Income poverty: Household expenses and indebtedness in European countries

Complex studies on the theoretical, methodological and empirical issues of income poverty in relation to household expenses and liabilities are generally lacking in European research. The missing dimensions of housing costs, regular expenditures and debt payments in income-based measures can distort the overall picture as income itself fails to properly identify populations in financial stress. This research will focus on how and why people become overburdened by expenses and over-indebted, and how their welfare is affected. The work will provide an enriched and broader view of the economics of poverty. Empirical findings will be demonstrated in the context of East-West European differences in economic and social standards. The recent pandemic and energy crises as well as growing inflation pressures are causing serious economic strains in households. The current situation intensifies the need to better understand the interlinks among household income, housing costs and expenses, (over-)indebtedness and well-being. 

The research enriches current knowledge in the income poverty field by considering household expenses and indebtedness. These facets of income poverty will be analysed in the context of East-West European differences.

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Four studies were published within the project. During the first two years, the project focused on household expenditures and savings. Using Czech data, the role of food and housing expenditures in households’ economic well-being have been examined. Similarly, the second study—approaching economic well-being from the opposite perspective, namely households’ ability to build precautionary savings—was also conducted in the Czech context. In addition, relationship between housing financial strain and households' financial well-being has been compared internationally.

In the final year, the studies were completed, and a fourth, key project study was prepared and published. This study reassesses the measurement of income poverty in the European context. Instead of using household disposable income, it employs residual income—i.e., disposable income after subtracting non-discretionary expenditures—to estimate income poverty. The concept of residual income highlights financial difficulties faced by households that are not apparent when non-discretionary expenditures are not taken into account.