Presented at the Joint Statistical Meetings, Anaheim, California, August 1997.

1

SAMPLING FOR EMPLOYMENT AT NEW ESTABLISHMENTS IN A MONTHLY BUSINESS SURVEY

George Stamas1, Karen Goldenberg, Bureau of Labor Statistics; Kerry Levin, David Cantor, Westat

Karen L. Goldenberg, Bureau of Labor Statistics, 2 Massachusetts Ave. N.E., Room 4985, Washington, DC 20212

Key words: Sampling, Business Births, Establishment Survey

1. Introduction

The Current Employment Statistics (CES) Survey

is conducted monthly by the U.S. Bureau of Labor Statistics (BLS). This survey samples business establishments to produce estimates of employment, hours and

earnings, by industry, for the nation, states and metropolitan areas. The sampling frame for CES is a file

of administrative records from state unemployment

insurance (UI) programs. An updated file is available

about 9 months after the end of each calendar quarter.

Like any survey attempting to estimate characteristics of a current population, CES misses the contribution of new units that did not appear on that frame. In

the present context, this means that CES does not

reflect employment from newly-opened businesses.

New businesses have been estimated to contribute

between 1 and 4 percent of U.S. employment (Subcommittee, 1994), and their absence has been the subject of

critical review (e.g., American Statistical Association,

1994). The study described here considers the

possibility of incorporating employment from new

businesses into the CES by sampling from files of

newly-established UI accounts to identify new

businesses, or “business births,” and to obtain

employment data from them.

2. Births and birth frames

Defining births. The sampling unit for the CES

survey is an employer’s unemployment insurance (UI)

account. An important feature of the UI program is

that it functions separately within each state, and

according to the UI laws of that state. Employers open

accounts in each state where they operate business

establishments. Most states require employers to

register for an account within either 90 or 180 days of

becoming liable for UI taxes in that state, although

compliance with this requirement varies. While many

new UI accounts go to new businesses, employers also

obtain them for reasons such as changes in ownership,

mergers, acquisitions, name changes, and

incorporations.

There are at least two ways to define business

births. Following a strictly administrative definition,

any new UI account is a birth. Therefore, we could

create a frame of newly-issued UI accounts and select a

sample of those accounts to represent business births.

This approach would require that we treat any

employer in our sample with a change in UI account

numbers as a

business death. As noted above, however, not all new

accounts go to new businesses. Also, every death

resulting from a change in UI accounts requires sample

turnover and recruitment of replacement respondents,

with associated costs and response burden.

An alternative to the administrative definition is an

economic definition of business births. Using this

approach, a business birth is an establishment which

formerly had no chance of being selected into the CES

survey. The reason for the new UI account is the key

to whether or not an employer’s business is a birth,

because it determines the zero or nonzero probability of

prior selection. Accounts assigned to newlyestablished businesses had no prior probability of

selection, and so clearly are births, as are accounts

assigned to businesses hiring employees for the first

time. In general, continuing economic ventures (such

as ownership changes or corporate reorganizations)

receiving new UI accounts had a prior probability of

selection into CES, and are not business births. The

exception is partial acquisitions of businesses. The

portion of the business that remains in operation under

the old ownership is not a birth, but that business will

show a loss of employment as a result of the sale.

Therefore the acquired portion, under a new account,

must be treated as a birth.

Because of the costs and sample turnover associated

with treating all changed UI accounts as deaths, we felt

that the economic definition of births would serve us

better than the administrative one. The pilot study

reported here evaluates the feasibility of using the economic definition. This required that we interview

recipients of new UI accounts to determine the reason

for the new account. Because of the cost involved, we

proposed interviewing a sample of these employers.

Birth frames. CES is conducted for BLS by and

within the individual States. The CES sampling frame

is taken from each state’s Quarterly Unemployment

Insurance (QUI) program administrative files, a

compilation of employer Quarterly Contribution

Reports (QCR), i.e., unemployment insurance tax

reports. The files are due from the states to BLS in

Washington five months after the calendar quarter,
2

with additional time allowed for editing before

businesses in this file are available for sampling. As a

result, a business that opened in the first month of a

quarter and paid UI taxes for that quarter would not be

eligible for sampling for as much as nine months, at

which point it is no longer truly a “new” business. The

question we raised was whether similar data on new

employers was available in the state agency, and

accessible for sampling at an earlier time.

States identify new employers in several ways, any

of which result in the employer being issued a UI

account number. Every state requires a new employer

to submit a status determination form (SDF) and so to

register for UI as part of the procedure for becoming an

employer. A business may neglect this paperwork but

file the QCR and pay taxes at the end of the first

quarter in business. A previously-unknown employer

may come to the attention of the state agency because a

laid-off employee filed a UI claim. Regardless of how

the state learns about them, the state eventually records

all new employers, along with all other UI-liable

employers, on its Employer Master Information (EMI)

file.

BLS staff conducted a series of discussions with

state UI program staffs to identify other data sources.

The EMI appeared to be the earliest source of machine

readable data on new UI accounts (Subcommittee,

1994). This file includes a record for every employer

issued a new UI account for any reason, and seemed to

provide a suitable frame for business births. However,

there is one important difference between this births

frame and the CES sampling frame. The births frame

includes employers that are expected to file QCRs but

might not ever be legally required to do so, while the

CES sampling frame consists only of employers that

have UI liability and so have filed QCRs.

Incorporating employment information into CES:

The primary reason for studying business births is to

measure their employment and to include that employment in the CES estimates. For birth units, our plan

was to add the weighted employment (selection weight

times reported employment) to the total employment.

We anticipated enrolling those units for monthly

participation in the CES survey until they (and the

units that they represented) had an opportunity to be

selected from the ongoing frame. For various reasons,

this phase of the research was never implemented.

3. The Business Births Pilot Study

The primary purpose of the Business Birth Pilot

Study (BBPS) study was to determine whether we

could effectively separate employers with new UI

accounts into economic births and continuing

economic units by means of a short telephone computer

assisted telephone interview (CATI). We learned

during the initial development of the questionnaire that

concepts associated with defining business births were

complex, even for the researchers defining them. As a

result, we invested considerable effort into

questionnaire design, to ensure that respondents could

provide information about their reasons for new UI

accounts. We began with cognitive interviews with

employers who were issued new UI accounts; these

resulted in a series of concept and questionnaire

revisions (Goldenberg, 1996). Because the survey was

to be conducted over the telephone, we then tested the

questionnaire in a telephone environment.2 We

conducted three rounds of telephone pretests with

employers from the birth frames, refining the

questionnaire after each round (Goldenberg et al.,

1997). Once the questionnaire was operational in

CATI mode, some interviews were tape recorded and

subjected to behavior coding, leading to still other

changes in questions and procedures (Levin et al,

1996).

Frame construction and sampling. Because of the

variations in practice across states, we wanted to

receive frames from, and select samples across, as

many states as possible. Seven states provided usable

frames in time for the pilot survey. We sampled 250 UI

accounts the first month and 500 UI accounts in each

subsequent month. We took samples from 3 to 5 states

per month. We stratified the frames by state and

employment size, where one size class was unreported

employment or fewer than 50 employees and the other

size class was 50 or more. We randomly selected

sample cases within each stratum.

Interviewing. We conducted interviews on current

samples monthly from July through November, 1996,

incorporating the experience of the previous month

into the next field period. Initially, the data collection

periods were one week. Because of the high noncontact

rates, we extended the field period to two weeks, and

added weekend and evening calls, in order to reach

representatives of small businesses who were difficult

to contact.

Data collection consisted of two phases of interviewing: telephone screening and regular interviews.

During telephone screening, interviewers attempted to

reach each selected sample unit, verified that the unit

was in fact the sampled business, and identified the

appropriate respondent for the pilot study (the person

responsible for payroll activities). The interviewer also

asked whether the establishment had a fax machine,

and if so, obtained the fax number. As a result of the

screening process, units that were out of business or
3

otherwise out of scope (e.g., hired domestic worker)

were not contacted for the regular interview.

Over the 5 months, interviewers successfully

reached and identified as eligible 1756 of 2248 cases.

They were unable to locate 270 sample cases (12 percent) through contacts with the listed telephone numbers, calls to directory assistance, and other sources.

Most of the "non-locatable" cases are probably not

active businesses, but we had no way to verify this.

Following screening, we faxed or mailed a letter

describing the survey to the designated respondent.

Interviewers began conducting telephone interviews

with designated respondents within a week. 3

Response. Response based on all eligible units

identified during screening was 69 percent. Assuming

that 90 percent of the non-locatable units and no

answer units are really out of business, this rate rises to

86 percent. Eight-five percent of the successfully

screened units completed the interview during the fivemonth period. Increasing the field period from one to

two weeks made a big difference. The number of

noncontacts because respondents were not available

during the field period or did not answer the phone

dropped from about 12 percent in July to 2 to 5 percent

in the remaining months of the survey. Refusals were

low, about 4 percent overall. Telephone screening was

effective in identifying the correct respondent, as 92

percent of the respondents in the regular interviews

were the people identified during screening

(Goldenberg et al., 1997).

4. Estimates of population characteristics

Classification. Over the months from August to

November, 73.5 percent of the cases were clearly

identifiable as business births. These percentages

range from a low of 65.8 in August to a high of 76.4 in

October. The data are based on a different combination

of states each month.

Among the units classified as births, more than half

were new businesses. Another 25 to 31 percent were

businesses that hired employees for the first time, and

so became liable for taxes under UI laws. All other

reasons accounted for 18 to 22 percent of births.

Birth dates. The onset of liability for UI taxes

differs from state to state. Some states hold the

employer liable when the first dollar has been paid in

wages, while others defer liability until the federal

minimum standard has been met ($1,500 paid during a

calendar quarter). Based on this requirement, it seems

reasonable to expect that most of the cases on the

sample files have been in business for a relatively short

time. In fact, it appears that about half of the units

filed by the end of the sixth month. At the time of the

interview, just over a fourth (26 percent) of the new

businesses with employees had had those employees for

6 months or less. Another 10 percent each had

employees for 7 or 8 months, with the median falling

at the ninth month. Factoring in both the time for the

states to transmit files to BLS and for BLS to process

those files and select a sample, the 9 month median is

probably just over 6 months of actual calendar time

since onset of employment.4

On the other hand, it appears that there is a fair

amount of noncompliance with state procedures, and as

a result the states do not learn about many births as

promptly as they should. Fewer than three-fourths of

the employers in the sample files appeared on the EMI

within a year of hiring employees, where we would

have expected to see nearly all of them. An additional

fourth of respondents' businesses were from 1 to 2

years old, while 3 percent had been employers more

than two years prior to the date of the pilot survey.

Apparently, even the EMI files miss a lot of business

births.

5. Quality and timeliness of the birth frames

We have several dimensions on which to assess the

quality of our birth frames apart from the pilot study.

These include coverage of births, completeness of the

information on the files, and timeliness—whether

records on the birth frames reach us earlier than they

would through normal CES procedures.

Coverage. We compared the month the businesses

appeared on the birth frames with the initial

appearance of those units on the CES sampling frame.

From what we learned in the pilot test, more than half

of the birth units from the July, August, and September

files were in operation during the first quarter of the

year, and so should appear on the CES frame for the

first quarter. However, only 20 percent of them do so.

Fifty-seven percent are present by the second quarter

CES frame. Equally important, about 30 percent of the

births on the CES frame for the states in question do

not appear on the birth files for those states. This

provides further evidence that EMI coverage is

incomplete, again raising questions about its value as a

sampling frame.

Completeness. Important data elements on the birth

frames include company name, address, telephone,

industry, and employment. As of April 1997, 45 states

had transmitted at least one birth frame to BLS. A

review of these files shows that name and address

information are nearly complete. CES increasingly

uses the telephone to enroll new sample units, and 73

percent of the records received had a phone number.
4

However, 8 states provided files without phone

numbers.

The primary purpose of the CES is to produce

employment data by industry, which means accurate

industry codes are essential. In addition, both industry

and employment are used in CES sampling. Overall,

63 percent of the records had a useable industry code

assigned. Industry codes were missing completely

from 3 states’ files, and 4 states coded fewer than 25

percent of the records. In terms of reported

employment, 10 of the states did not report

employment or reported it as zero. Another 5 states

reported employment of 1 unless the employer

indicated otherwise. Because of the importance of

industry and employment in CES, these shortcomings

again suggest serious limitations in using EMI files as

a sampling frame.

Another important data element is a predecessor

code. In continuing economic units, this is a

designation that links the unit to another, now

discontinued, UI account. Predecessor codes are

assigned to some but not all continuing economic

units, with rules for supplying them based on state

legal standards.

Thirteen percent of the birth file records showed

some predecessor codes. However, 8 states reported no

predecessors. This could be because they had not determined predecessor status at the time they sent the files,

or because the states had eliminated records with

predecessor codes despite our request to include them.

Sample interviews and the birth frames. The

screening and pilot study interviews also offer insights

into the quality of the birth frames. Do they represent

active businesses? Over the course of the pilot study,

we found 3 percent of the contacted sample units were

out of business. Another 3 percent did not answer the

phone or had a non-working phone. A smaller fraction

were out of scope. Interviewers were unable to locate

12 percent of the sampled businesses using information

provided on the files, even with the help of directory

assistance. Since businesses generally need to be

accessible in order to remain viable, it seems likely that

most of these non-locatable cases are not active firms.

Of the cases still operating and eligible for the

screening instrument, between 15 and 20 percent of the

telephone numbers were no longer or had never been

associated with the sample establishment. Ninety-nine

percent of sample cases had business names supplied

on the files, but according to respondents only half of

those names were correct. Some names appear to have

been truncated. Also, BLS originally requested one of

two available names (legal or trade) and selected the

legal name for sample files if both were available. It is

possible that non-owner respondents are not familiar

with their employer’s legal name, and so reported that

the business’ correct name was incorrect. We

addressed this problem later by requesting both names

from all states. We were not able to determine whether

the names were correct in a fifth of the cases, including

non-locatable and noncontacted businesses.

As noted above, the number of records with

predecessor codes was small. There should be very few

predecessors among business births—and only for the

case of partial acquisitions. Over the duration of the

study, partial acquisitions ranged from 2.5 to 5.8

percent of business births, while the percentage of birth

units with predecessor codes ranged from 1.8 to 11.3.

Clearly, some birth units also had predecessor codes

assigned.

A review of the October births with predecessor

codes tells us more about the use of predecessor codes

and about births in general. We found that some firms

had UI accounts even though they are not liable for

taxes, a situation that we did not anticipate. Apparently

they reapplied for new accounts when they became

liable. Two firms were spin-offs, a form of partial

acquisition. Others were involved in corporate restructuring, which could also be viewed as partial acquisitions, although the questionnaire did not treat them

that way. There were four cases that were classified as

new businesses with no other explanation of why they

might have a predecessor code. We believe the

presence of predecessors may relate to the state

becoming aware of the employer in more than one way

and so assigning more than one UI account. Then,

when a final determination is made on that business,

one of the accounts might be assigned as a predecessor.

Timeliness. An important consideration in

sampling for births in the manner proposed is whether

using the EMI files as a sampling frame improves on

coverage and especially on timeliness as compared to

relying on the CES sampling frame. As an example,

consider the birth frame files for new UI accounts

assigned in August. Some states transmitted these files

as early as the first week of September, but typically

the files were not available to BLS until later in the

month. Data from the August EMI files provided the

sample for October BBPS interviews. In September,

however, states were also sending BLS the first edition

of the first quarter 1996 Quarterly Unemployment

Insurance files, which becomes the CES sampling

frame. The QUI files could include any of those

employers that had established liability for January,

February, or March, or even earlier. We know that

more than half of the birth accounts on the August

birth frame had hired employees and established

liability prior to April, and so we would expect them to

appear on the CES sampling frame for first quarter.
5

The August birth frame also provides information on

some of the new employers liable for taxes after the

first quarter, as would all of the birth frames from

April though July. We also know that only a small

fraction of the August births are present on the August

birth frame; most will appear later. Regardless of

whether birth units appear on the sample frame,

however, their existence will be reflected in the

performance of the economy and in the UI benchmark

source for CES for August.

Another way to view the birth frames and the first

quarter CES frame is to consider what the January,

February and March birth frames might have added to

the CES frame, and when. We would expect half of the

birth accounts on these frames to also be on the CES

sampling frame for third quarter 1996, which was first

available in April 1997. Another quarter of the records

would appear three months later on the fourth quarter

CES frame. Birth frames offer a limited head start on

the CES sampling frame, but this is at a cost of quality

in the frame, and still leaves the survey in need of an

alternative method to determine a portion of

employment.

Overall, the pilot study identified several limitations of the EMI as a sampling frame for business

births. There are problems of completeness and especially of timing. Many of the new accounts go to

businesses that have had employees for months or even

years before coming to the state’s attention, and so are

not truly “births” at the time we find them. In

addition, our experience with predecessor codes

demonstrates that we cannot assume such codes serve

as an adequate indicator of the business as a continuing

economic unit. Finally, it is necessary to differentiate

between economic births and other changes in UI

accounts, because these data showed that over a quarter

of new UI accounts went to continuing economic units.

6. Comparing the birth frames with additions to

the CES sampling frame

We compared birth frames for April, May and June

1996 to the UI records that make up the second quarter

and first quarter 1996 sampling frame. Eighty-six

percent of the records matched second quarter 1996 UI

files. These records matched on many key characteristics: 74 percent on industry code; 71 percent on UI

liability date; 91 percent on ownership; 53 percent

exact match on name; 81 percent of records with

predecessor UI accounts matched; and 38 percent on

employment. (These matches exclude cases with

missing values on the birth frames.) Match rates may

appear low but the birth frames are often incomplete,

whereas the UI records from the sampling frame are

based on tax reports and have benefitted from

additional research required to correctly establish most

of these data.

Comparing the birth frame records to longitudinal

records from the QUI, we find 54 percent of the second

quarter birth frame records can be found in the first

quarter of 1996 and another 25 percent in the second

through fourth quarter of 1995. These administrative

files indicate that births occurred months earlier than

our birth frames suggest. There are several reasons for

this. First, not all records on the birth frames are

economic births. The BBPS showed that as many as a

third of the records are continuing enterprises.

Second, as the survey results demonstrate, employers

register with their states, on average, about 6 to 7

months after starting their businesses. The files that

constitute the CES sample frame are not closed until 6

to 9 months following the reference month of the birth

frames, allowing the states to add these birth records

and their employment to earlier reference months. The

birth frames tell us the firms exist earlier than the CES

sampling frame can, but still do not tells us of the

births as they occur. As a result, sample based

estimates from the birth frame do not synchronize with

the CES sampling frame and the final historic CES

employment series. And, of course, there is the

possibility that the frames do not reflect all births.

If we take the CES sampling frame for first and

second quarter and match UI accounts, the unmatched

accounts could be defined as births. We cannot find

about 30 percent of these births when comparing these

accounts with the birth frames from April through

November of 1996. One might suppose that some of

these records would have been in birth frames that

were not collected for January through March of 1996

or even earlier. This still leaves the possibility that the

birth files are incomplete. To better understand the

coverage problems of these files we must continue

collecting them and compare them to CES sampling

frames. Communication with the states that compile

the files is also critical if we are to refine a process to

create a useful birth sampling frame.

7. Collection Costs

Costs of conducting an on-going survey of new UI

accounts can be separated into telephone costs for

prescreening and for the main interview, and personnel

costs for prescreening, interview preparation and conducting the main interview. There are additional fax

and postage charges for written prenotification about

the survey. There are also the costs of creating and

maintaining the birth frames and selecting samples.

By October, data collection had stabilized sufficiently for us to approximate costs in a production

environment. During this period, we made about 1255
6

phone calls for initial screening, with 57 percent of the

cases requiring only one call and another 18 percent

requiring 2 calls. On average, each of the 500

screened cases required 2.25 calls. Conducting the

main interview took another 1500 calls, averaging 4

calls to each of the 375 successfully screened sample

units. Each of the original 500 cases required an

average of 5.25 calls, or 8.5 calls for each of the 327

completed interviews. Assuming 5 minutes for each

completed screening interview, 7 minutes for each

completed main interview, and a 1 minute charge for

each of the other calls, at 10 cents a minute each of the

500 selected cases averaged $1.38 in phone charges.

Using the same assumptions, each of the completed

interviews averaged $2.10.

Staff time required to conduct the survey accounted

for a much larger part of the survey costs: 131 hours to

prescreen the 500 cases; 65 hours to prepare the 375

main interview cases; and 155 hours to conduct the

main interview. It took a total of 351 staff hours to

screen and collect data during the October field period.

Time required to close each of the 500 cases averaged

42 minutes. A completed sample interview (327) averaged 68 minutes, factoring in the cost of screening the

other 173 cases that did not result in completed interviews. At $35 per hour of staff time including benefits

and overhead for a mix of staff, costs run $25.88 per

selected case or $41.76 per completed interview including the telephone expense.

A recent quarterly update of the CES sample frame

from first quarter 1996 to second quarter 1996 yielded

65,000 new accounts each month. This figure is

smaller than the actual number of new UI accounts that

we would expect to see, because frame records are

linked to the extent possible. The average number of

new records per month from 45 states submitting birth

frames sums to 74,000. If we were to sample at a rate

of 1 in 40, the annual bill would come to a

conservatively estimated $434,000. This figure does

not include costs of on-going monthly collection for

those units identified as births. Nor does it include the

cost of states providing the frames, of BLS file

maintenance, or of sample selection. State design

simulations for CES have shown relative standard

errors in birth estimates selected at these rates range

from about 5 to 20 percent (BLS, 1997). Before setting

up an infrastructure around these frames, we will

investigate less costly alternatives to estimating birth

employment that could provide data that are equally

(or more) reliable.

8. Discussion

We began with a question about the feasibility of

using an economic definition and a short telephone

interview to identify business births. Pilot test results

show that, in fact, the procedure is feasible. Indeed,

the employer population seems receptive to BLS’s need

to collect data on new employers, demonstrated by an

overall 85 percent response rate. The BBPS also

provided us with a look at the cost of interviewing

employers to determine their status.

Assuming reasonable costs for conducting an

ongoing survey of new employers, will employment

data on new businesses be earlier, more complete, or

otherwise better than what we how have with the CES

sampling frame? We learned from the pilot test that

the answer is “probably not.” The birth frames offer

less of an early start in identifying births than we

anticipated. The quality issues of the frames add to

survey costs. Given the incomplete nature of the birth

frames and other problems associated with either

frame, both approaches require supplementing

employment estimates. This leaves the value of

collecting birth frames and sampling from them to

compute a birth employment estimate in doubt. As an

alternative, we are pursuing statistical modeling as a

less expensive and equally reliable solution to the

problem of obtaining employment from new

businesses.

The opinions expressed in this paper are those of the

authors and do not constitute official policy of the

Bureau of Labor Statistics.
7

ACKNOWLEDGMENTS

Thanks to Jurgen Kropf and Jon Schomaker for matching birth frames and birth sample files with the UI files

that define the CES sampling frame.

REFERENCES

American Statistical Association. 1994. A Research

Agenda to Guide and Improve the Current Employment Statistics Survey. Panel for the Bureau of

Labor Statistics; Current Employment Statistics

Survey.

Bureau of Labor Statistics, Statistical Methods Division. 1997.“Five Year Simulations of the Sample

Design” for various states. BLS internal reports,

January.

Goldenberg, K.. 1996. “Using Cognitive Testing in

the Design of a Business Survey Questionnaire.”

Proceedings of the Section on Survey Research

Methods. American Statistical Association.

Goldenberg, K., K. Levin, T. Hagerty, T. Shen, and D.

Cantor. 1997, forthcoming, “Procedures for reducing measurement errors in establishment surveys.”

Proceedings of the Section on Survey Research

Methods. American Statistical Association.

Levin, K., T. Shen, S. Heltemes, T. Hagerty, D.

Cantor, and K. Goldenberg. 1996. Business

Births: Initial Evaluation of CATI Survey. Report

submitted to the Bureau of Labor Statistics, August.

Rockville, MD: Westat. (Also other WESTAT

reports for each month of the Business Birth Pilot

Study.)

Subcommittee on Business Births and Deaths

Research. 1994. Report of the Subcommittee on

Business Births and Deaths Research. Bureau of

Labor Statistics, December.

NOTES

1

 Now with the Federal Aviation Administration.

2

 Westat conducted all telephone interviewing for this

survey under contract to BLS. All but the pretest

interviews were made using Westat’s in-house Computer Assisted Telephone Interview (CATI) system.

3

 See Goldenberg et al., 1997, for a more detailed

discussion of telephone screening and respondent contact procedures.

4

 As an example, the August files arrived at BLS by the

end of September. We produced a sample for data

collection early in October.