Does labor income include tips?
Am I wrong in thinking labor income only includes tips for self-employed people? By definition, employee compensation is the total payroll cost of the employee *paid by the employer* (i.e. not tips). However, proprietor income consists of payments received by self-employed individuals and unincorporated business owners, so I think that these “payments” could include tips (since they have to be reported). Is this logic correct?
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Your thoughts are certainly logical but, theoretically, the BEA output data we use for the restaurant sector (and presumably other sectors that typically involve tips) include tips - the tips are part of the "benefits" received by the workers. As a former restaurant employee I can attest that we had to report our tips each night. This of course depends on how accurately the workers report their tips. In terms of setting up an impact, you will want to include the tips as a part of Employee Compensation too, since you will want to capture the induced effects of these tips (the workers spending the tips).0
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