Understanding Labor Income (LI), Employee Compensation (EC), and Proprietor Income (PI)


Labor Income is the sum of Employee Compensation (wages and benefits) and Proprietor Income. Labor Income represents the total value of all forms of employment income paid throughout a defined economy during a specified period of time. It reflects the combined cost of total payroll paid to employees (e.g. wages and salaries, benefits, payroll taxes) and payments received by self-employed individuals and/or unincorporated business owners across the defined economy.




Labor Income consists of two parts. The first, Employee Compensation, is the total payroll cost of wage and salary employees to the employer. This includes wages and salaries, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment insurance taxes, etc.). It is also referred to as fully-loaded payroll.

The second piece of Labor Income is Proprietor Income (PI). PI consists of payments received by self-employed individuals and unincorporated business owners. More specifically, it represents the current-production income of sole proprietorships, partnerships, and tax-exempt cooperatives. It includes the capital consumption allowance and is recorded on Federal Tax form 1040C. It excludes dividends, monetary interest received by nonfinancial business, and rental income received by persons not primarily engaged in the real estate business. Note that Labor Income can be negative if there is a net loss to the proprietor.

Note that IMPLAN’s estimated Employee Compensation and Proprietor Income fields represent the average payroll values for all employees that work in a firm, across all Industries that report in the Study Area’s region.

Labor Income generates Induced Effects via the spending by local residents that are employed by the direct business or businesses. The local residents employed by the Indirect businesses also generate Induced Effects due to their spending. If no Labor Income is entered into the Event, IMPLAN will calculate it by the ratio of the Industry’s Labor Income to Output. Note, if Labor Income information is entered in your Event in addition to Output, IMPLAN will not re-balance Output.


Labor Income can be found in IMPLAN in Region Details in the Study Area Data tab. Within the Industry Detail table you will find the two forms of Labor Income, Employee Compensation and Proprietor Income, by Industry. Within the Industry Summary table you will find Labor Income as a total and Labor Income per Worker by Industry. 



The REGIONS screen offers a massive assortment of data points in Region Details . Details on the two pieces of Labor Income (EC and PI) can be found by clicking

  > Study Area Data

          > Industry Detail





On the Impacts screen, you can model Employee Compensation and Proprietor Income by Industry. If you don't know which Industry the income will be in, you can model a Labor Income Event. The article Types of Events can help you choose which one is best for your analysis.




The Summary Results Overview will display Labor Income by Direct, Indirect, and Induced Effects. To dig further into the details, navigate to the Value Added tab. Here you will find all of the details for the four pieces of VA which include Employee Compensation and Proprietor Income.




While Labor Income represents the total value of all employment income paid throughout an economy, Proprietor Income and Employee Compensation help us delineate between types of income more precisely. Specifically, Proprietor Income represents the value of payments received by any self-employed individuals and/or unincorporated business owners, and Employee Compensation represents the fully-loaded value of all payroll paid to any employees. So, Labor Income (LI) values represent the collective cost of both Proprietor Income and Employee Compensation. 

Labor Income contains two pieces:


And those two pieces are part of Output:





Understanding Types of Income

Why is Personal Income for My Region so High?

Income Data


Updated February 26, 2020

Was this article helpful?
0 out of 0 found this helpful