primarily in

independent, small private establishments employing fewer than 100

workers. Few excluded workers

were found in large organizations

such as large general governments or

major corporations. Field economists found that token wage earners

and wage setters often were family

members. Volunteers and certain

religious workers also were found to

have token wages, while partners

and members of a Board of Directors

occasionally were found to be wage

setters.

Except for student workers, the

number of excluded workers tended

to be small in the establishments

studied. For example, 1.75 owners

were excluded, on average, for

establishments reporting at least one

owner. However, the average number

of excluded owners for all useable

establishments was .63 of an owner.

These data are illustrated in the

tables below. Table 6 shows the

average number of excluded workers

for establishments with excluded

workers and the average number of

workers for all establishments in the

test.

Conclusion

The purpose of the New Orleans

test was to determine if the collec1

 The data collected for this test were in conjunction with testing for the Bureau’s National

Compensation Survey, formerly COMP2000.

This new program will integrate three current surveys (Employment Cost Index, Employment Benefit Survey, and Occupational Compensation Survey program) into a single program combining all

BLS compensation data.

2

 Tips are currently excluded from wages in

the BLS’s principal compensation survey, the Employment Cost Index (ECI). The primary reason

for this is that tips are not a cost to the employer,

and as such, are outside the definition of employer

costs for employee compensation used in the ECI.

In addition, tips are excluded from the survey due

to past difficulties in collecting accurate data. Nevertheless, tip data are collected to calculate the

employer’s cost for certain benefits such as Social

Security.

3

 The BEA’s national income accounts provide a quantitative view of the production, distribution, and use of the Nation’s output—one of the

most widely known measures is gross domestic

product (GDP). BEA also prepares estimates of

the Nation’s tangible wealth and input-output

tables that show how industries interact.

4

 Bureau field economists are full-time professionals who are trained and certified in both specific survey requirements and data collection techniques. Only in the rare instances when an establishment agreed to provide data, but refused to

meet with a field economist face-to-face, was a

telephone interview completed.

5

 Not all participating establishments with

tipped workers in the New Orleans test provided

tip amounts.

tion of accurate data on tips were

possible and to measure the incidence of individuals excluded from

previous BLS surveys. The results

indicate that the collection of data on

tips may be feasible; however, the

data had a higher than expected

nonresponse rate while data quality

was not as high as regular survey

standards call for. Almost 40

percent of the sampled establishments having employees who receive

tips did not provide tip data. This,

coupled with suspect quality for over

a third of the data on tips, indicates

additional testing is required,

possibly in the form of a pilot survey,

before tips can be included in the

NCS as a regular data item. Additional testing would determine the

most appropriate methods of data

collection to increase the response

rates while also improving data

quality.

In addition, the New Orleans test

Number of

establishments Excluded worker type

Number of excluded

individuals

Excluded worker type

Excluded worker type

Average number of

excluded workers per

establishment

Average number of

excluded workers per

schedule with excluded

workers

Table 6. Average number of excluded workers, by type, for establishments reporting such workers and for all

useable establishments, New Orleans NCS test, 1996

Owners ...................................................................................... .63 1.75

Set own wages ........................................................................... .16 2.93

Token wage earners ................................................................... .13 2.92

Student workers ......................................................................... 3.32 101.78

Percentage of total

excluded totals

Table 5. Total number of individuals excluded, by type, all useable establishments, New Orleans NCS test, 1996

 Total ....................................................................................... 1,170 100

Owners ...................................................................................... 175 15

Set own wages ........................................................................... 44 4

Token wage earners ................................................................... 35 3

Student workers ......................................................................... 916 78

Percent of total

establishments

Table 4. Number and percentage of establishments with at least one excluded worker by type, New Orleans NCS

test, 1996

Owners ...................................................................................... 100 36

Set own wages ........................................................................... 15 5

Token wage earners ................................................................... 12 4

Student workers ......................................................................... 9 3
 Compensation and Working Conditions Summer 1997 36

—ENDNOTES—

1

 The data collected for this test were in conjunction with testing for the Bureau’s National

Compensation Survey, formerly COMP2000.

This new program will integrate three current surveys (Employment Cost Index, Employment Benefit Survey, and Occupational Compensation Survey) into a single program combining all BLS

compensation data.

2 Tips are currently excluded from wages in

BLS’s principal compensation survey, the Employment Cost Index (ECI). The primary reason for

this is that tips are not a cost to the employer, and

as such, are outside the definition of employer costs

for employee compensation used in the ECI. In

additions, tips are excluded from the survey due

to past difficulties in collecting accurate data. Nevertheless, tip data are collected to calculate the

employer’s cost for certain benefits such as Social

Security.

3 The BEA’s national income accounts provide a quantitative view of the production, distribution, and use of the Nation’s output—one of the

most widely known measures is gross domestic

product (GDP). BEA also prepares estimates of

the Nation’s tangible wealth and input-output

tables that show how industries interact.

4

 Bureau field economists are full-time professionals that are trained and certified in both

specific survey requirements and data collection

techniques. Only in the rare instance when an establishment agreed to provide data, but refused to

meet with a field economist face-to-face was a telephone interview completed.

5

 Not all participating establishments with

tipped workers in the New Orleans test provided

tip amounts.

6

 Probability selection of occupations is a statistical method used to randomly sample occupations in an establishment. It is done to reduce respondent burden and increase participation while

maintaining a high level of quality in the published

data.

7

 The number of occupations sampled varies

by the employment size of the establishment. Four

occupations are sampled in establishments with

fewer than 50 employees, 8 occupations between

50 and 99 employees, 10 between 100 and 249,

12 between 250 and 999, 16 between 1,000 and

2,499, and 20 occupations in establishments with

more than 2,500 employees.

gauged the incidence of currently

excluded workers. Whether accurate

wages can now be collected for

owners and other previously excluded workers will also need to betested further.

8

 Published wage data for a specific occupation must meet the following criteria: Sampled

from at least three establishments, a minimum of

six weighted workers, and no single establishment

can contribute more than 60 percent of those workers. The four occupations that met this criteria

are listed in table 2. All average tips per hour are

weighted.

9

 Actual tip data are from employers who pay

tips directly to the employees (for example, banquet worker in a hotel). Reported tip data are from

employer records (IRS, etc.) as reported by the

employee.

10

 Tip data for this test were collected during

July and August of 1996, generally considered a

slower tourist/convention period in New Orleans.

11 Examples of individuals who set their own

pay, but are not owners or partners, may include

officers in a corporation, members on a board of

directors, and family members.

12 A token wage is one that is significantly

below the expected average for that occupation.

Examples of token wage earners may include certain religious workers, volunteers, and family

members.