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MEASURING WHAT WE SPEND Toward a New Consumer Expenditure Survey Panel on Redesigning the BLS Consumer Expenditure Surveys Don A. Dillman and Carol C. House, Editors Committee on National Statistics Division of Behavioral and Social Sciences and Education

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THE NATIONAL ACADEMIES PRESS  500 Fifth Street, NW  Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Govern- ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineer- ing, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropri- ate balance. This study was supported by Contract No. DOLJ109J31331 between the National Academy of Sciences and the U.S. Department of Labor, Bureau of Labor Statis- tics. Support for the work of the Committee on National Statistics is provided by a consortium of federal agencies through a grant from the National Science Foundation (award number SES-1024012). Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13: 978-0-309-26575-1 International Standard Book Number-10: 0-309-26575-4 Additional copies of this report are available from the National Academies Press, 500 Fifth Street, NW, Keck 360, Washington, DC 20001; (800) 624-6242 or (202) 334-3313; http://www.nap.edu. Copyright 2013 by the National Academy of Sciences. All rights reserved. Printed in the United States of America Suggested citation: National Research Council. (2013). Measuring What We Spend: Toward a New Consumer Expenditure Survey. Panel on Redesigning the BLS Con- sumer Expenditure Surveys, Don A. Dillman and Carol C. House, Editors. Commit- tee on National Statistics, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Acad- emy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding en- gineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineer- ing programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is presi- dent of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Insti- tute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sci- ences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Coun- cil is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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PANEL ON REDESIGNING THE BLS CONSUMER EXPENDITURE SURVEYS DON A. DILLMAN (Chair), Department of Sociology and Social and Economic Sciences Research Center, Washington State University DAVID M. BETSON, College of Arts and Letters, University of Notre Dame MICK P. COUPER, Institute for Social Research, University of Michigan ROBERT F. GILLINGHAM, Independent Consultant, Potomac Falls, VA MICHAEL W. LINK, The Nielsen Company BRUCE D. MEYER, Harris School of Public Policy Studies, University of Chicago SARAH M. NUSSER, Department of Statistics, Iowa State University ANDY PEYTCHEV, RTI International MARK M. PIERZCHALA, Independent Consultant, Rockville, MD ROBERT SANTOS, The Urban Institute MICHAEL F. SCHOBER, New School for Social Research MELVIN STEPHENS, JR., Department of Economics, University of Michigan CLYDE TUCKER, Independent Consultant, Vienna, VA CAROL C. HOUSE, Study Director ALICIA JARAMILLO-UNDERWOOD, Program Associate ANTHONY MANN, Program Associate LINDA DePUGH, Program Associate AGNES GASKIN, Administrative Assistant v

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COMMITTEE ON NATIONAL STATISTICS 2011–2012 LAWRENCE D. BROWN (Chair), Department of Statistics, The Wharton School, University of Pennsylvania JOHN M. ABOWD, School of Industrial and Labor Relations, Cornell University ALICIA CARRIQUIRY, Department of Statistics, Iowa State University WILLIAM DuMOUCHEL, Oracle Health Sciences, Waltham, Massachusetts V. JOSEPH HOTZ, Department of Economics, Duke University MICHAEL HOUT, Survey Research Center, University of California, Berkeley KAREN KAFADAR, Department of Statistics, Indiana University SALLIE KELLER, Provost, University of Waterloo, Ontario, Canada LISA LYNCH, Heller School for Social Policy and Management, Brandeis University SALLY C. MORTON, Department of Biostatistics, University of Pittsburgh JOSEPH NEWHOUSE, Division of Health Policy Research and Education, Harvard University RUTH D. PETERSON, Department of Sociology (emeritus) and Criminal Justice Research Center, The Ohio State University HAL S. STERN, Donald Bren School of Computer and Information Sciences, University of California, Irvine JOHN H. THOMPSON, National Opinion Research Center at the University of Chicago ROGER TOURANGEAU, Westat, Rockville, MD ALAN ZASLAVSKY, Department of Health Care Policy, Harvard University Medical School CONSTANCE F. CITRO, Director vi

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Acknowledgments T he Panel on Redesigning the BLS Consumer Expenditure Surveys (CE) wishes to acknowledge the support, effort, and expertise of many individuals who contributed to this report and the delibera- tions behind it. As chair of the panel, I want to begin by thanking my fellow panel members for extraordinary efforts they have made over the past 18 months, and the commitment each gave to this team. The panel members brought a wide range of needed expertise to the table along with a dedica- tion to good science and improving the CE. They consistently provided constructive ideas and assessments under tight timelines. They worked hard together to articulate a balanced framework of conclusions and recom- mendations that we believe will be helpful to the Bureau of Labor Statistics (BLS). It was a true pleasure working with this group of individuals. The panel wishes to commend BLS for its commitment to a thoughtful, systematic, and comprehensive multiyear process to redesign the CE. The Gemini Project was initiated by BLS in 2009 and has overseen a wealth of research and information-gathering workshops that formed a base from which the panel launched its own activities. BLS has created a well-­ organized website that provides easy access to this research and informa- tion. Michael Horrigan, associate commissioner, Office of Prices and Living Conditions, is a driving force behind the redesign efforts. He provided the panel with his insight and expectations as well as management support. Working with Michael to steer the Gemini Project and support the panel’s activities were Jay Ryan, Consumer Expenditure Division Chief, and Adam Safir, Branch Chief of Research and Program Development Branch. Both Jay and Adam were very helpful throughout the entire process—answering vii

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viii ACKNOWLEDGMENTS questions, making staff available for assistance, providing suggestions for workshop speakers and participants, and setting a tone of cooperation with the panel. We want to thank Kathy Downey, who is leader of the Gemini Project. Kathy was the main BLS contact with the panel, so our questions and requests flowed through Kathy. She was well organized and worked hard to assist the panel in its requests. Thanks to Jeanette Davis, who man- aged the contract. Many other BLS staff stepped forward in many ways to assist the panel by answering questions, participating at panel-sponsored meetings or workshops, and carrying out research that proved very use- ful to the panel’s work. These staff include Rob Cage, Bill Casey, Jennifer Edgar, John Eltinge, Thesia Garner, Steve Henderson, Bill Mockovak, Bill Passero, Dave Swanson, and many others. The panel held four meetings and two workshops in the process of preparing this report. We would like to thank all participants in these meet- ings and workshops, and particularly the presenters. The Household Survey Producers Workshop was held in June 2011. At that workshop, overviews of the measurement of consumer expenditures in other countries were pre- sented by Guylaine Dubreuil (Statistics Canada), Giles Horsfield (Office of National Statistics, UK), and Peter Paul Borg (European Union). Presenta- tions describing survey designs that add flexibility in data collection mode were given by Richard Hough (U.S. Census Bureau), Jolene Smyth (Univer- sity of Nebraska), and Jennifer Wine (RTI International). That session was followed by presenters who discussed survey designs that effectively mix data from multiple surveys and/or external/administrative data to produce estimates—Steve Machlin (Agency for Healthcare Research and Quality), Eileen O’Brien (Energy Information Agency), and Van Parson (National Center for Health Statistics). The fourth session in the workshop presented work by Dave Aune (National Agricultural Statistics Service), Jason Fields (U.S. Census Bureau), and Jane Gentleman (National Center for Health Statistics) on the topic of designs that effectively mix global and detail infor- mation to reduce burden and measurement error. Jason Fields (U.S. Census Bureau) and Frank Stafford (University of Michigan) discussed designs that use “event history” methodology. In the final session of the workshop the following presenters provided examples of Diary surveys that effectively utilize technology to facilitate recordkeeping or recall— Justin Bailey (The Nielsen Company), Nancy Cole (Mathematica Policy Research), and Paul Kizakevich (RTI International). Our thanks go to all. The panel, through the National Academies, competitively selected and commissioned two groups to produce research reports laying out a redesign of the CE. We thank Jennifer Edgar (BLS) for her work with the panel’s study director to develop a “statement of work” for this competi- tion. Two contracts were awarded—Westat, and a consortium from the

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ACKNOWLEDGMENTS ix University of Wisconsin–Milwaukee, the University of Nebraska–Lincoln, and Abt-SRBI. The ideas presented in these reports were important as the panel considered its own recommendations. Both reports presented designs that were innovative and well researched. The time frame given the groups was very short, and both groups met the challenge. The panel used their research and ideas extensively. We would like to give special thanks to both teams: The Westat team—David Cantor (team leader), Brad Edwards, Bob Fay, Abie Reifer, and Sid Schneider; and the consortium team—­ ourtney Kennedy (Abt-SRBI), Nancy Mathiowetz (team leader, C University of Wisconsin–­ ilwaukee), and Kristen Olson (University of M Nebraska–Lincoln). These authors presented their reports at the October 2011 Redesign Options Workshop. The panel was fortunate to also have a number of excellent formal discussants at this workshop. Richard Kulka (independent consultant) discussed the two reports from the view of cogni- tive and methodological issues, while Chet Bowie (NORC) talked about the issues of implementing change in a large ongoing survey. We were also fortunate to have Mark Lino (Center for Nutrition Policy and Promo- tion, USDA), Clinton ­ cCully (Bureau of Economic Analysis), and Melvin M S ­ tephens (University of ­ ichigan and a panel member) discuss both designs M from the perspective of data users. The panel thanks all of these discussants for their insightful comments. The panel reached out to many users of the CE data. First we wish to extend our thanks to staff at several federal agencies who spoke with panel members about how the CE data are used to help administer programs within their agencies. Thanks to Mary Kate Catlin, Centers for Medicare & Medicaid Services; Cathy Cowan, National Health Statistics Group; Kenneth Hanson, Economic Research Service, USDA; Arnold Katz and Marshall Reinsdorf, Bureau of Economic Analysis; and Geng Li, Federal Reserve Board. The panel held a session at the 2011 CE Data Users Con- ference, and we would like to thank the analysts who attended this session and passed along their comments on the CE. We would especially like to extend our appreciation to Christopher Carroll (Johns Hopkins University) who attended each of the panel’s public meetings and workshops, listening intently and providing insightful comments and suggestions at each venue. This report was reviewed in draft form by seven individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the Report Review Committee of the National Research Council (NRC). The independent reviewers provided candid and critical comments that assisted the panel in making its report as sound as possible and ensuring that the report meets the NAS standards for objectiv- ity, evidence, and responsiveness to the study charge. We wish to thank the following individuals for their review of this report: F. Jay Breidt, Depart-

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x ACKNOWLEDGMENTS ment of Statistics, Colorado State University; Stephen Cohen, National Center for Science and Engineering Statistics, National Science Foundation; Erik Hurst, The University of Chicago Booth School of Business; Timothy P. Johnson, Survey Research Laboratory, University of Illinois, Chicago; Jean Opsomer, Department of Statistics, Colorado State University; Frank Stafford, Department of Economics, University of Michigan; and Alan R. Tupek, Arbitron, Inc. Their comments were extremely helpful, and the report is much improved because of their efforts. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by Robert Bell (AT&T Labs) and Stephen Fienberg (Carnegie Mellon), who served as Review Coordinator and Review Moni- tor, respectively. They were responsible for making certain that an inde- pendent scientific review of this report was carried out in accordance with institutional procedures and that all review comments were carefully con- sidered. The panel was privileged to have these two individuals working on the report, and we thank them for their efforts and insight. The panel also wants to acknowledge the efforts of our editor, Paula Whitacre, who did a great job in making the entire report read smoothly. The panel would like to show appreciation to the many individu- als within the National Academies who provided support and assistance throughout this process. First, we thank Connie Citro, director of the Committee on National Statistics. Connie provided support to the panel throughout the entire process, attending panel members and workshops. She also provided her own insights and recommendations when requested by the panel. Her comments were very helpful. We also want to express our profound gratitude to the panel’s study director, Carol House. Her contribution to the panel’s work was enormous, from obtaining needed background information and research for the panel deliberations to drafting the text of final report. The latter was particularly challenging because of the need to bring together diverse input from mul- tiple scientific disciplines and meet the prescribed deadlines. The panel also wants to thank the four program assistants who worked with the panel over its lifespan in setting up meetings and workshops, processing finan- cial paper­ ork, interacting with workshop participants, preparing agenda w books, carrying out web searches, and generally making sure that the entire process proceeded smoothly. So our thanks go to Linda DePugh, Agnes Gaskin, Alicia Jaramillo-Underwood, and Anthony Mann. In addition we thank Kirsten Sampson-Snyder and Eugenia Grohman for their many efforts ­ in assisting the report through the steps required for final publication.

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ACKNOWLEDGMENTS xi Finally, we recognize the many federal agencies that support the Com- mittee on National Statistics directly and through a grant from the National Science Foundation. Without their support and commitment to improving the national statistical system, the committee work that is the basis of this report would not have been possible. Don A. Dillman, Chair Panel on Redesigning the BLS Consumer Expenditure Surveys

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Contents SUMMARY 1 1 INTRODUCTION AND OVERVIEW 15 Background of the Consumer Expenditure Surveys, 15 Context for This Study, 17 Overview of This Report, 19 2 THE MANY USES OF THE CONSUMER EXPENDITURE SURVEYS 21 CE Data Provide Critical Input for Calculating the Consumer Price Index, 21 The CE Provides Data Critical in Administering Government Programs, 25 CE Data: A Cornerstone for Policy Analysis and Economic Research, 27 Summary, 36 3 THE CURRENT CONSUMER EXPENDITURE SURVEYS 37 Design and Implementation, 37 Cost of the Consumer Expenditure Surveys, 45 4 THE PANEL’S INVESTIGATION INTO THE ISSUES WITH THE CE 47 Feedback from Data Users, 48 Panelists’ Insight as Survey Respondents, 50 xiii

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xiv CONTENTS Household Survey Producers Workshop: Description and Insights, 51 Redesign Options Workshop: Description and Insights, 59 5 WHY REDESIGN THE CE? 68 Evidence of Underreporting in the CE, 69 Measurement Differences Between the Interview and Diary, 77 Sources of Response Error in the Interview Survey, 82 Sources of Response Error in the Diary Survey, 92 Nonresponse, 101 Issues Regarding Nonexpenditure Data, 106 Summary of Reasons to Redesign the CE, 107 6 PATHWAY TO AN IMPROVED SURVEY 109 Overview, 109 Panel’s Approach to Design and the Commonalities That Emerged, 113 Redesign Prototypes, 118 Roadmap to Get There, 163 Summary, 186 REFERENCES AND BIBLIOGRAPHY 188 APPENDIXES A Dissent and Panel Response 201 B BLS Communication of Issues 208 C Uses of the CE in Administering Federal Programs: Debriefing of Program Staff 215 D Statement of Work for CNSTAT Competitive Solicitation of Design Ideas 223 E Household Survey Producers Workshop Agenda 229 F Redesign Options Workshop Agenda 233 G Biographical Sketches of Panel Members and Staff 235