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BUREAU OF LABOR STATISTICS

STATEMENT OF JANET L NORWOOD, COMMISSIONER
ACCOMPANIED BY:
WILLIAM G. BARRON, ASSOCIATE COMMISSIONER FOR ADMINISTRA:

TIVE MANAGEMENT
MARY ANN WYRSCH, DIRECTOR, OFFICE OF BUDGET

INTRODUCTION OF ASSOCIATES

Senator SCHMITT. Our next witness is Ms. Janet Norwood, Commissioner of the Bureau of Labor Statistics.

Commissioner Norwood, please introduce your colleagues.

Ms. NORWOOD. Thank you, Mr. Chairman. It is a pleasure to be here. I have with me Mr. William Barron, who is responsible for our internal operations.

1983 REQUEST I'd like to ask that my statement be included in the record. Let me just say that we are requesting a budget of $120.1 million for fiscal 1983, which is funding required to carry forward into the coming fiscal year all of the programs remaining after the 12-percent reduction in fiscal 1982.

BLS, as you know, is a very small agency. We are also one of the oldest agencies. We are almost 100 years old, having preceded the Department of

Labor. Our budget represents less than one-half of 1 percent of the Department of Labor's total appropriation. We believe that the output that is covered in our budget request is essential. These data permit evaluation of the health of the economy, and four of the basic series—the Consumer Price Index, Producer Price Index, the Employ ment Cost Index, and our monthly Payroll Series

are widely used to escalate income and contract costs that affect literally hundreds of billions of dollars in private contracts, as well as in the Federal budget.

We have worked hard this year to contribute to the President's budget reduction initiatives, while preserving the basic core of economic intelligence for which BLS has responsibility.

The requested appropriation of $120.1 million is, I believe, essential to maintain the quality and the timeliness of our critical base program. I'd be glad to try to answer any questions that you may have.

STATISTICAL SERIES

Senator SCHMITT. Thank you. You've testified before this committee that much of the data the Bureau collects is mandated by law. If we were to make recommendations on which data series collection should

be dropped from law, what guidance could you give us? Is there anything that you're doing that nobody ever uses and you'd just as soon not do?

Ms. NORWOOD. Mr. Chairman, I found that there is always a user for any statistical series in existence.

Senator SCHMITT. The corollary to that is that if you mandate a certain set of statistics, somebody will come along and use them; is that correct?

Ms. NORWOOD. I think that's true. Our experience has been that it's the Congress of the United States that is the primary user, and I think that's for good reason. We have eliminated or sharply reduced 19 programs. Those programs which are in that cut list, some of the programs in that cut list are required by law, and we reduced them, but only to the limits allowable by law.

For example, we are required by law to produce data on work days lost due to strikes. We will continue to produce those data, but only covering establishments of 1,000 or more, which is a very small proportion of all strike statistics.

So we have tried our best to live up to the law and still reduce our budget. And we have tried to do so by eliminating programs, even though they have important users, because those that we continue, especially the basic core of data, which is what is covered by this appropriation request, must be of reasonable quality.

Senator SCHMITT. Yes; you could get into trouble by having data that wasn't of particularly good quality.

Have you ever considered charging for the data so that you might be able to improve quality as well as quantity?

USER CHARGES Ms. NORWOOD. Yes; we have looked at user charges. We do sell publications. We sell tapes and so on. But there are laws that we have to follow about that. We do a considerable amount of contract work for other parts of the Department. We have done work for the private sector, but that involves having personnel and we run into difficulties with personnel ceilings.

Senator SCHMITT. But is this under consideration, couldn't implementation of user charges justify increased personnel ceilings which, in turn, improve your data?

Ms. NORWOOD. I think that any new series that we take on, we will certainly discuss that issue with OMB. For the basic core of data that is covered by this appropriation, however, we believe that these are critical to the Nation and that they must be considered to be objective and therefore, cannot be paid for by any single group.

Senator SCHMITT. Well, to some degree, the data you collect and the money expended for that, subsidizes a fairly large industry, does it not, the economic forecasting industry. And they, in turn, with the largesse that you provide it, sell what they produce for quite handsome prices.

Do you think that they ought to be paying a little bit more to the Government? I understand that, generally, they get their information free, or at least they pay only for the cost of the publication?

Ms. NORWOOD, Mr. Chairman, there are laws which we follow which have been established by the Congress about user charges. We can't change those by ourselves.

Senator SCHMITT. Well, what I'm asking is are you considering recommending that we change them?

Ms. NORWOOD. Well, we've always felt that we would like to see a system of using the private sector for things like printing charges and for things like distribution. In fact, we're unique among the statistical agencies in having a competitive system installed in our use of computers. We use a private computer center and one of the most efficient Government computer centers and shift our work, depending on where we can get the best work done for the cheapest amount of money. We have found that that works very well.

We used to, some years ago, have our own computer center. We think we do some things extremely well. We collect data. We compile the data. We understand how to put things together. We understand the concepts and we know how to analyze data. But we found that we did not know how to run a very efficient computer center. And so we use the private sector, as well as the Government sector so that we can get the best and most efficient and cheapest service.

Senator SCHMITT. But what about these economic forecasting operations, such as Data Resources and Chase Econometrics, Wharton, et cetera, that use Government data, which is essentially free to them? Are you considering that we might charge them, not only for the cost of publication, but some reasonable user charge for the cost of production of the collection and analysis?

Ms. NORWOOD. They use the same data that is used by the Congress, by labor, by business, and by the general public. We have to treat all users in the same way. I don't think that we would want to charge the Congress or the administration or the press for information on the Consumer Price Index, for example. And so it's rather difficult, since those data are available, to charge some of the forecasting units.

On the other hand, if they ask for special things that are not a part of our regular program, we do charge them, and we charge them the full cost.

Now as to being able to make a profit on it, that's a question that really goes beyond our single statistical agency. That's a Governmentwide policy and there are laws, as I understand it.

HOMEOWNERSHIP COMPONENT Senator SCHMITT. In response to questions from this committee last year, you indicated that a test program was needed before the homeownership component of the CPI could be replaced by a rental equivalence measure. Yet, it was announced in October 1981 that such a change in the CPI was to be made beginning with data for January 1983.

Could you explain why the test program was no longer felt to be necessary or that it was accomplished in a shorter amount of time than you anticipated?

Ms. NORWOOD. We accomplished some of the testing in a shorter time and we are making increasing progress, faster progress than we had anticipated. We have become very concerned about changes in the housing market. As I'm sure you're aware, that because of interest rate arrangements and changes in the Federal Housing Administration guarantees, the data system that we use, which comes from FHA data for house prices, is quite limited. We have become quite concerned about that.

In addition, there has been a lot of creative financing in which sellers finance their homes. As a result of that, we felt it necessary to speed up our work and we have announced this change. We have also indicated that continued work will go on, even after the change in the Consumer Price Index for all urban consumers. There is a two-stage process that is required and that's all entirely consistent with our proposal to this committee.

Senator SCHMITT. Except that we didn't expect you to do it as soon as you did it. That wasn't consistent.

Ms. NORWOOD. I don't think we indicated, Mr. Chairman, in our request and in our discussion last year exactly what the timing would be. But I am sure that you would agree with me that we have to do everything we can to see to it that the Consumer Price Index is as representative of economic conditions as we can make it.

Senator SCHMITT. Well, I would think so, but unfortunately, whatever you do, the formulas that are used to calculate various colas and other budgetary increases based on the CPI themselves do not relate to current conditions. If inflation is going up, well, then they tend to provide too little. If inflation is going down, they provide too much because of the lag in the way that those formulas work.

So that's not your fault.

Ms. NORWOOD. Well, I have found, Mr. Chairman, that on one side or the other, there are people who think that our data are either too high or too low. But, in a way, that's what we're here for, to be completely objective and to try to provide the truth, to the extent that we can.

PREPARED STATEMENT AND SUBMITTED QUESTIONS Senator SCHMITT. We are not going to keep you any longer. Your statement and some additional questions will be inserted in the record at this point. Thank you for coming up one more time for such a short period. I appreciate it.

[The statement and the questions, which were not asked at the hearing but were submitted for response for the record, follow:)

STATEMENT OF JANET L. NORWOOD

Mr. Chairman and Members of the Subcommittée:

I appreciate this opportunity to appear before you to present the Bureau's FY 1983 appropriation request. The Bureau of Labor Statistics is requesting $120.1 million for FY 1983, a net increase of $7.1 million over the FY 1982 level. The Bureau's FY 1983 request provides funds to carry forward into the coming fiscal year all the programs remaining after the 12 percent reduction in FY 1982. No further statistical program increases or decreases are contemplated at this time. The $7.1 million increase is to meet (a) mandatory, largely inflationary, increases in such operating costs as rent, telephones, and contract services for data collection, like the Census Bureau charges for collecting unemployment and other data; and (b) other administrative requirements such as replacing electronic equipment essential to continue the transmission of data between the field, the computer centers and the national office. In PY 1983, because of general budget contraints and operational dislocations stemming from the recent program reductions, the Bureau will be hard pressed to maintain the quality and timeliness of its basic core programs in the employment, unemployment, price, wage and industrial relations, and productivity areas, all of which are essential to tracking the performance of the economy. Nineteen programs are being either eliminated, reduced, or deferred in FY 1982. Despite the budgetary problems, which all of us in government are confronting, we must manage to accomplish some changes as we continue our basic program. Last year, the Congress appropriated funds to expand the rent sample to represent more adequately rental units of the same type and in the same locations as owned units. This work is extremely important since the homeownership component of the CPI will be shifted to a cost of shelter concept in January 1983 for the CPI-U and in January 1985 for the CPI-W. In the labor force area, beginning in January 1983, the Bureau will include members of the Armed Forces in the definition of the labor force, as, recommended by the National Commission on Employment and Unemployment Statistics (NCEUS) and approved by the Secretary of Labor. A report on labor-market related economic hardship--also part of the NCEUS recommendations--has been published. Program expansions funded for the producer price measures and import and export price indexes are being cut back and stretched out to conserve resources in FY 1982. In addition, redesign of the sample for the Current Population Survey and revision of the industry employment, hours, and earnings series are also being delayed by the need to conserve BLS resources. The Bureau of Labor Statistics--a statistical agency now nearly 100 years old--is small: less than one-half of one percent of the Department of Labor's total appropriation. Its output is essential to the Nation: not only does its data permit evaluation of the health of the economy, but four of its series--the Consumer Price Index, Producer Price Index, the Employment Cost Index, and payroll earnings data -are widely used to escalate income and contract costs

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