By Kari Williams & Isabel Pastoor
Researchers working with variables that report income must account for the changing value of a dollar across time. IPUMS USA, and other IPUMS data collections, include resources that streamline the process of adjusting monetary variables into constant dollars to facilitate comparison. These tools are very useful for researchers who are initiating research projects and exclusively using IPUMS data; however, these tools can make it difficult to directly compare, for example, IPUMS and the original U.S. Census Bureau versions of public use microdata sample (PUMS) data. This blog post provides an overview of how the Census Bureau reports income values in the American Community Survey (ACS) PUMS data, the adjustment factors provided by the Census Bureau, and how those map onto variables and ACS microdata extracts from IPUMS USA.
Want to skip the gory details? The key points are summarized in the next paragraph and in Table 1.
TL;DR
The Census Bureau does not automatically adjust for inflation in the PUMS files. They provide an adjustment factor, available as the variable ADJINC in the original Census Bureau PUMS files, that users can apply manually. This adjustment factor is intended to account for the differential reference period of respondents based on the rolling sample design of the ACS and, in multi-year files, to account for inflation across the five-year (or three-year) period. In contrast, IPUMS USA does automatically adjust for inflation across multi-year periods. However, IPUMS does not automatically apply or recommend using the within-year reference period adjustment because it does not adequately account for the differences in reference periods between respondents within a single year of the ACS. Users who wish to apply this adjustment can use the IPUMS USA variable ADJUST, which provides the within-year adjustment factor only (i.e., it does not include the multi-year inflation adjustment as that is automatically applied by IPUMS to multi-year ACS PUMS samples).
Table 1: Comparing U.S. Census Bureau and IPUMS USA Adjustment of Income Variables, 1-Year and 5-Year ACS PUMS
| Census Bureau | IPUMS | |
|---|---|---|
| Inflation Across Years | 1-Year: N/A | 1-Year: N/A |
| 5-Year: Apply manually, included in ADJINC variable | 5-Year: Applied automatically | |
| Within-Year Reference Period Adjustment | 1-Year: Apply manually, entirety of ADJINC variable | 1-Year: Not recommended; apply manually using ADJUST variable |
| 5-Year: Apply manually, included in ADJINC variable | 5-Year: Not recommended; apply manually using ADJUST variable |
ACS PUMS Files
The ACS is conducted on a rolling basis throughout the year. Income questions have a reference period of the previous 12 months. The public use versions of the PUMS files released by the Census Bureau do not include a variable that reports the month of the survey. Each year, the Census Bureau releases both a 1-Year ACS file, a sub-sample of about two-thirds of those who responded to the ACS in a given year (e.g., 2024), as well as a 5-Year file, which combines five adjacent single-year ACS PUMS files into a single dataset1.
There are very few differences between the 1-Year and 5-Year ACS PUMS files other than the additional records and years represented in the 5-Year file. The Census Bureau adjusts the sampling weights to account for the pooling in the 5-Year files to produce accurate point estimates. In recent years, the Census Bureau generally applies the most recent vintage of codes for variables that use different coding schemes across the five-year period (e.g., occupation and industry, Public Use Microdata Area (PUMA) boundaries and codes)2. Notably, the Census Bureau does not directly adjust income variables for inflation in the multi-year PUMS files. IPUMS, however, does adjust multi-year ACS files to report dollar values in constant units adjusted to the final year of the file (e.g., 2024 dollars for the 2020-2024 ACS).
Census Bureau Income Adjustment Factor
Instead of automatically adjusting income variables for inflation, the Census Bureau provides an adjustment factor for users to apply manually. This variable is called ADJINC in the original ACS PUMS files. In the multi-year ACS files, the adjustment factor has two elements. The first is to adjust all dollar amounts for income variables to the final year of the file (e.g., 2024 dollars for the 2020-2024 ACS). The second element is intended to account for the variability in the reference period for the ACS given the rolling survey design. In the single-year ACS files, ADJINC consists only of the within-year reference period adjustment.
Within-Year Reference Period Adjustment
To understand the rationale for a reference period adjustment within each year of the ACS, consider two people who respond to the 2024 ACS in February and October, respectively. Both will be instructed to report income for the past 12 months; the first respondent will report their income for February 2023 through January 2024. The second respondent will report their income for October 2023-September 2024. Ideally, we would adjust each person’s income earned in calendar year 2023 differently than their income from calendar year 2024, or adjust their income for inflation based on the calendar year in which they earned the majority of their income.
However, we do not directly know the distribution of income across calendar years in the generic 12-month reference period. The ACS does not report monthly income, nor does it report the month in which the respondent completed the survey. Without such detail, it is not possible to make informed assumptions about income distribution across calendar years (e.g., assume constant earnings and divide them among calendar years based on month of survey). A month-specific adjustment factor could account for differences in reference periods without directly reporting monthly income or month of survey. Presumably this presents a disclosure risk – if not for individuals, then at least for the month of response; notably, the ACS is not intended to produce estimates for periods of less than 12 months.
The within-year reference period adjustment provided by the Census Bureau is a single, annual adjustment factor (ADJINC) for the ACS; it is an unweighted average of the twelve month-specific adjustment factors. However, a constant adjustment factor cannot adjust dollar amounts across the rolling reference period to calendar-year dollars. Dollars earned during the previous year (as for January respondents) need to be adjusted the most; dollars earned mostly during the current year (as for December respondents) are essentially in calendar-year dollars already and need to be adjusted only slightly.
IPUMS USA Income Adjustment Factor
As documented in our user note on income standardization, IPUMS researchers found that applying the within-year reference period adjustment factor does not meaningfully affect estimates. IPUMS does not automatically apply the within-year adjustment factor for the reference period in either the single-year ACS files or when adjusting the multi-year files to report monetary values in constant dollars for the final year of the file. Users interested in applying the within-year adjustment factor should include the IPUMS USA variable ADJUST in their extracts and can apply it manually.
Note that to ensure that IPUMS users who apply the within-year adjustment when working with multi-year files from IPUMS (which have already been adjusted for multi-year inflation) are not double-adjusting their estimates, the IPUMS USA variable ADJUST reports only the within-year reference period adjustment of the ADJINC variable. The Census Bureau variable ADJINC and the IPUMS USA variable ADJUST are identical for single-year files, but not for multi-year files. Those applying ADJUST to multi-year files from IPUMS should get identical estimates to those applying ADJINC to multi-year files from Census, with minor exceptions for rounding.
Other Resources for Inflation Adjustment
For those who don’t need to compare the original PUMS data with IPUMS USA versions of the ACS, we recommend the Adjust Monetary Values Feature, which allows users to automatically add a new variable to their extract that adjusts dollar amount variables to 2010 dollars; read our working paper to learn more about the feature. IPUMS USA also offers the variable CPI99, which is a multiplier that will convert dollar figures to constant 1999 dollars (note that Adjust Monetary Values currently converts all dollar values to 2010 dollars), and a user note that describes how to use CPI99 to convert 1999 dollars to constant dollars for another base year.
Footnotes
1 The Census Bureau previously also offered 3-Year ACS files.
2 Note that some variables may adapt a coding scheme vintage (e.g., major changes to race assignments in 2020) but not apply it consistently to all years within the 5-year file – instead reporting the contemporaneous code from the original single-year file. It is more common for variables to use mixed vintages or contemporaneous coding schemes in earlier years of the ACS (e.g., occupation in the 2009-2013 ACS).