Economic data is valuable, which is why survey respondents should be paid for their efforts.
Several members of Congress have proposed to eliminate the American Community Survey (a survey of households with special attention to geography and housing), or at least change how the survey is conducted, because it is too intrusive. In particular, the American Community Survey mandates that, with little or no compensation, randomly selected individuals assist the Census Bureau in their data collection by answering a number of questions about how they live.
Economists and business people have recently spoken out on the significant value of the American Community Survey data for their research. The economists Emi Nakamura, Jon Steinsson and Nicolas Vincent explained how the Census Bureau data “provide researchers and the public with a trove of information on everything from the size of families’ mortgage payments in Boise, Idaho, to the nation’s median annual income.”
I agree that economic survey data are valuable, and have used them many times in my own research. But in documenting the value of those data, economists have so far failed to address legislator concerns about survey burdens.
The survey for households consists of 30 pages of forms and instructions. The Census Bureau estimates that the survey takes an average of 38 minutes for each household to complete (including time for reading instructions), which is a total of 1.31 million hours per year for the 2.06 million survey participants in 2010.
But a few economists insist that the survey burdens are absolutely necessary: “Making census-type surveys voluntary … can actually increase costs because the sample size would need to be increased to offset biased response rates.” Processing data from a voluntary collection scheme, they believe, would be too difficult and would take away from some of the value provided by those surveys.
This episode reminds me of debates about military manpower during the Vietnam War. Before 1973, our government would require randomly selected individuals – draftees with low draft lottery numbers – to assist the Department of Defense by acquiring military skills and joining troops in the battlefield. President Nixon appointed the Gates Commission in 1969 to consider whether military manpower could instead be acquired in a normal labor market – that is, on an all-volunteer basis.
At first, military leaders were opposed to an all-volunteer system, referring to volunteers as “mercenaries” and insisting that an all-volunteer system would be less effective. (Gary S. Becker also tells the story that his paper “The Case Against the Draft” was rejected by the Air Force-supported Rand Corporation because Air Force leaders were convinced that the draft was beneficial.)
It was also believed that a draft is cheaper because it allows the military to recruit manpower without paying market wages. But as Milton Friedman persuasively explained to fellow members of the Gates Commission, the cost of the military is not limited to the Department of Defense payroll but also includes the burdens imposed on those drafted and their families. By paying market wages, the all-volunteer system helps shifts some of that burden from the families with unlucky draft numbers to taxpayers generally.
For the same reason, I don’t believe that the randomly chosen American Community Survey respondents should be asked to bear the burden of the survey collection. Rather, taxpayers should bear it by compensating survey respondents for their voluntary participation.
Although the official survey budget does not include an “expenditure” for the time of survey participants, survey participants’ time amounts to a social cost of about $54 million per year (valuing hours answering survey questions at the national average labor compensation per hour of about $41.50).
As the University of Chicago economist Tomas Philipson’s research suggests, using incentive-based compensation for survey participants — similar to that used in many other labor markets — could make government data not only more plentiful but also of better quality, compared to compelling people and businesses to take part at no pay.
Economic data would be of better quality if supplied, as Milton Friedman put it, by mercenaries rather than by slaves.