NAS Provides Suggestions to Improve Business Stats

The national economy is a dynamic system, and the techniques to measure the system must be updated in order to understand its complexity, according to a recent report published by the National Academy of Sciences (NAS). In Understanding Business Dynamics: An Integrated Data System for America’s Future, NAS outlines steps that could be taken to properly capture pertinent information about firms, especially the young and small ones that are driving the emerging sectors of the economy. While the report primarily concentrates on the operations of federal agencies and the recording of statistics that are national in scope, it raises an alternative question:



Are the states properly measuring small business dynamics?

 

The report’s recommendations are divided into three categories, which may be applicable to states wishing to improve their data collection systems:

• Steps to increase the measurement of young businesses;
• Steps to coordinate data collection efforts; and,
• Steps to accommodate data sharing while protecting confidentiality.

Because the current system of data collection focuses on larger companies and traditional sectors, the report contends it is more difficult to monitor the parts of the economy that are rapidly changing. Agencies such as the Census Bureau and the Bureau for Labor Statistics (BLS) are advised to increase sampling of younger companies in future survey work. In addition, as economic data are released to the public, they should be presented in a manner that incorporates the age of the companies.

 

Many of the measurement objectives outlined in the report can be accomplished by coordinating currently available data instead of creating new and costly mechanisms, the report states. The authors recommend establishing a longitudinal data infrastructure that would link individual households and businesses across various surveys and data collection methods. Instead of expanding the reach of individual agencies, some agencies could coordinate efforts to administer periodic joint surveys to test certain variables and correct errors in their survey methods.

 

The report indicates there are four business registers in the U.S. that provide wide-scale coverage of businesses: one organized by Dun & Bradstreet and three administered by the IRS, the BLS, and the Census Bureau. The BLS and Census Bureau lists are inconsistent when compared to each other, however, possibly leading to errors in the calculation of measures such as the gross domestic product and productivity. Such errors may, in turn, alter policies dependent on this data. The Census Bureau is limited by the amount of information it can share with the BLS because its data contains federal tax information. The panel behind the report recommends expanding federal legislation to allow tax information to be extended to entities such as BLS and the Bureau of Economic Analysis.



The report was supported by a contract between NAS and the Kauffman Foundation. Chapter Five contains more specific information on recommendations. The report is available in full for purchase or can be read, page by page, for free through NAS. The executive summary also is available for download and can be accessed with the full report at: http://books.nap.edu/catalog.php?record_id=11844