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• How Much Financial Help Do People Give and Receive? Evidence from the Understanding America Survey

Transcript

Tim Sablik: My guests today are John Bailey Jones and Jason Kosakow. John is vice president of microeconomic analysis and Jason is survey director, both at the Richmond Fed. Gentlemen, thanks for joining me.

John Bailey Jones: Thank you for inviting us.

Jason Kosakow: It's great to be back.

Sablik: We're going to be discussing a recent Economic Brief article that you both wrote about the aid that families give each other. John, this is related to a topic that's a focus area of your research. We've had you on the show before to talk about work related to family bequests and those sorts of things.

Can you start by giving us a sense of how financial transfers between family members might matter for the economy, and why gaining a better understanding of these types of transfers is helpful for economic policymakers like the Fed?

Jones: A lot of my work is on the saving behavior of older households. Transfers are important in this area for at least a couple of reasons. One is that many older households may save in order to leave bequests and those are, of course, by definition financial transfers. A second reason is that many older households may save in order to be able to pay for long-term care. Households that can rely on informal care from other family members — these would be time transfers — may not need to save as much.

But I want to emphasize that transfers are important at all ages. They allow families to pass wealth down through the generations. They can also be used as informal insurance. A family member that has a negative shock, say a layoff, may be able to get assistance from family or friends.

Sablik: What are some things that we already know about family transfers? What sort of data are those findings based on?

Jones: The data tells us that bequests are large and they are distributed unevenly. Their distribution is similar to the distribution of wealth overall.

One dataset containing this information would be the Survey of Consumer Finances [SCF]. They have very good information on bequests. Another dataset is the Health and Retirement Study [HRS], which is the one I'm more familiar with because it focuses on older households. The HRS provides us not only with information about bequests, but it also has information about long-term care services. The HRS tells us that older households rely heavily on informal care. We also have data from other sources — this has popped up in the media recently — telling us that young adults have become more likely to live with their parents.

Sablik: Are there any limitations to the existing data that we have on this topic?

Jones: Each dataset does some things well and others not so well. The SCF has great data on wealth and income, but doesn't cover time transfers. The HRS is great for older households, but not young adults. So, it's kind of hard to get a comprehensive picture of transfers.

Sablik: Yeah, and I imagine those limitations were sort of motivation for the Economic Brief article I mentioned at the beginning. In that research, you partnered with the Understanding America Study [UAS] to conduct a new survey of family transfers. Jason, what were the benefits of working with this study to gather this data?

Kosakow: There's an old adage in survey research that essentially goes that you can either have high data quality, low survey costs or get the results quickly, but you can't have all three. It kind of makes sense, right? There are panels out there that have low data quality, but they're cheap and you get the results quickly. Conversely, if you want to have high data quality, it takes a lot of time and effort to do it.

Usually, it is very hard to get certain populations in studies: immigrant groups, racial minorities, rural populations, lower-income individuals, people without internet access. These people tend to be dropped from surveys because it's expensive to reach them and they generally have less interest in participating.

But if you think about how individuals differ in the reception and giving of monetary benefits and times within their families and within friend groups, they likely differ. Having a representative sample where those who usually wouldn't provide this information is crucial in understanding a broader aspect of the American economy.

With the Understanding America Study, this is something managed by the University of Southern California. They already built an online panel using high-quality recruitment methods. They spent a lot of time [and] a lot of money, resources [and] effort making sure that they have a representative sample within their survey panel. They go to these households in person and give them tablets that are connected to the internet so they can participate.

Every year, they do a call for research. John and I submitted a proposal to conduct this research and they accepted it. We were able to get high-quality data that was gifted to us from USC through the study and we were able to do it pretty quickly.

Sablik: Can you talk a bit more about how the survey was constructed and fielded? What sort of questions did you ask?

Kosakow: It took a few months to craft the questions we asked.

There are two main things we needed to balance. The first was to ensure that the data we collected from the survey gave John and other researchers who would use these data the information they would need to understand wealth transfers. We just don't want to ask such broad, simple questions that it didn't allow us to dig into the data and didn't really provide the richness that we would need.

As you can imagine, there are hundreds and hundreds of questions you can probably ask. We need to balance the need for details with the reality of the survey experience. If we ask a lot of questions that take a lot of time that are all similar, people just wouldn't give us data. They'll drop out or they'll just give us wrong information, just kind of click through to get to the end, right?

John and I worked together over the course of two or three months. John knows the literature very well and he's a foremost expert in this field, so he provided some thoughts on how to best address this. I worked to craft the topics that we wanted to understand into coherent questions that would be easy to answer.

Interestingly, though, there are topics that were not really widely explored in large-scale studies. So, we had to come up with those ourselves — things like couch surfing or time transfers of daycare or adult care.

It sounds pretty easy on paper just to ask these questions. But asking these questions in an easy-to-understand way that's not burdensome, it took a lot of time.

Overall, it was a really good experience. I think the information we collected was a good, strong first attempt. Future attempts might change a little bit, but the results that we did get seemed to vibe with what John and I were expecting to see.

Sablik: That's a good segue. John, can you talk a bit about some of your key findings and how those did or didn't line up with what you expected based on the existing literature on family transfers?

Jones: We found that transfers were really prevalent. About 30 percent of respondents in our survey report giving financial transfers in the past year, and about a quarter report giving time transfers. The most common type of transfer is, as perhaps you might expect, from a parent to an adult child. But there's a lot of other combinations.

Another thing that was kind of interesting is that we did a few cuts of the data by household income. It looked like lower-income households were particularly active in terms of giving of time transfers. Lower-income households tended to give higher amounts of hours.

Sablik: Jason, did any of the results from the survey surprise you?

Kosakow: What I was particularly interested in was the in-kind time transfers. As someone with a young child who is pretty often sick for ear infections or just a stomach ache or something along those lines, we rely on a good amount of free family-based child care. We're fortunate enough to have a relative in the area who can come over in a pinch and just watch our daughter. If you didn't have this, you would need to find alternative daycare, or you would just have to not work and lose that money for the day. So, it's interesting to see how these results that we got in the study compared with my real-life experiences.

It wasn't surprising to me, but I thought it was still interesting that younger people relied a lot more on these time transfers than older populations. The median number of days per year that an 18-to-34-year-old used for these in-kind transfers was 50 days. For people in my cohort — the 35-to-54-year-old cohort — is 38 days.

Sablik: I'd imagine that a survey is well positioned to capture those time transfers that maybe don't show up in traditional economic data or GDP numbers or things like that.

Kosakow: That's what's nice about what we're doing. We were able to craft what we were interested in. From the beginning, John was particularly interested in the monetary transfers but also these time transfers — these soft monetary benefits like paying a small bill, food assistance from a family member or an auto repair, things that just generally might not get picked up in the larger surveys.

Jones: To follow up on some of what Jason was saying, having access to informal childcare is especially important for working mothers. It makes it easier to advance in your career.

I'll point out one little anomaly that we did see in the data which is that, in general, more people reported giving transfers than receiving them. It may be just the way the world works. A lot of different people give transfers to a handful of people — it takes a village, as it were. Or it could just be differences in recall — you probably have a sharper recollection of exactly what you're giving than if you receive something, especially if, as Jason said, it's smaller quantities.

Sablik: On that note, are you planning to do any further analysis on the data you collected, or conduct additional surveys to gather more data on this topic?

Jones: There are lots of relationships we can explore. One of the really neat things about the UAS is that this module can be linked to all the other modules in the survey. That data is incredibly rich. There are all sorts of family relationships and economic factors that we could try to connect to these transfers.

Sablik: Alright. Well, John and Jason, thank you both for being here today to talk about your work.