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A vibrant economy that provides opportunities for corporations while helping individuals obtain financial security is highly dependent on decision makers having access to quality data. These shot-callers span a wide range of individuals and organizations, including businesses, non-profits, academia, unions, investors, the Federal Reserve and elected officials at various levels of government. Yet, response rates among individuals and organizations asked to complete economic surveys have dropped precipitously, calling into question the quality of research that Fed members and other leaders use to make important decisions that impact the nation and Americans’ financial well-being. Government agencies and other researchers, however, have various options for addressing this issue.
Flying Blind
Federal Reserve Chair Jerome Powell has emphasized that additional evidence pointing to durable progress in taming inflation is needed before the central bank starts accommodating monetary policy. Among other factors, he said that sustainably limiting price pressures will require the tight labor market to soften. Meanwhile, some employers have hoarded workers due to fears that constrained staffing conditions could make it hard to rebuild a workforce if needed in the near future.
However, one of the primary job market gauges, Current Employment Statistics, which provides estimates of nonfarm employment, hours worked and employee earnings, has experienced a significant decline in data providers. The report is developed by surveying 119,000 businesses representing 629,000 individuals and is another important source of figures used by Fed members and businesses when assessing the strength of labor conditions. Its participation rate has fallen to 43.5% from about 64% in 2014.
Other economic publications have also experienced large declines in replies, which can impact indicators used by a wide variety of organizations. Consider the following examples:
- Various federal agencies depend on inflation numbers when determining increases for benefits provided by the Supplemental Nutrition Assistance Program, the Veterans Administration, Social Security, Medicare, Medicaid and other programs.
- Federal, state and local officials depend on statistics such as GDP growth, inflation and employment trends when establishing budgets, taxes and fees. On a local basis, economic figures can have a significant impact when officials establish property and sales levies.
- Other bureaus and departments, such as those that maintain highways and other types of infrastructure, depend on price publications when adjusting tolls or other charges.
- Businesses rely on intelligence when deciding if they should expand or contract their operations or change their product offerings. Firms also assess economic material when establishing employee compensation.
- Unions depend on data when determining pension payments and other benefits for their members. Organized labor also uses statistics when negotiating contracts with employers.
- Investors rely on economic aggregations when deciding how to efficiently deploy capital.
Participation Issues Are Widespread
Regrettably, Current Employment Statistics isn’t the only program with declining contributions. The Employment Cost Index (ECI), which is released quarterly by the Bureau of Labor Statistics (BLS), tracks changes in total compensation, or the combination of wages and benefits, such as health insurance, retirement outlays and vacation time. It is an important measure of inflationary pressures resulting from employer costs. As such, it is significant data for the Fed to assess for both evaluating pricing developments and managing monetary policy. The index is also important for businesses that are evaluating whether they should add or reduce workers. For example, elevated wages are currently discouraging employers from adding workers even though a historically high level of job openings exists. However, the ECI response rate has dropped from nearly 74% at the end of 2014 to approximately 46% this year.
- The Job Openings and Labor Turnover Survey (JOLTS) has a participation rate of only 31%, compared to 69% in 2015, implying that the indicator may not be as high quality as it could be.
Weak response rates aren’t limited to labor topics. The rate of involvement in the Consumer Expenditures program (diary) has declined from approximately 66% in 2014 to 38.1%. The survey also includes telephone interviews that only 37% of individuals typically complete. The statistics seek to show changes in consumer spending and are also used to compile the Consumer Price Index, an important gauge of inflation. The publication looks at 14 major components of household spending, such as shelter, transportation, food, insurance, entertainment and apparel.
Even the American Community Survey, which covers a wide range of topics such as housing, personal transportation and employment, has experienced a significant decline in cooperation despite a legal requirement that individuals participate in the research. As of 2022, its participation rate was 84%.
Problems Associated with Negligence
A modest amount of feedback can cause sampling bias, or certain groups of individuals or businesses that are outliers having a disproportionate influence on research, resulting in statistics being distorted rather than reflecting averages for specific regions or the entire country. For example, discount retailers that are growing sales by capturing market share among budget-conscious consumers when the economy slows are likely to hire workers while other stores are reducing their headcounts due to a loss of customers. If depressed participation results in a few large deep discounters having excessive representation in the final numbers, then the data may incorrectly imply that retailers overall are adding workers. In another example, results may be heavily skewed by large companies that typically have more resources than their smaller counterparts, making them more likely to reply to information requests.
Misrepresentation resulting from weak engagement can also cause changes in preliminary and final economic reports, leading to sharp revisions while undermining the public’s confidence in statistics. As more replies are gathered for a final report, the additional figures may offset the initial distortions and cause the final report to be significantly different from the preliminary numbers. The large difference in outcomes between the preliminary and final publications can cause members of the public to question the quality of the research and spark market volatility.
Contracting cooperation also requires government agencies to increase the amount of time and effort they dedicate to finding individuals or organizations that will provide information. This problem could easily translate into higher costs associated with completing research. Reduced participation may also require an increase in questions included to better ascertain if any interviewees are outliers and not representative of a broad industry or region. Additionally, as field economists find it harder to locate providers of details, it may become difficult to release prints in a timely manner as the amount of time required to find a sufficient number of participants increases.
Obstacles to Increased Involvement
The issue of lessened response rates has been studied by numerous organizations, including the American Institute for Research. In one study, the organization contacted individuals who failed to acknowledge survey requests. It found the following reasons for the disregard:
- People said they didn’t have enough time
- Some folks didn’t recall receiving mailed forms
- A few characters expressed negative attitudes toward the government
- Persons believed that the Federal government already had the details
- Others said they didn’t complete them because they were irrelevant
Other researchers have found that some individuals are reluctant to place their information online. Additionally, it’s increasingly common for households to only have cellphones. The lack of listed telephone numbers for landlines has complicated efforts to contact potential providers over the telephone. Meanwhile, some are reluctant to give the government information due to fears related to their immigration status. The shift to working from home and hybrid work, furthermore, has made it more difficult to reach appropriate individuals at businesses.
Possible Solutions
For minority response rates, ethnic organizations can help their members understand the importance of completing survey forms. In some instances, the findings can be used to identify and address issues that may improve quality of life. More broadly, government agencies can provide cash incentives to increase contributions. Over time, agencies can experiment to find the minimum amount of motivation required to entice individuals and organizations to cooperate. Government organizations can also provide paper forms to individuals who balk at providing information online. While this would require that agencies bear the cost of manually entering information into databases, it would only be used as a last resort to encourage individuals to answer the questions. Additionally, the cost of entering the numbers may be offset by lowering the expenses of finding a sufficient number of respondents.
Artificial intelligence (AI) is also being developed to improve response rates. AI companies maintain that voice surveys have higher response rates than text questionnaires. With AI-generated voice questions, research can be conducted without having to pay workers to conduct interviews. Proponents of AI also maintain that the technology can make the process more engaging for providers by eliminating inquiries that are determined to be irrelevant based on previous answers. Conceivably, AI could help determine the best time to contact potential interviewees.
One final approach is to make cooperation mandatory. Government agencies could expand the types of surveys that must be completed according to Federal law. Currently, businesses are legally required to complete some census information requests, but there is no legal requirement for businesses or individuals to participate in other research, including BLS’s. As illustrated by the Census Bureau’s American Community Survey’s participation rate exceeding 80%, the potential benefits of this change may justify its heavy-handed nature. An even more significant justification for mandating engagement, as explored above, is the significance of research related to economic decisions, such as those involving potential changes to interest rates and/or fiscal policies.
In a country known for personal freedom, mandates shouldn’t be adopted without thorough consideration, but as a former BLS economist responsible for convincing businesses to respond to government requests, I have observed how challenges with gathering details waste taxpayers’ dollars and diverts resources from more important tasks. Rather than have economists serve as the equivalent of salespeople in motivating businesses to supply details, the BLS would be better served by having staff members address more pressing matters, such as correcting the misalignment of skills prevalent in the nations’ workforce amidst the qualifications that employers desire. Or figuring out how universities can better equip graduates for the jobs of today and tomorrow.
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