Understanding Household Finance through Better Measurement

Lead Research Organisation: University of Essex
Department Name: Inst for Social and Economic Research

Abstract

To date there are no surveys in the UK (or other developed countries) that measure income, expenditure, assets and debts for the same households. These data limitations constrain our understanding of the dynamics of living standards. For example, expenditure surveys in the UK and other countries suggest that households with the lowest incomes spend as much as households with much higher incomes. It is however not known whether this pattern is the result of measurement error in expenditure or income or whether it reflects genuine borrowing or dissaving. Having data about the assets and debts of a household over time, in addition to income and expenditure, would enable analysts to resolve this puzzle. Understanding the spending, saving and borrowing of households is critical for assessing the sustainability of economic growth, including whether the current recovery is fuelled by unsustainable consumer spending. There are other similar unresolved puzzles. For example, in survey data richer households save larger proportions of their income, however aggregate savings rates have not increased over time as real incomes have increased. This discrepancy could again be due to measurement error or reflect true behaviours. A better understanding of household finances will allow a clearer picture of which households are disadvantaged, and how advantage and disadvantage cumulate across time and generations.

The reason why no existing survey collects data about all aspects of a household's finances is because it would take a very long questionnaire. This would be costly to conduct and burdensome for respondents. Through interdisciplinary collaboration between topic experts, survey methodologists and experts in commercial market research, we aim to develop methods of data collection that reduce costs and respondent burden, while maintaining or improving the quality of each data component. We will develop a web survey that will have at its core a reconciliation screen where respondents are asked to balance the totals of their income, expenditure, assets and debts. We will repeat this survey, to test the potential of boosting the reconciliation by incorporating information from the previous interview. To reduce the length of the survey we will assess ways of collecting components of household finances prior to the survey, using new technologies already routinely used in commercial market research. These data would be preloaded into the web questionnaire and incorporated into the reconciliation screen. We will explore the feasibility, data quality and costs of different potential technologies, including technologies that would reduce respondent burden by capturing data passively. For example, barcode scanners to collect detailed expenditure data, coding of till receipts, linking to store card data, or asking survey respondents to sign up to a "financial aggregator" service and relaying the data to us. To help respondents provide more accurate reports in the web survey we will also assess the potential for in-the-moment surveys triggered at salient dates such as the deadline for self-assessment tax returns or tax credit renewals, when sub-groups of respondents will have better knowledge of their income, and the potential for using elements of 'gamification' to increase respondent engagement with the survey and reduce burden. We will assess the quality of data obtained with different methods by examining the balance of the household accounting identity and the quality of individual components. To inform the development work and methodological tests we will carry out experiments in an existing survey (the Understanding Society Innovation Panel) to test methods aimed at reducing under-reporting of income. In addition, we will carry out secondary analyses using existing data sources.

We will apply the data generated to understanding current puzzles in household finances, and make the data available to other researchers in this area.

Planned Impact

Our ambition is to transform the way that data on household finances are collected in developed countries, and thereby to transform our understanding of household financial circumstances and behaviour. We will do this by using new technology and innovations in survey measurement to capture the full accounting identity for individual households: net income minus expenditure equals change in financial position; and to use the resulting data to address important, unresolved puzzles in Household Finance.

The following groups outside academia will benefit directly from our findings on how best to collect data on household finances in large-scale social science surveys:

National statistics offices from around the world (e.g. the ONS in the UK, Statistics Canada, the US Bureau of Labor Statistics) and international organisations (e.g. the World Bank, the European Central Bank, Eurostat) that design survey instruments to collect data on household income, consumption or wealth.

Private sector organisations that design survey instruments to collect data on household income, consumption or wealth (some of these will be commissioned by public sector or research organisations, and some will sell products to other private sector organisations).

The following groups outside academia will benefit directly from our substantive analysis of existing micro-data-sets, and of the new data on household finances that will be created through this project:

Organisations from central government (e.g. HM Treasury, DWP, the Child Poverty Unit, the Cabinet Office, plus their equivalents in the devolved administrations of the UK) and other government executive agencies, non-departmental public bodies, parliamentary select committees and quangos (e.g. the Social Mobility and Child Poverty Commission) involved in policy-making in the area of living standards, poverty and inequality.

Organisations (e.g. the FSA, HM Treasury, Bank of England) involved in policy-making concerned with household savings and debt, or other issues concerned with household finances.

Private companies in the financial services sector as well as not-for-profit organisations (e.g. Money Advice Service) that are concerned about assessing the financial circumstances of households, including whether debt levels are sustainable.

Organisations (e.g. think-tanks like the Resolution Foundation or Policy Exchange, and third-sector organisations such as CPAG, the JRF and the Nuffield Foundation) involved in public debate about issues of social policy that are concerned with living standards, poverty and inequality.

Organisations (e.g. Which, Citizens Advice) involved in public debate about issues to do with household finances, savings and debt.

The public will also be affected by changes in policy that arise as a result of the transformed understanding of household financial circumstances and behaviour.

If organisations outside the UK alter the way that they collect data on household finances in large-scale social science surveys, then organisations outside the UK equivalent to the ones listed above will also benefit, as, potentially, will members of the public in other countries.

Our research will also benefit academics, and researchers and analysts outside of academia; we describe how in Academic Beneficiaries.
 
Description "Improving the measurement of household finances" workshop, to launch the start of ESRC TR grant ES/N006534/1 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact This worskhop was organised to mark the start of the ESRC TR grant ES/N006534/1 "Understanding household finance through better measurement" and to engage with stakeholders.

The workshop included presentations by international researchers, presentations by our project team on the plans for our research, comments from discussants and general discussion.

Participants included survey practitioners and researchers engaged in the collection and/or analysis of data about household finances, inlcuding representatives from the Department for Work and Pensions, the Office for National Statistics, the Financial Conduct Authority, TNS BMRB, the European Central Bank, the Central Bank of Spain, the Dutch Central Bank, Eurostat, the Institute for Fiscal Studies, the University of Kentucky, University of Southern California, University of Munich, and the University of Essex.
Year(s) Of Engagement Activity 2016
 
Description (Brewer & Jenkins) Roundtable on measuring incomes and inequality hosted by Resolution Foundation 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Local
Primary Audience Policymakers/politicians
Results and Impact At an event hosted by the Resolution Foundation, MiSoC's Prof Stephen Jenkins presented his work on the SPI adjustment and measuring very top incomes, and Prof Mike Brewer presented results of the measuring household finances component of the UKHLS IP9 experiment
Year(s) Of Engagement Activity 2017
 
Description Article on "Innovations in measuring household finances" in the NCRM MethodsNews newsletter 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact Newsletter article to diseminate current research in a way that is accessible to a general audience
Year(s) Of Engagement Activity 2017
URL https://www.ncrm.ac.uk/news/show.php?article=5523
 
Description Economic Experts Working Group, Office of National Statistics 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact The Economic Experts Working Group will meet six times a year to help ONS set its development agenda as well as offering expert advice to help solve the difficulties of measuring the changing economy.
Year(s) Of Engagement Activity 2016
URL https://www.ons.gov.uk/news/news/onsexpandsitseconomiccapabilityappointmentoftheneweconomicexpertswo...
 
Description Expert consultation on Measurement of food consumption using household consumption and expenditure surveys (World bank and UN FAO) 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact The World Bank and the UN Food and Agricultural Organization invited Crossley to participate in an Expert consultation on
Measurement of food consumption using household consumption and expenditure surveys. The goal of the consultations was to develop a set of guidelines for surveys, particularly in developing countries. The proposed guidelines are to be submitted to the UN statistical Commission.
Year(s) Of Engagement Activity 2016
 
Description NCRM podcast on "Using mobile devices to understand spending" 
Form Of Engagement Activity A broadcast e.g. TV/radio/film/podcast (other than news/press)
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Podcast to disseminate current research to a general audience
Year(s) Of Engagement Activity 2017
URL https://www.ncrm.ac.uk/resources/podcasts/?id_specific=46&title=Using%20mobile%20devices%20to%20unde...
 
Description Presentation at RTI International 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact I presented our research in a seminar at RTI International. Approx. 10-15 people attended the seminar and reported increased interest in the subject.
Year(s) Of Engagement Activity 2018
 
Description Presentation at Westat 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact I presented our research in a seminar at Westat. Approx. 20-25 people attended the seminar and reported increased interest in the subject. After the seminar, I met with staff responsible for the design of FoodAPS-2, the National Household Food Acquisition and Purchase Survey, to discuss our project in more detail. They expressed great interest in our project and mentions that this is likely to inform their own work.
Year(s) Of Engagement Activity 2018
 
Description Presentation at a workhop organised by the U.S. National Academies of Sciences, Engineering, and Medicine, on behalf of the U.S. National Institute of Aging 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Supporters
Results and Impact Invited presentation on "Lessons learnt from the Understanding Society Innovation Panel" at a workshop organised by the National Academies of Sciences. Workshop participants included representatives of the National Acadmies of Sciences, the National Institute of Aging, researchers in private industry, national statistical agencies, and academics. The aim of the workshop was to indentify a programme of research the methodology of longituidnal surveys which the National Institute of Aging could fund.
Year(s) Of Engagement Activity 2017
 
Description Presentation at conference including private sector organisations and National Statistical Institutes 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Presentation at the General Online Research conference on "Quality of expenditure data collected with a receipt scanning app in a probability household panel". The audience included survey practitioners and researchers from the private sector, National Statistical Institutes, and academics and created interest and discussion about methods we have developed to automatically code categories of household spending.
Year(s) Of Engagement Activity 2018
URL https://www.gor.de/gor18/sessions.php
 
Description Presentation at the U.S. Bureau of Labor Statistics 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact I presented research in a seminar at the U.S. Bureau of Labor Statistics. Approx. 15-20 people attended the seminar and reported increased interest in the subject. After the seminar, I met with staff responsible for the Redesign of the Consumer Expenditure Survey (Gemini Project) to discuss our project in more detail. They expressed great interest in our project and mentioned that this is likely to inform their own work. We have been invited to present our work at the Consumer Expenditure Survey Methods Symposium next year.
Year(s) Of Engagement Activity 2018
 
Description Presentation/Seminar/Q&A at the Office of National Statistics 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact About 50 live + 10 video attendees to presentation of our project at Newport with Q&A. Lots of discussion. Aim to foster interest in topic, possible future collaboration?
Year(s) Of Engagement Activity 2018
 
Description Seminar at private sector fieldwork agency (Westat, USA) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Approximately 70 members of staff at Westat, a private sector fieldwork agency in the USA attended a research seminar on "Participation in a Mobile App survey to collect expenditure data as part of a large-scale probability household panel: response rates and response biases", followed by discussion and exchange of experiences. The paper was of interest to Westat as they are developing and testing similar methods, and they were interested in sharing the paper with one of their key clients, the US Bureau of Labor Statistics.
Year(s) Of Engagement Activity 2017
 
Description Two presentations at the BigSurv18 Conference, Barcelona 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Presented two papers at the BigSurv18 Conference to disseminate findings from the HH Finance Project and liaise with other researchers working on app data collection as part of a general population survey. Attendees reported increased interest in the subject.
Year(s) Of Engagement Activity 2018
URL https://www.bigsurv18.org/program2018
 
Description Visit from Bank of England 
Form Of Engagement Activity Participation in an open day or visit at my research institution
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact On 17 May a representative of the he Bank of England visiting the University of Essex at our invitation to discuss our research on measuring household finances, the Understanding Society Data, and possibilities for Collaboration.
Year(s) Of Engagement Activity 2016
 
Description joint workshop with Office for National Statistics and ISER 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact Workshop with ONS 7 researchers who lead the ONS transformation agenda and who lead surveys collecting household finance data. The aim was to share research findings related to the modes of survey data collection and the collection of financial data, and to identify potential collaborations in research and development.
Year(s) Of Engagement Activity 2017