USING THE P90/P10 INDEX TO MEASURE U.S. INEQUALITY TRENDS WITH CURRENT POPULATION SURVEY DATA: A VIEW FROM INSIDE THE CENSUS BUREAU VAULTS

Abstract

The March Current Population Survey (CPS) is the primary data source for estimation of levels and trends in U.S. earnings and income inequality. However, time‐inconsistency problems related to top coding lead many CPS users to measure inequality via the ratio of the 90th to the 10th percentile (P90/P10) rather than by more traditional summary measures. With access to public use and restricted‐access internal CPS data, and by applying bounding methods, we show that using P90/P10 does not completely obviate time‐inconsistency problems, especially in capturing household income inequality trends. Using internal data, we create consistent cell mean values for all top‐coded public use values that, when used with public use data, closely track inequality trends in earnings and household income using internal data. But estimates of longer‐term inequality trends with these corrected data based on P90/P10 differ from those based on the Gini coefficient. The choice of inequality measure still matters.