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November 1, 2012

Why Does the Government Ask so Many Questions?

Too many surveys, too many forms and too little to show for it

When the latest government survey of business arrives in the mailbox of Marlin Steel Wire Products in Baltimore, Maryland, president Drew Greenblatt knows it won’t take much time, maybe a couple of hours, to complete. Still, that’s a couple of hours when he or one of his 30 employees won’t be making sales calls, fashioning products, pursuing collections, meeting with bankers, ordering steel or otherwise keeping the business in business. 

“At a big company, they have so many people that delegating those projects is less of a challenge,” Greenblatt noted. “When a small company is given one of these projects, it’s a big deal. Those two hours are critical, because that means we’re not doing something that’s holding the company together.” Marlin’s sales this year will total about $7 million.

“We would love to shorten it, but the reality is that electronic reporting (by survey filers) does encourage more people to file,” said Shirin Ahmed, assistant director for economic programs at the Census Bureau. “Our data product schedule is dependent on the funding we get.”

A Fractured Backlash

It is no surprise, then, that small manufacturers are increasingly pushing back. “What’s in it for me?” says David Sheer, general manager at the Steel Supply Company in Rolling Meadows, Illinois.

Last spring, the sentiment embodied in Sheer’s remark found its way to Capitol Hill. The House, but not the Senate, voted to withdraw funding for the Economic Census, a comprehensive survey of business conducted every five years by the Census Bureau, as well as the bureau’s annual American Community Survey of households.

The Paperwork Burden at Nelsen Steel

Davis Nelsen, CEO of his 73-year-old family business, Nelsen Steel Company, has launched an unusual project—taking a cost-based inventory of the government surveys his company fills out in a given year. Preliminary results show that his 69-employee steel finishing business in Franklin Park, Illinois, spent more than 100 hours in the last year filling out 13 mandatory surveys from various federal agencies. Nelsen shared his thoughts on this statistical paperwork burden with Forward.

Why did you undertake a project to count data collection mandates?

When I began in this business in the early 1980s, there was one report we had to fill out. I was tasked with filling it out when I was wet behind the ears. It was incredibly frustrating. They would ask for information in a format that we did not readily have available. Now, it seems not a month goes by when we don’t get some new request from the government. I can’t put my finger on any one of these surveys that does anything for me other than create cost.

What data do you find useful in your business?

We look at automotive build rates [available from several private sources], like the Thomson Reuters/University of Michigan Survey of Consumers, the Young Presidents’ Organization Global Pulse survey, unemployment figures, housing starts and scrap metal prices.

What is required to respond to government surveys?

The process in many cases requires software modifications to put the data in a format for what’s being requested. There’s always a clerical element, but there are a great deal of grey areas—some decisions, some estimating to honestly answer the survey—that gets to the CFO level or my level.

Let’s look at one survey currently underway, the Commodity Flow Survey, required every quarter in a survey year, which occurs every five years. The government says the survey provides “a crucial set of statistics on the value, weight, mode and distance of commodities shipped by mining, manufacturing, wholesale, and selected retail and services establishments, as well as auxiliary establishments that support these industries.” That’s a mouthful. What’s required here?

The government estimates each report takes two hours. It takes us four hours to set it up. It requires us to build a spreadsheet to drop the data in and a new routing in our own data flow. Then each report takes three hours per quarter. Listen, we’re very profitable. We have the capacity and the staff to work on these things, but maybe at the expense of not working on other things. If somebody’s not very profitable, can they afford to spend time working on these things?

By comparison, there are a lot of forms to file if you export to or import from Canada or Mexico under the North American Free Trade Agreement (NAFTA) and Homeland Security rules. Isn’t that an equal or greater data-gathering hassle?

There’s a whole regimen under NAFTA and Homeland Security. We do it in-house. It’s a pretty complicated set of forms, but it’s a cost of doing business. The quid pro quo is that when we created the free trade area, tariffs and duties went close to zero. We have to do this, and we become more competitive.

You seek certification under the International Organization for Standardization (ISO) for production quality, a process that takes time and involves considerable paperwork. How does this voluntary data generation task compare to the work of responding to government data requests?

To me that’s like a wellness check. I view ISO as measuring how well you follow your procedures and your business plan.

What do you hope to do with the results of your internal survey of government surveys?

I would love to get the National Association of Manufacturers to focus more clearly on the issue. Just think of the economy-wide inefficiency of companies spending these hundreds of hours.

– Bill Barnhart

After the vote, U.S. Rep. Kevin Brady, a Texas Republican and vice chair of the Joint Economic Committee, called for a “broad inquiry into the accuracy, relevance and timeliness of all U.S. economic statistics.”

“You’re getting a lot of the questions from those new Republican congressional freshmen who want to change the way government does business,” says Grant Aldonas, managing director of the trade and investment consulting firm Split Rock International in Arlington, Virginia, and a former under secretary of commerce for international trade. “They’re hearing from their constituents in small business.”

In spite of congressional efforts to kill it, public support for the Economic Census, which has existed in some form alongside the decennial census since 1810, is widespread, including trade associations that lobby for manufacturers. The 2012 Economic Census is now underway.

A survey published this year by the National Federation of Independent Business, a small business lobbying group, ranked federal paperwork 16 out of 75 problems facing small manufacturers. Among warehousing and transportation firms, the federal paperwork problem ranked 11, ahead of poor sales and poor profits as principal concerns among manufacturers and distributors.

Canada Does It Differently, and the Same

Compared to the multiple statistical agencies in the United States, Canada collects nearly all its economic data through a single office, Statistics Canada, which operates under its own budget and has no statutory obligation to support other agency policy missions. Nonetheless, among 12 government-imposed paperwork burdens on small and medium-sized businesses in Canada, the most disliked by business operators was Statistics Canada’s mandatory surveys. They are used to compile 32 reports on the macroeconomy, prices of goods and services, construction trends, labor trends and international trade, among other topics, according to a 2010 report by a Canadian commission on government red tape.

“Certainly having some coordination makes sense,” says Laura Jones, executive vice president of the Canadian Federation of Independent Business. “But one in four businesses identify surveys from Statistics Canada as among the most burdensome federal regulations that they come up against.”

We Need Some of This Data

U.S. federal agencies that conduct surveys and issue questionnaires must (by law) declare the purpose of each inquiry. According to the Census Bureau, the Economic Census is justified by a simple idea: “Good public policy depends on accurate information.”

“There are some signs that the U.S. is becoming more competitive and we do have some manufacturing returning to the U.S. … To really get a true picture of that we really need every small business to respond to the survey,” says Maurine Haver, president of Haver Analytics, an international business data aggregator in New York, New York, and a past president of the National Association for Business Economics.

Still, there are three main, nagging issues here. First, the paperwork burden complaint reflects gradual expansion over many decades of data collection by government agencies. Second, it reveals a dilemma for business managers: They may be distracted or just annoyed by having to respond to questionnaires that seem to have no operational value to them. But the stature of their industry in government policy circles depends on their ability to cite reliable statistics. Third, the complaint points to reforms that could ease survey fatigue.

As a member of Congress in 1790, founding father and future president James Madison urged the U.S. House to extend the decennial “enumeration” mandated by the Constitution by gathering data on the “various interests of the United States.” He specified agriculture, commerce and manufacturing. “This kind of information has never been obtained in any country,” he said, adding that Congress could benefit from “the opportunity of marking the progress of the society and distinguishing the growth in every interest.”

Safe to say, the federal government’s effort to mark the growth of “every interest” through mandatory surveys has generally provoked grumbling, if not outright revolt, among survey subjects. One of the more notorious incidents occurred in the mid-1970s, amid the Watergate investigation of President Richard Nixon. Lewis Engman, Nixon’s appointee to chair the Federal Trade Commission (FTC), forced more than 1,000 industrial companies to submit to the FTC highly detailed and previously confidential reports of sales and profits by lines of business, not just total company results.

“In the process of analyzing the economy, we need data and profit figures and information on price movements which can tell us whether or not things are really happening competitively within an industry,” Engman insisted, according to a New York Times story at the time.

Dozens of companies, including Aluminum Company of America, Inland Steel Company, Bethlehem Steel Corporation and Republic Steel Corporation sued the FTC to halt the program. A federal appeals court in Washington, D.C., upheld the FTC’s authority to conduct the survey. But the program was canceled in 1979, after five annual reports were compiled amid strident opposition on Capitol Hill from business lobbyists.

A Kinder, Gentler Approach?

Faced with widespread antagonism among business data providers, government agencies softened their approach. Congress passed the Paperwork Reduction Act in 1980, as Ronald Reagan succeeded Jimmy Carter, requiring the White House of Management and Budget to vet and certify proposed surveys by federal agencies.

“The early 90s marked our proactive outreach with data providers,” says Ahmed. In 1993, President Bill Clinton ordered a systematic review of federal red tape. Most recently, President Barack Obama ordered another round of paperwork reform, demanding by this fall that each agency “list at least three new initiatives, producing significant quantified reductions in paperwork and reporting burdens.”

Last year, Canadian Prime Minister Stephen Harper appointed a Red Tape Reduction Commission, which conducted a nationwide listening tour about paperwork “irritants that have a clear detrimental effect on growth, competitiveness and innovation.” Harper’s recommendations from the commission’s finding are due at the end of this year.

What’s a Green Job?

Still, new surveys continue to emerge. The U.S. Labor Department’s attempt to count “green” jobs in its three-page quarterly Green Goods and Services

Survey has prompted criticism and political derision. The questionnaire, which the department estimated would take “an average of 15 minutes” to complete, was inserted into the Bureau of Labor Statistics’ (BLS) Quarterly Census of Employment and Wages, which the BLS says can take up to an hour to fill out without the green jobs insert.

Last June, U.S. Rep. Darrell Issa of California quizzed Labor Department officials about the wide variety of jobs that the department’s Bureau of Labor Statistics (BLS) defined as “green” under the new regulation. Testifying at Issa’s hearing, John Galvin, acting BLS commissioner, acknowledged, for example, that “oil lobbyist” was a green job.

Diana Furchtgott-Roth, chief economist for the Labor Department under President George W. Bush and an adviser to President Reagan, told Congress last June: “Green jobs are the most recent reappearance of a perennial idea—industrial policy to promote certain industries. The entire exercise is an attempt to justify government initiatives, while in practice doing nothing to make America more efficient.”

In spite of its sometimes loose criteria, no industrial company or industry trade group has sued to halt the green jobs survey. The American

Iron and Steel Institute, responding to President Obama’s call for more green jobs has stated, “America’s sustainable steel industry is creating green jobs.” The Aluminum Association likewise maintains that “recycling is a source of sustainable private-sector-driven green jobs.” But proving their case requires statistics.

“I’ve got a lot of CEOs who tell me that aluminum as a sustainable product is a no-brainer,” says Nicholas Adams, vice president for business information and member services at the Aluminum Association in Arlington, Virginia. “You can make a good argument to classify aluminum jobs as green jobs, but you have to have a survey to tell you that somebody has collected the data.”

Indeed, the BLS report from its first green jobs count found that manufacturing was the largest generator of green jobs in the private sector, with nearly 462,000 jobs representing 20.4% of total private-sector green jobs. The only higher green jobs generator was local government, which includes waste removal jobs. In turn, primary metals manufacturing and metal fabrication accounted for 100,000 green jobs, or 21.7% of green manufacturing jobs.

In January 2013, the initial results of a new mandatory Census Bureau survey of manufacturers, taken earlier this year, will be published. The 10-page Management and Organizational Practices Survey, embedded in the Annual Survey of Manufacturers, was designed, according to the bureau, to provide information on “the use of decentralized decision(s) … data-driven decision making, and investments in human capital.” It will allow the government for the first time to “estimate a firm’s stock of management and organizational assets.” Got that?

“This breaks from our traditional types of collection efforts,” said Mendel Gayle, chief of the Census Bureau’s manufacturing and construction division. “Normally, we’re looking at production-type statistics. This is more about how you go about making management decisions. How do you go about making decisions about bringing on a new product?”

Some Numbers are Useful, Even Crucial

Undeniably though, companies and their trade associations are using government statistics to paint a favorable picture of themselves and lend credibility to their lobbying efforts.

“Without the census data, we have no way of understanding what the economic impact of the industry is,” says Adams. Using macroeconomic government data “is not so much inward-looking.” Instead, the data asseses “whether we are going to count in terms of public policy.”

Adams said he would not meet with a member of Congress without having at his fingertips data on aluminum employment in the member’s district or state. “Data end up being a baseline for argument,” he says. “You can’t have a discussion about anything without putting together some numbers.”

Last year, the Census Bureau, citing budget priorities, dropped its Current Industrial Report series of monthly, quarterly and annual statistics about American industry. The move eliminated time-consuming surveys. But several industrial trade associations protested, saying the reports “support American manufacturing competitiveness.”

Allen Irish, director of the industry affairs for the American Coatings Association in Washington, D.C., says data gathered for the Current Industrial Reports had “self-evident” value to industry analysts. For one thing, he says, the reports provided raw material for the Federal Reserve’s widely followed monthly reports on industrial production and capacity utilization as well as the Labor Department’s monthly producer price index.

“The absence of the numbers derived from the Current Industrial Reports surveys means they have to fall back on proxies they can’t really validate,” he says.

“It was a valuable survey,” said the Census Bureau’s Mendel Gayle. “However, due to the budget constraints and everybody having to do their fair share to get the budget under control, that program was terminated. We rolled some of the details into the 2012 Economic Census.”

And Now, Factoryless Goods Producers

Ninety-eight U.S. government agencies, each with its own budget and policy agenda, gather statistics on American businesses and individuals. The White House Office of Management and Budget reports that the annual federal paperwork burden on the public swelled 4.3% in 2010, to 10.2 billion hours. That statistic does include individual tax returns as well as the load on businesses. But, it is hardly reassuring that the government paper load, for all of us, is not getting lighter.

For the manufacturing sector, 23 statistical reports are published by the U.S. Census Bureau alone. Other business data gatherers include the Departments of Labor, Transportation, Homeland Security and Energy, as well as the Environmental Protection Agency, the Federal Reserve Board and regional Federal Reserve banks.

“This is information collected that winds up going into a black hole, as far as I’m concerned,” says Davis Nelsen, CEO of Nelsen Steel Company in Franklin Park, Illinois. Nelsen counted 13 surveys from federal agencies that his company was compelled, by law, to fill out in the last year. He estimates his company devoted 101 hours to the task [see sidebar].

Some Modest Proposals to Lighten the Load

Several antidotes to survey fatigue:

  • Tell us once. Canada is considering a “tell us once” rule, forcing information sharing among government agencies to reduce redundant survey questions. In 2002, the U.S. Congress passed the Confidential Information Protection and Statistical Efficiency Act as a step toward increasing statistics sharing and ending overlapping surveys by extending the confidentiality rules of the Census Bureau to all 12 major statistical agencies. Without such protection, a tell-us-once rule would have no hope of enactment in Congress.

 

  • Less is more. Statisticians can make better use of existing raw materials to fight survey creep. For many years, several regional Federal Reserve banks have surveyed local companies to compile a monthly manufacturing conditions report. In 1987, the Federal Reserve Bank of Chicago introduced a new report on manufacturing activity in five Midwestern states that involves no new surveys. Instead, the Federal Reserve Bank of Chicago uses existing data sources, including employment numbers gathered by states as well as reports from the Census Bureau, Bureau of Labor Statistics and Federal Reserve Board.

 

  • Listening helps. Canada’s Red Tape Reduction Commission last year held 15 roundtables with business leaders in 13 cities. “It was a terrific approach,” says Laura Jones of the Canadian Federation of Independent Business. “It was very eye-opening for many of the politicians on that panel to hear the first-hand frustration of business.”

 

  • Speed up delivery of data products. A four-year lag, as noted earlier, in the release of what could be very useful information, makes it useless to the business managers who supplied the data in the first place.

Just as aggravating, once the government collects all this information, it takes its time slicing, dicing, chewing and interpreting it, before releasing it to the public. The final results from the 2007 Economic Census concerning manufacturing, for example, were not released until the third quarter of 2011, long after the Great Recession of 2008-2009 had hammered the economy. Data on the state of manufacturing in 2007 was especially irrelevant in the second half of 2011.

The Census Bureau plans to release final reports from the 2012 Economic Census, currently underway, in the summer of 2016, raising the prospect of another dump of out-of-date statistics useful only for long-term, academic benchmarking studies. In an economy based on just-in-time delivery of information and products, these lags seem egregious.

Still, at least one of the changes being made by government statisticians may turn out to add always welcome political clout for manufacturers. At the federal level, a committee of several statistical agencies this year introduced a new category in the North American Industry Classification System (NAICS)—factoryless goods producers, or companies that design products but outsource physical production as manufacturers.

“It’s probably not a real word,” says Ahmed. “These companies are now considered manufacturers, not wholesalers or service establishments. We’re trying to get at value-added and better measurements of innovation.” The change also took effect this year at Statistics Canada and its sister agency in Mexico, the Instituto Nacional de Estadística y Geografía, known as INEGI.

The change means certain companies that had been counted as wholesalers or service providers before will now be subject to the multiple mandatory government surveys taken of manufacturers, a new status they may or may not appreciate.

On the other hand, classification as factoryless goods producers “will arguably expand the traditional definition of manufacturing beyond establishments known as factories, plants or mills to include a broader range of establishments undertaking the production of goods,” said an Economic Classification Policy Committee report. “Arguments can be made that this expansion will artificially increase the importance of manufacturing.”

With such changes, survey fatigue is unlikely to subside among small manufacturers any time soon. William Dunkelberg, chief economist for the National Federation of Independent Business, said the response rate to his organization’s voluntary Small Business Optimism Index monthly survey is declining in part because of survey overload. “Everybody else figured they can do surveys, too,” he said. “People get bombarded with stuff.”

Unfortunately, in most cases it seems, efforts at reforming business data-gathering are skewed toward accommodating users of data in the government, academia and private consultancies, but not the data providers.

For example, none of the more than 100 experts invited to a 2010 conference in Washington, D.C., for improving the Commodity Flow Survey currently underway was from companies that produce or transport the commodities to be tracked in the survey.

On the other hand, a website scan of trade associations claiming to represent small manufacturers reveals no formal objections to the new Green Goods and Services Survey, the Management and Organizational Practices Survey or any other surveys by the government.

Manufacturers want to be counted, but there has to be a better way.


Bill Barnhart, a Chicago-based financial writer, was a business editor and columnist for the Chicago Tribune for 30 years. He is the author of MSCI’s 100th history, “Links in the Long Chain.”