Non-standard matches and charitable giving

Author: Michael Sanders

Non-standard matches and charitable giving

The use of incentives to encourage charitable donations is commonplace. The governments of most developed countries (including the UK), as well as many large employers, offer match rates, or rebates to encourage donations. The principle behind such match rates is simple. With Gift-Aid, the UK’s main form of tax effective giving, a donation of £1 from net-of-tax income by a taxpayer attracts basic rate tax relief, which goes straight to the charity – hence, the charity receives £1.25 for every £1 donated.

The effect of this is to reduce the price of donating a given amount – if I am a basic rate taxpayer, and think “I want the British Heart Foundation to receive £100”, making that happen will only cost me £80 from my net of tax spending.

There is much discussion, both in the academic economics literature and in the public sphere, about the effectiveness of such matches, particularly in the aftermath of last year’s proposed £50,000 cap on charitable tax relief – although most studies find that people’s donations are relatively unresponsive to changes in the match rate (they are price inelastic), CMPO research has shown that high value donors may be more responsive to changes in their match (or rebate) than are smaller donors.

This mixed evidence on the effectiveness of matches at increasing out-of-pocket donations suggests that alternatives to the standard match may be more effective. Options for non-standard matches are summarized in our new working paper, which draws on the behavioural economics and psychology literatures to several such possibilities, including, non-linear matches, where the more an individual donates, the higher the match rate; social and team matches, in which the match rate received by one donor depends on the donations of others, giving them an incentive to ‘crowd in’ their friends and colleagues; competitive matches , when only the most successful fundraisers receive a match); and lottery matches, where each donation increases the chance of a donor’s chosen charity receiving a large windfall match.

Although these suggestions are sound in principle, and supported by both theory and empirical evidence, none has been experimentally tested in a real world setting. We would encourage anybody interested in testing one or more of these novels matches to contact us.

 

Justifying ‘Never-Working Families’?

Author: Lindsey Macmillan

Justifying ‘Never-working Families’?

The Secretary of State for Work and Pensions, Iain Duncan Smith, has repeatedly made references to families where generations never work. When asked to justify these claims (to Paul Goggins MP), he concedes this is based on personal observations, not evidence.  His justification for this is that statistical information on the number of UK families that never work is not available.

A recent Freedom of Information (FOI) request makes the same argument – but then goes on to cite my own research;

“a research report was produced by the University of Bristol in 2011 
looking at this issue. This reports that there are pockets in Britain where there are two and three generations of families who are unemployed.”

In fact, there is clear evidence that shows how rare a phenomenon the never-working family is.

In my paper in Dec 2011, I looked at the number of households where two generations had never worked. Evidence from the Labour Force Survey, which is used by DWP in their labour market statistics analysis, showed that in Spring 2010, only 0.3% of multi-generational households were in a position where both generations had never worked. That’s just 15,000 households in the country. Of these, in 5,000 households the younger generation had only just left full time education, within the last year, and so had barely had a chance to work yet.

This story holds in data where the families don’t live together in the same house (as seen in the National Child Development Study, the British Cohort Study and the British Household Panel Survey). There is very little evidence of even two-generation-never-working families, driven by the fact that so few of the younger generation are never in work (less than 2% by age 23 and less than 1% by age 29 – see here). Instances of three-generation-never-working families would be even rarer.

A recent Joseph Rowntree Foundation Study took the more direct qualitative approach and sent researchers out into deprived neighbourhoods in Glasgow and Middlesbrough to look for families where three generations had never had a job. They couldn’t find a single one.

Iain Duncan Smith isn’t the only senior politician to make these claims – Tony Blair said in 1997 that “Behind the statistics lie households where three generations have never had a job” (see p16 of this). But my work and others’ shows the evidence doesn’t match the rhetoric.