Don’t Starve the BLS | Commentary
By Katharine G. Abraham, Steven J. Davis and John C. Haltiwanger Amid market volatility, looming interest rate increases and an uncertain outlook for jobs and incomes, now is not the time to hobble our ability to monitor and understand the economy. So why is Congress eyeing further cuts to the Bureau of Labor Statistics budget?
Proposed Senate legislation would cut the BLS by another $13 million in 2016, after its real annual spending has already fallen more than 10 percent ($72 million) over the last five years. A less draconian House bill would barely begin to offset past cuts. The question will have to be decided before the continuing resolution expires.
Failing to restore more of BLS’s lost funding, let alone cutting it further, would be bad for business and a disservice to workers and investors alike. Reliable economic data inform and reassure markets. With signals about the economy and jobs so mixed, the BLS is an indispensable source of clarity.
BLS statistical releases move financial markets, sometimes sharply. The monthly BLS Employment Situation Summary is arguably the most closely watched and influential statistical report in the world. The BLS website draws over 18 million page views a month (not counting the many businesses accessing BLS data through other channels). Commercial data providers, analysts, news media and policymakers rely and report on BLS statistics daily.
BLS is also the main source of data on U.S. wage and price movements. They are essential for tracking inflation, living costs and compensation trends, and feed into countless business and policy decisions. Cost-of-living adjustments for Social Security, Disability Insurance and federal retirement pensions depend directly on movements in the BLS Consumer Price Index, as do income tax brackets, tax exemptions and deductions, and thresholds for the Earned Income Tax Credit.
As the federal budget tightens and private data collection expands, the BLS should take steps to save money without compromising its essential services, and it has. It stopped tracking mass layoff statistics when other sources of information became available. It discontinued an international labor comparisons program that could be taken over by the private sector. It eliminated a non-essential green jobs data program, which served only a narrow constituency. It saved $15 million a year by reengineering its collection of labor compensation and monthly payroll data, and implemented many other cost-cutting measures.
Unfortunately, budget pressures forced it to make other cuts as well. Over the past two years, BLS deferred hiring, IT maintenance and equipment purchases in the hope future funding would improve. It hasn’t, and now key programs could suffer. Some, like the Quarterly Census of Employment and Wages, have already been cut back. Others might be eliminated, including the Job Openings and Labor Turnover Survey, which yields important insight into changing labor demand, the Export Price Index, which helps compute GDP and other indicators, and the American Time Use Survey.
While the cuts Congress is contemplating may not threaten the quality of the BLS’s signature employment reports, we need more and better data to understand our changing economy, not less. Instead of narrowing its data collection, BLS ought to expand it. For starters, it should develop and strengthen programs to help assess the growth of the “gig economy,” how global supply chains affect the US economy, and why wage growth remains sluggish despite job vacancy rates at a 15-year high.
Skeptics will ask, why not rely entirely on the private sector to do this work? Why should the public underwrite the BLS at all? The answer is simple. Government should do it, because no private entity can match government statistical agencies’ ability to collect objective data and aggregate them into usable basic statistics. Taxpayers should pay for it, because those basic statistics, such as basic scientific research, yield highly diverse applications and valuable benefits across our economy and society.
Underfunding the BLS would be a false economy. It would mean basic statistics would be undersupplied, and the quality of economic decision-making would suffer. It may save a few million dollars in the 2016 federal budget, but would ultimately cost us much more.
Katharine G. Abraham is a professor of economics and survey methodology at the University of Maryland and a former commissioner of the Bureau of Labor Statistics. Steven J. Davis is a professor at the University of Chicago Booth School of Business and a visiting fellow at the Hoover Institution. John C. Haltiwanger is a professor of economics at the University of Maryland and a former chief economist of the U.S. Census Bureau.