Introduction
While reading the local daily, “The Star”, my attention was caught by headlines discussing an ongoing political or social discussion on the country’s financial state. Often, it is interesting to know the underlying cause of a certain political debate or the factors contributing to an increase or decrease in inflation. “A large income is the best recipe for happiness I ever heard of” quotes the famous English novelist Jane Austen. Income is a primary concern that dictates the standard of living and economic status of an individual. Taking into account, its importance and impact on determining a nation’s growth, this study aims at presenting meaningful insights which can be used to serve as the basis for many wiser decisions that could be taken by the nation’s administrators.
This study is organized as follows;

Research question

The dataset

Making data management decisions
A. Exploratory Data Analysis (EDA)
 Data preprocessing (collapse the factor levels & recoding)
 Missing data visualization
 Some obvious relationships
 Some notsoobvious relationships
B. Correlation Detection & Treatment
 Detecting skewed variables
 Skewed variables treatment
 Correlation detection

Predictive data analytics
 Creating the train and test dataset
 Fit a Logistic Regression Model
 Fit a Decision Tree Model
 Fit a Support Vector Machine (SVM) classification model
 Fit a Random Forest (RF) classification model

Conclusion
1. Research question
This study is driven by the question, “Predict if a person’s income is above or below 50K$/yr given certain features(both quantitative and qualitative)..”
2. The dataset
The dataset used for the analysis is an extraction from the 1994 census data by Barry Becker and donated to the UCI Machine Learning repository. This dataset is popularly called the “Adult” data set.
3. Making data management decisions
With the research question in place and the data source identified, we begin the data storytelling journey. But wait, we first require to load the data,
# Import the data from a url
> theUrl<"http://archive.ics.uci.edu/ml/machinelearningdatabases/adult/adult.data"
> adult.data< read.table(file = theUrl, header = FALSE, sep = ",",
strip.white = TRUE, stringsAsFactors = TRUE,
col.names=c("age","workclass","fnlwgt","education","educationnum","maritalstatus", "occupation","relationship","race","sex","capitalgain","capitalloss", "hoursperweek","nativecountry","income")
)
> dim (adult.data)
> [1] 32561 15
A. Exploratory Data Analysis (EDA)
The function, col.names()
adds the usersupplied column names to the dataset. We also see 32,561
observations in 15
variables. As always, we look at the data structure,
Immediately, a few problems can be spotted. First, there are some categorical variables where the missing levels are coded as ?
; Second, there are more than 10 levels for some categorical variables.
 Data preprocessing (collapse the factor levels & recoding)
We begin by collapsing the factor levels to meaningful and relevant levels. We have also recoded the missing levels denoted in the original data as ?
to misLevel
.
> levels(adult.data$workclass)< c("misLevel","FedGov","LocGov","NeverWorked","Private","SelfEmpNotInc","SelfEmpInc","StateGov","NoPay")
> levels(adult.data$education)< list(presch=c("Preschool"), primary=c("1st4th","5th6th"),upperprim=c("7th8th"), highsch=c("9th","Assocacdm","Assocvoc","10th"),secndrysch=c("11th","12th"), graduate=c("Bachelors","Somecollege"),master=c("Masters"), phd=c("Doctorate"))
> levels(adult.data$maritalstatus)< list(divorce=c("Divorced","Separated"),married=c("MarriedAF spouse","Marriedcivspouse","Marriedspouseabsent"),notmarried=c("Nevermarried"),widowed=c("Widowed"))
> levels(adult.data$occupation)< list(misLevel=c("?"), clerical=c("Admclerical"), lowskillabr=c("Craftrepair","Handlerscleaners","Machineopinspct","Otherservice","Privhouse serv","Profspecialty","Protectiveserv"),highskillabr=c("Sales","Techsupport","Transportmoving","ArmedForces"),agricultr=c("Farmingfishing"))
> levels(adult.data$relationship)< list(husband=c("Husband"), wife=c("Wife"), outofamily=c("Notinfamily"),unmarried=c("Unmarried"), relative=c("Otherrelative"), ownchild=c("Ownchild"))
levels(adult.data$nativecountry)< list(misLevel=c("?","South"),SEAsia=c("Vietnam","Laos","Cambodia","Thailand"),Asia=c("China","India","HongKong","Iran","Philippines","Taiwan"),NorthAmerica=c("Canada","Cuba","DominicanRepublic","Guatemala","Haiti","Honduras","Jamaica","Mexico","Nicaragua","PuertoRico","ElSalvador","UnitedStates"), SouthAmerica=c("Ecuador","Peru","Columbia","Trinadad&Tobago"),Europe=c("France","Germany","Greece","HolandNetherlands","Italy","Hungary","Ireland","Poland","Portugal","Scotland","England","Yugoslavia"),PacificIslands=c("Japan","France"),Oceania=c("OutlyingUS(GuamUSVIetc)"))
Now, here is an interesting finding about this dataset. Although, the response (dependent) variable can be considered as binary but there are majority of predictors (independent) that are categorical with many levels.
According to Agresti [1], “Categorical variables have two primary types of scales. Variables having categories without a natural ordering are called nominal. Example, mode of transportation to work (automobile, bicycle, bus, subway, walk). For nominal variables, the order of listing the categories is irrelevant. The statistical analysis does not depend on that ordering. Many categorical variables do have ordered categories. Such variables are called ordinal. Examples are size of automobile (subcompact, compact, midsize, large). Ordinal variables have ordered categories, but distances between categories are unknown. Although a person categorized as moderate is more liberal than a person categorized as conservative, no numerical value describes how much more liberal that person is. An interval variable is one that does have numerical distances between any two values.”
“A variable’s measurement scale determines which statistical methods are
appropriate. In the measurement hierarchy, interval variables are highest,
ordinal variables are next, and nominal variables are lowest. Statistical
methods for variables of one type can also be used with variables at higher
levels but not at lower levels. For instance, statistical methods for nominal
variables can be used with ordinal variables by ignoring the ordering of
categories. Methods for ordinal variables cannot, however, be used with
nominal variables, since their categories have no meaningful ordering.”
“Nominal variables are qualitative, distinct categories differ in quality, not in quantity. Interval variables are quantitative, distinct levels have differing
amounts of the characteristic of interest.”
Therefore, we can say that all the categorical predictors in this study are nominal in nature. Also note that R will implicitly coerce the categorical variable with levels into numerical values so there is no need to explicitly do the coercion.
we check the data structure again and notice that predictors, education
,occupation
and native.country
have 11077, 4066 and 20
missing value respectively. We show this distribution in Fig1.
aggr_plot < aggr(adult.data, col=c('navyblue','red'), numbers=TRUE, sortVars=TRUE,
labels=names(adult.data), cex.axis=.7, gap=3,
ylab=c("Histogram of missing data","Pattern")
)
Fig1: Missing Data Visualization
Now, some scholars suggest that missing data imputation for categorical variables introduce bias in the data while others oppose it. From, an analytical perspective we will impute the missing data and will use the missForest
library. The reason why we are imputing is because some classification algorithms will fail if they are passed with data containing missing values.
# Missing data treatment
> library(missForest)
> imputdata< missForest(adult.data)
# check imputed values
> imputdata$ximp
# assign imputed values to a data frame
> adult.cmplt< imputdata$ximp
 Some obvious relationships
A majority of the working adults are between 25 to 65 years of age. From Fig2, we see that adults below 30 years earn <=50k a year while those above 43 years of age earn greater than fifty thousand dollars. This leads to the assumption that experience surely matters to earn more.
> boxplot (age ~ income, data = adult.cmplt,
main = "Age distribution for different income levels",
xlab = "Income Levels", ylab = "Age", col = "salmon")
Fig2: Boxplot for age and income
Evidently, those who invest more time at workplace tend to be earning more as depicted by Fig3.
It is also interesting to note in Fig5, that there are roughly 10% of people with doctorate degrees working in lowskilled jobs and earning greater than 50k/year.
> boxplot (hoursperweek ~ income, data = adult.cmplt,
main = "More work hours, more income",
xlab = "Income Levels", ylab = "Hours per week", col = "salmon")
Fig3: Boxplot for hours per week in office and income
 Some notsoobvious relationships
Question: Does higher skillset (sales, technicalsupport, transport movers, armed forces) is a guarantor to high income?
Answer: We explore this question by plotting occupation against income levels. As shown in Fig4, its evident that acquiring a high skill set does not guarantee increased income. The workers with a low skill set (craftrepair, maintenance services, cleaner, private house security) earn more as compared to those with higher skill set.
> qplot(income, data = adult.cmplt, fill = occupation) + facet_grid (. ~ occupation)
Fig4: Qplot for occupation and income
Question: Does higher education help earn more money?
Answer: We explore this question by plotting education against income levels. As shown in Fig5
> qplot(income, data = adult.cmplt, fill = education) + facet_grid (. ~ education)
Fig5: Qplot for education and income
From Fig5, we can easily make out that the number of graduates earning >50K are more than the high school or upperprimary school educated. However, we also notice that they are certainly higher in number when compared to master’s or phd degree holders. It makes sense because if for example, in a given academic session, there will be say 90% graduates, 30% masters, <10% phd degree holders. It is also unfortunate to know that there are roughly 10% of people (n=94) with doctorate degrees working in lowskilled jobs and earning less than 50k/year!
We further drill down in this low income group bracket, shown in Fig5, we realize that majority of them are white male married workers closely followed by the blacks and the AsiaPacific islanders.
> qplot(income, data = adult.cmplt, fill = relationship) + facet_grid (. ~ race)
Fig5: Qplot for race, relationship and income
 Detecting skewed variables
A variable is considered, highly skewed
if its absolute value is greater than 1. A variable is considered, moderately skewed
if its absolute value is greater than 0.5.
> skewedVars< NA
> library(moments) # for skewness()
> for(i in names(adult.cmplt)){
... if(is.numeric(adult.cmplt[,i])){
... if(i != "income"){
... # Enters this block if variable is noncategorical
... skewVal < skewness(adult.cmplt[,i])
... print(paste(i, skewVal, sep = ": "))
... if(abs(skewVal) > 0.5){
... skewedVars < c(skewedVars, i)
... }
... }
... }
... }
[1] "fnlwgt: 1.44691343514233"
[1] "capitalgain: 11.9532969981943"
[1] "capitalloss: 4.59441745643977"
[1] "age: 0.558717629239857"
[1] "educationnum: 0.311661509635468"
[1] "hoursperweek: 0.227632049774777"
We find that the predictors, fnlwgt
,capitalgain
and capitalloss
are highly skewed as their absolute value is greater than 0.5.
 Skewed variable treatment
Post identifying the skewed variables, we proceed to treating them by taking the log transformation. But, first we rearrange/reorder the columns for simplicity;
> adult.cmplt< adult.cmplt[c(3,11:12,1,5,13,2,4,6:10,14:15)]
> str(adult.cmplt)
'data.frame': 32561 obs. of 15 variables:
$ fnlwgt : num 77516 83311 215646 234721 338409 ...
$ capitalgain : num 2174 0 0 0 0 ...
$ capitalloss : num 0 0 0 0 0 0 0 0 0 0 ...
$ age : num 39 50 38 53 28 37 49 52 31 42 ...
$ educationnum : num 13 13 9 7 13 14 5 9 14 13 ...
$ hoursperweek : num 40 13 40 40 40 40 16 45 50 40 ...
$ workclass : Factor w/ 9 levels "misLevel","FedGov",..: 8 7 5 5 5 5 5 7 5 5 ...
$ education : Factor w/ 8 levels "presch","primary",..: 6 6 5 5 6 7 4 6 7 6 ...
$ maritalstatus: Factor w/ 4 levels "divorce","married",..: 3 2 1 2 2 2 2 2 3 2 ...
$ occupation : Factor w/ 5 levels "misLevel","clerical",..: 2 5 3 3 3 3 3 4 3 4 ...
$ relationship : Factor w/ 6 levels "husband","wife",..: 3 1 3 1 2 2 3 1 3 1 ...
$ race : Factor w/ 5 levels "AmerIndianEskimo",..: 5 5 5 3 3 5 3 5 5 5 ...
$ sex : Factor w/ 2 levels "Female","Male": 2 2 2 2 1 1 1 2 1 2 ...
$ nativecountry: Factor w/ 8 levels "misLevel","SEAsia",..: 4 4 4 4 4 4 4 4 4 4 ...
$ income : Factor w/ 2 levels "<=50K",">50K": 1 1 1 1 1 1 1 2 2 2 ...
We took a log transformation. Post skewed treatment, we notice that capitalgain
& capitalloss
have infinite values so we removed them from subsequent analysis.
> adult.cmplt.norm< adult.cmplt
> adult.cmplt.norm[,1:3]< log(adult.cmplt[1:3],2) # where 2 is log base 2
> adult.cmplt.norm$capitalgain< NULL
> adult.cmplt.norm$capitalloss<NULL
 Correlation detection
We now checked for variables with high correlations to each other. Correlation measures the relationship between two variables. When two variables are so highly correlated that they explain each other (to the point that one can predict the variable with the other), then we have collinearity (or multicollinearity) problem. Therefore, its is important to treat collinearity problem. Let us now check, if our data has this problem or not.
Again, it is important to note that correlation works only for continuous variables. We can calculate the correlations by using the cor()
as shown;
> correlat< cor(adult.cmplt.norm[c(1:4)])
> corrplot(correlat, method = "pie")
> highlyCor < colnames(adult.cmplt.num)[findCorrelation(correlat, cutoff = 0.7, verbose = TRUE)]
All correlations <= 0.7
> highlyCor # No high Correlations found
character(0)
Fig7: Correlation detection
From Fig7, its evident that none of the predictors are highly correlated to each other. We now proceed to building the prediction model.
###4. Predictive data analytics
In this section, we will discuss various approaches applied to model building, predictive power and their tradeoffs.
A. Creating the train and test dataset
We now divide the data into 75% training set and 25% testing set. We also created a root mean square evaluation function for model testing.
> ratio = sample(1:nrow(adult.cmplt), size = 0.25*nrow(adult.cmplt))
> test.data = adult.cmplt[ratio,] #Test dataset 25% of total
> train.data = adult.cmplt[ratio,] #Train dataset 75% of total
> dim(train.data)
[1] 24421 15
> dim(test.data)
[1] 8140 15
**B. Fit a Logistic Regression Model **
We fit a logistic regression model.
> glm.fit< glm(income~., family=binomial(link='logit'),data = train.data)
Warning message:
glm.fit: fitted probabilities numerically 0 or 1 occurred
This Warning: glm.fit: fitted probabilities numerically 0 or 1 occurred means that the data is possibly linearly separable. Let’s look at the summary for the model.
> summary(glm.fit)
Call:
glm(formula = income ~ ., family = binomial(link = "logit"),
data = train.data)
Deviance Residuals:
Min 1Q Median 3Q Max
5.2316 0.4639 0.1713 0.0311 3.4484
Coefficients: (1 not defined because of singularities)
Estimate Std. Error z value Pr(>z)
(Intercept) 27.1523662282 171.0342617549 0.159 0.873863
age 0.0274845471 0.0019376261 14.185 < 2e16 ***
workclassFedGov 0.4073987950 0.2085465221 1.954 0.050759 .
workclassLocGov 0.3070912295 0.1944447001 1.579 0.114262
workclassNeverWorked 10.5345275621 510.1141392772 0.021 0.983524
workclassPrivate 0.1374981405 0.1816628614 0.757 0.449118
workclassSelfEmpNotInc 0.1132407363 0.1995129601 0.568 0.570316
workclassSelfEmpInc 0.6270437314 0.1773500692 3.536 0.000407 ***
workclassStateGov 0.4387629630 0.2049449847 2.141 0.032284 *
workclassNoPay 13.9146466535 367.0432320049 0.038 0.969759
fnlwgt 0.0000004226 0.0000002029 2.083 0.037252 *
educationprimary 18.6369757615 171.0337793366 0.109 0.913229
educationupperprim 18.6015984474 171.0337199499 0.109 0.913393
educationhighsch 19.4272321191 171.0336543439 0.114 0.909565
educationsecndrysch 18.3381423049 171.0336420490 0.107 0.914615
educationgraduate 20.1855955674 171.0336647250 0.118 0.906051
educationmaster 20.6169432260 171.0337212540 0.121 0.904053
educationphd 20.8122445845 171.0338205358 0.122 0.903149
educationnum 0.1301601416 0.0134594027 9.671 < 2e16 ***
maritalstatusmarried 0.6518153342 0.1922871329 3.390 0.000699 ***
[ reached getOption("max.print")  omitted 26 rows ]

Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
(Dispersion parameter for binomial family taken to be 1)
Null deviance: 26907 on 24420 degrees of freedom
Residual deviance: 14892 on 24376 degrees of freedom
AIC: 14982
Number of Fisher Scoring iterations: 14
Its evident that the significant predictors are age
, workclassSelfEmpInc
,fnlwgt
,educationnum
and maritalstatusmarried
. As for the statistical significant variables, age
and educationnum
has the lowest p value suggesting a strong association with the response, income
.
The null deviance
shows how well the response is predicted by the model with nothing but an intercept. Deviance is a measure of goodness of fit of a generalized linear model. it’s a measure of badness of fit–higher numbers indicate worse fit. The residual deviance shows how well the response is predicted by the model when the predictors are included. From your example, it can be seen that the residual deviance decreases by 12115 (2700114886)
when 15 predictors
were added to it.(note: degrees of freedom = no. of observations – no. of predictors). This decrease in deviance is evidence of significant fit. If the deviance would have increased it would indicate a significant lack of fit. The AIC
is 14976
. The Akaike Information Criterion (AIC) provides a method for assessing the quality of your model through comparison of related models. It’s based on the Deviance, but penalizes you for making the model more complicated. Much like adjusted Rsquared, it’s intent is to prevent you from including irrelevant predictors. However, unlike adjusted Rsquared, the number itself is not meaningful. If you have more than one similar candidate models (where all of the variables of the simpler model occur in the more complex models), then you should select the model that has the smallest AIC. So AIC is useful for comparing models, but isn’t interpretable on its own.
We now create another logistic model that includes only the significant predictors.
> glm.fit1< glm(income ~ age + workclass + educationnum + fnlwgt + maritalstatus, family=binomial(link='logit'),data = train.data)
Now we can run the anova()
function on the improved model to analyze the table of deviance.
> anova(glm.fit, glm.fit1, test="Chisq")
Analysis of Deviance Table
Model 1: income ~ age + workclass + fnlwgt + education + educationnum +
maritalstatus + occupation + relationship + race + sex +
capitalgain + capitalloss + hoursperweek + nativecountry
Model 2: income ~ age + workclass + educationnum + fnlwgt + maritalstatus
Resid. Df Resid. Dev Df Deviance Pr(>Chi)
1 24376 14892
2 24406 18428 30 3536.1 < 2.2e16 ***

Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
By conducting the anova test, it performs the Chisquare test to compare glm.fit
and glm.fit1
(i.e. it tests whether reduction in the residual sum of squares are statistically significant or not). The test shows that, Model 2 is statistically significant as the p value is less than 0.05
. Therefore, the predictors, (age + workclass + educationnum + fnlwgt + maritalstatus)
are relevant for the model
. See this links for details, 1, 2 and 3.
We now test the logistic model on all predictors and make predictions on unseen data.
> set.seed(1234)
> glm.pred< predict(glm.fit, test.data, type = "response")
> hist(glm.pred, breaks=20)
> hist(glm.pred[test.data$income], col="red", breaks=20, add=TRUE)
> table(actual= test.data$income, predicted= glm.pred>0.5)
predicted
actual FALSE TRUE
<=50K 5674 482
>50K 678 1306
> (5674+1306)/8140
[1] 0.8574939
The classifier returns 86% accuracy when the model includes all predictors in it. Let us see, if the model accuracy increases with the inclusion of significant predictors only;
> set.seed(1234)
> glm.fit1< glm(income ~ age + workclass + educationnum + fnlwgt + maritalstatus, family=binomial(link='logit'),data = train.data)
> glm.pred1< predict(glm.fit, test.data, type = "response")
> table(actual= test.data$income, predicted= glm.pred1>0.5)
predicted
actual FALSE TRUE
<=50K 5683 473
>50K 997 987
> (5683+987)/8140
[1] 0.8194103
With the inclusion of significant predictors in the model, the classifier accuracy decreases by 4 percent to 82%.
Logistic Regression Inference: The model gives higher accuracy on unseen data when it has all the predictors included. The model’s accuracy decreases when some of the predictors are removed.
C. Fit a Decision Tree Model
We try the decision tree model.
> tree.model< rpart(income~., data=train.data, method="class", minbucket=20)
> tree.predict< predict(tree.model, test.data, type = "class")
> confusionMatrix(test.data$income, tree.predict) # 86% accuracy
Confusion Matrix and Statistics
Reference
Prediction <=50K >50K
<=50K 5832 324
>50K 760 1224
Accuracy : 0.8668
95% CI : (0.8593, 0.8741)
No Information Rate : 0.8098
PValue [Acc > NIR] : < 2.2e16
Kappa : 0.6097
Mcnemar's Test PValue : < 2.2e16
Sensitivity : 0.8847
Specificity : 0.7907
Pos Pred Value : 0.9474
Neg Pred Value : 0.6169
Prevalence : 0.8098
Detection Rate : 0.7165
Detection Prevalence : 0.7563
Balanced Accuracy : 0.8377
'Positive' Class : <=50K
The accuracy is 87% for the model with all the predictors in it and the accuracy decreases to 82 percent for a model with significant predictors only. Also, a decision tree model is no better than the logistic regression model in terms of accuracy.
D. Fit a Support Vector Machine (SVM) classification model
We tried the SVM model;
> svm.model< svm(income~., data = train.data,kernel = "radial", cost = 1, gamma = 0.1)
> svm.predict < predict(svm.model, test.data)
> confusionMatrix(test.data$income, svm.predict) # 87% accuracy
Confusion Matrix and Statistics
Reference
Prediction <=50K >50K
<=50K 5695 461
>50K 582 1402
Accuracy : 0.8719
95% CI : (0.8644, 0.8791)
No Information Rate : 0.7711
PValue [Acc > NIR] : < 2.2e16
Kappa : 0.6451
Mcnemar's Test PValue : 0.0002027
Sensitivity : 0.9073
Specificity : 0.7525
Pos Pred Value : 0.9251
Neg Pred Value : 0.7067
Prevalence : 0.7711
Detection Rate : 0.6996
Detection Prevalence : 0.7563
Balanced Accuracy : 0.8299
'Positive' Class : <=50K
The classification accuracy of the SVM model having all predictors, increases by 1 percent to 87%, when compared to the decision tree and the logistic regression model. Again, its interesting to note that the SVM model accuracy decreases to 4 percent when only the significant predictors are included in the model.
E. Fit a Random Forest (RF) classification model
We finally try the RF model.
> rf.model< randomForest(income~.,
... data = train.data,
... importance=TRUE,
... keep.forest=TRUE)
> rf.predict < predict(rf.model, test.data)
> confusionMatrix(test.data$income, rf.predict) # 88%
Confusion Matrix and Statistics
Reference
Prediction <=50K >50K
<=50K 5809 347
>50K 567 1417
Accuracy : 0.8877
95% CI : (0.8807, 0.8945)
No Information Rate : 0.7833
PValue [Acc > NIR] : < 2.2e16
Kappa : 0.6835
Mcnemar's Test PValue : 0.000000000000436
Sensitivity : 0.9111
Specificity : 0.8033
Pos Pred Value : 0.9436
Neg Pred Value : 0.7142
Prevalence : 0.7833
Detection Rate : 0.7136
Detection Prevalence : 0.7563
Balanced Accuracy : 0.8572
'Positive' Class : <=50K
So, it is the Random Forest model that gives the highest prediction accuracy of 88%.
5. Conclusion
In this study, we aimed to predict a person’s income based on variables like habitat, education, marital status, age, race, sex and others. We found in exploring this particular dataset that, higher education is no guarantee to high income. This pattern could be attributed the uneven sample distribution. Several classification models were tested for prediction accuracy and we determined that the Random Forest model gives the highest accuracy among others.
As a future work, we will extend this study to include feature engineering methods, to measure if the predictive power of the models could be increased or not.
The complete code is listed on our Github repository
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