The Household Finance and Consumption Survey (HFCS) is the most important source of data on wealth distribution in Austria. The most recent publication of the fourth survey wave shows a marked social stratification along property ownership and that the HFCS still does not adequately capture the upper end of the distribution. Although the data provide a good picture of the wealth of the general population, they do not offer any empirical basis for the socio-political debate on wealth concentration.
Property owners win, tenants lose
Die Results from the new HFCS show two distinct dividing lines: 1) between the lower half (1st to 50th percentile of wealth) and the upper middle (50th to 90th percentile) along the line of ownership of one’s primary residence and 2) the demarcation of the top 10 percent along the line of ownership of businesses and rentable real estate.
Austria is a society of renters, because less than half of the population owns their property. Roughly speaking, anyone who owns their main residence is in the upper middle. The assets of this group have increased significantly compared to the last survey in 2017. A major reason for this is the massive price increases in real estate in recent years. Landlords, who are mainly found at the upper end of the wealth distribution, also benefited from this.
While wealthy households have been able to save more in recent years, prices for poorer households and especially renters are rising drastically. Since these households have to spend a large part of their income on rent, they are left with less and less money. This further limits their ability to accumulate wealth. As a result, the richest tenth of the population has been able to save three times as much of their income in recent years as households in the lower half of the population.
Few affected by wealth taxes
This development is exacerbated by the fact that, according to the principle “whoever has, will receive”, richer households receive inheritances much more often: in the lower tenth of wealth in the current HFCS, only 20 percent of households inherited anything at all – an average of 21,000 euros. In contrast, 77 percent of the richest households received inheritances averaging EUR 413,000. Nevertheless, income from work is primarily taxed in Austria, while inheritance and assets are hardly used for tax purposes.
The HFCS 2021 offers additional insights into current debates about wealth taxes from net assets of one million euros. Inhabited main residences are worth an average of 372,000 euros. Even the company property owned by the self-employed amounts to “only” 579,000 euros on average. Both values are thus far below the threshold of one million euros. Less than 5 percent of households in Austria are millionaire households and would be affected by a wealth tax, as is currently being discussed. But they do not consider themselves to be rich or particularly wealthy – this is also asked in the HFCS. Hardly any household from the richest 10 percent is located in the top tenth – on the contrary: These households see themselves in the middle of society. That may be part of the explanation why wealth taxes are misrepresented as taxes on the middle class.
16, 23, 39 or 50 percent share of assets?
In any case, the new data only contain a few very rich households, even fewer than in the previous waves of the HFCS: in 2010 the richest household in the data had around 14.3 million euros, in 2014 it was 43.7 million euros, Then 32.5 million euros in 2017 and 12 million euros in the current wave of 2021. These fluctuations show why the distribution measures calculated from the raw data are hardly comparable across the waves. The well-known Gini coefficient, which in itself is a rather sluggish measure of inequality, has ranged between 0.73 and 0.76 in the past survey waves and now stands at 0.69. The share of the richest 1 percent in total wealth is now 16 percent in the HFCS 2021, after 23 percent in the HFCS 2017.
A plausible explanation for the small number of “rich observations” in the HFCS 2021 is quickly found: Covid-19, lack of willingness to provide information and the sample selection. Due to the pandemic, the survey period originally planned for 2020 was postponed to May 2021 to February 2022, but Covid made interviews for the survey more difficult during this period. Because the HFCS is a voluntary survey, the response rate used to be around 50 percent and has now fallen further to 39 percent.
The expert employees of the Oesterreichische Nationalbank (OeNB), who carry out the HFCS, attach great importance to data quality. A lot of work is put into the survey design, the questionnaire and the training of interviewers. It is all the more astonishing that the OeNB management has so far decided against oversampling the HFCS, which is recommended by many experts. The idea is simple: Since the likelihood of participating in the survey decreases with increasing wealth, a disproportionately large number of households are included in the gross sample that are suspected to have greater wealth. 17 out of 22 countries in the HFCS survey are doing just that – with success.
The Pareto method is a tried-and-tested method for statistically adding the missing rich in the HFCS afterwards. With the help of a justified distribution assumption and journalistic lists of the rich, researchers can supplement the upper edge of the wealth distribution. As a result, the wealth share of the top 1 percent rose from 23 percent to around 39 percent in the HFCS 2017. When aligning the survey data with the macroeconomic aggregates (Distributional Wealth Accounts), the share of the richest 1 percent in total assets is determined by the National Bank economists even estimated at up to 50 percent. This approach has been used in the USA for some time by the Fed and will also be adopted by the European Central Bank (ECB) from autumn.
More light into the darkness in the concentration of assets
Over-wealth and a high concentration of wealth endanger democracy and also the climate. The HFCS does not provide an adequate data basis for this socially necessary debate. In addition to the long overdue oversampling, an asset register could also be introduced, as proposed by well-known economists Joseph Stiglitz, Jayati Ghosh or Thomas Piketty is required. Such a register would create more transparency for very large fortunes, which was recently even considered in the European Union for Russian oligarchs after the attack on Ukraine. Furthermore, a wealth tax would not only be an important source of funding for the welfare state, but would also shed more light on the wealthy through the administrative recording of private wealth.
A voluntary survey of private wealth without effective, targeted accompanying measures to record wealthy households can only paint an incomplete picture of wealth distribution. The HFCS data are undoubtedly of high quality in terms of wealth in the general population, but they provide little information on the democracy and climate-threatening concentration of wealth at the top end. A better assessment is not expected until the publication of the microdata and the statistical estimation of very rich observations using the Pareto method and the ECB’s “Distributional Wealth Accounts” in autumn. Nonetheless, the HFCS 2021 reveals some worrying patterns: While the assets of property owners are steadily increasing, rising prices are reducing the opportunity for poorer households, and especially renters, to build wealth.