PSLmodels
Correct CPS for people with reported work hours but no earnings
This was suggested at a forum I presented a paper at this week, per Meyer (2019), who does it the following way:
Among those still in extreme poverty after incorporating in-kind transfers, we calculate lower-bound earnings based on survey reports of hours worked for pay, under the assumption that workers earn at least the federal minimum wage ($7.25/hour). We then remove households from extreme poverty if the earnings resulting from this correction for missing dollars exceed $2/person/day.23 We first identify the households removed by lower-bound earnings using only reported wage and salary hours. Subsequently, we identify households removed by lower-bound earnings for reported hours worked in self-employment jobs as well. One might worry that this algorithm applies less well to off-the-books and/or self-employment jobs where the federal minimum wage does not apply. As a robustness check, we apply half the federal minimum wage to hours worked for pay, which leaves our final result unchanged. The vast majority of individua ls removed by these corrections report a full set of employment characteristics but zero earnings, and they work in occupations typically paid above the minimum wage. This finding suggests that the zero earnings, rather than the positive hours worked (most of which are not imputed), areanomalous and thus recorded incorrectly.24 The appendix provides a thorough discussion of how we calculate these lower-bound earnings and the occupations associated with households removed by these corrections.
