By all means celebrate the return of the long-form Census, but remember the old saw that politicians tend to use statistics the way a drunk uses a lamppost – for support rather than for light, writes Stanley H. Hartt. Policy makers should base their decisions more on tomorrow's prospects than yesterday's evidence.

By Stanley H. Hartt, May 26, 2016

When the federal Conservative government decided to eliminate the mandatory long-form census in 2010, it caused an outcry among academics  and other adherents of so-called “evidence-based” policy development. Intended to appeal to the electoral base of the political party then in power, the decision was an ideologically-motivated manoeuvre designed to provoke outrage among the “chattering classes” while purporting to protect the privacy of citizens already fiercely opposed to intrusive, big government.

In its place, a new survey, the National Household Survey (NHS), would become voluntary for one out of every three households (estimated at about 4.5 million at the time) while the short form would remain mandatory.

The debate was predictable: individuals who had been selected in the past as among the 20 percent of households formerly compelled to complete a 40-page questionnaire had bristled when asked about their ethnicity, size and layout of their living accommodations, relationships with others living in the same abode, number of bedrooms etc. The reaction typically was, “Of what possible use could this information be to the government?” Even the knowledge that Statistics Canada was prohibited by law from divulging personal information to other agencies of government did not comfort the objectors.

On the other side were the representatives of government-funded organizations, or those advocating policies backed by tax dollars, who relied on the census data to make their arguments that greater resources be allocated to the work of correcting the various ills that the data had exposed. Poverty groups, representatives of aboriginal communities, advocates for same sex relationships,  provincial and municipal governments, churches and charities, for example, opposed the interruption of the statistical series begun in 1971. They made the valid point that by altering the basis of data gathering, the accumulated output would become increasingly useless.  They accused the government of using privacy concerns as an excuse, arguing that voluntary samples usually produce biased results because various groups, such as the very rich and the impoverished, often decline to respond.

As it turned out, while 97.1 percent of eligible respondents did complete their short form in 2011, only 68.6 percent submitted the voluntary NHS, a significantly lower proportion than for prior mandatory long-form census replies.

Fast forward to 2015. The Liberals promised to reinstate the mandatory long-form census in their election platform, and in early May of 2016, the distribution of mandatory long and short forms to the Canadian public began. It was accompanied by a feel-good advertising campaign designed to make respondents feel they were performing a civic duty by responsibly (indeed, the ad campaign seemed to suggest, joyously) completing their form and submitting it.

A cynic could have concluded that the determination to count census forms among the promises kept, was nothing more than a part of its slash and burn initiative to reverse signature measures in the Conservative policy legacy, (including withdrawal of the CF-18s from combat against ISIS in the Middle East, eliminating financial reporting by First Nations, lowering the eligibility age for OAS, closing the Office of Religious Freedoms, reversing the capital gains exemption for charitable donations of private company shares and real estate etc.).

Of course, the federal government gathers all sorts of data from us, some for very specific purposes, like our income tax returns, which are also used in aggregated form to support a great variety of social policy initiatives. Many other statistical series managed by Statistics Canada provide us with information about defined fields of interest, as for example, the Labour Force Survey measuring participation rates and unemployment in Canada.

This latter statistic is a slave to its own limitations: by including only individuals who are actively seeking work, it systematically under-estimates the economic pain felt by those who have abandoned hope of finding employment and have stopped looking. It also fails to count the large numbers who have chosen to call themselves “self-employed” as consultants or some other euphemistic designation in order to preserve their dignity, but who are suffering financial hardship not addressed by government policy. The uncounted deprived are part of the rebellion against establishment politicians seen in advanced Western democracies recently.

This raises a point that seems to have been overlooked in the furor over maintaining the integrity of the census and the reliance placed on the end product as a major basis for introducing, modifying or expanding various governmental policy initiatives: are we relying too much on the “rear view mirror” of past historical information and not concentrating enough on predicting future trends and developments? Are we basing policy on yesterday’s evidence and not on tomorrow’s prospects?

Conscious of the wry humour in Yogi Berra’s famous statement that, “It's tough to make predictions, especially about the future,” yet fully aware of the old saw that politicians use statistics the way a drunk uses a lamppost – for support rather than for light, should we not require that the evidence on which policy is based be reflective of the reality it addresses, not of some past state of affairs?

Two personal experiences come to mind. Freshly graduated with my M.A. in Economics, I went to work for a summer at the Economics and Research Branch of the Department of Labour in Ottawa. There, we endeavoured to determine how Canada figured out what jobs it ought to be providing training for. What we learned was shocking. We had selected for a case study the job category of “electronics technician” at the dawn of the age in which such skill sets were coming into significant demand. We identified the five largest employers of that category in Canada and went to see them. We learned that, at the time, despite an evident requirement for large numbers of trained personnel, effectively 100 percent of the employees in this job category were being recruited from the United Kingdom and, with great administrative trouble and expense, supported in their efforts to immigrate to Canada. The UK had advanced, sophisticated training programs that we didn’t have for this kind of specialized labour and had foreseen the need to turn out graduates en masse; Canada was not even in the game.

One solution that has developed since, of course, is programs like the Canada Job Grant, under which the federal government farms out to industry the selection of those skilled trades for which training is demonstrably required. This permits employers to select the specific categories they believe they will most need in the future. Spectacular success stories have resulted from this program, such as General Electric Canada’s introduction of robotics technology in its Canadian plants and leading-edge skills being acquired by existing and new employees.

But if there were a criticism to be levelled at this reliance on the enlightened self-interest of market participants it would be that the government has no long-term guarantees of the sustainability of the skills developed with our tax dollars (in the face of disruptive technologies or the exportability of whole factories to lower-cost jurisdictions).  This training might be of fleeting benefit to our labour pool composition and ability to compete. What is missing is a view of the future and the impact of change, technological or otherwise, that would enable us to better match demand with supply of our skilled workforce.

This does not mean governments should become central planners. The remnants of the telecommunications policy that attempted to superimpose four cellular wireless competitors in each market, and the repeated scandals and waste from the Ontario government’s attempts at top-down energy policy should assure us of that. But “fact-based” needn’t mean we consider only old facts.

A second illustration of the limits of bureaucrats’ abilities to have access to current facts from which they can base urgent policy-making is the daring, massive, and ultimately highly successful initiative of the Canadian federal government during the Global Financial Crisis.

Budget 2009 created the Extraordinary Financing Framework (EFF), consisting of up to $200 billion in programs. Among them was authority for the government to purchase up to $125 billion of insured mortgages from the financial institutions that held them, so that banks and other lenders could continue to make credit available to businesses to finance inventories and receivables, cover overheads, and manage payroll costs. Aside from direct spending on things like infrastructure, the main focus of Budget 2009 was on ensuring that credit remained available to credit-worthy participants in our economy.

A Canadian Secured Credit Facility (CSCF) of $12 billion was established to help large and small originators of loans or leases securitize the purchase or leasing of vehicles and equipment.

But here is the rub: the government formed an Advisory Committee on Financing, a group of ten chairpersons, CEOs and CFOs (chaired by the undersigned), to monitor the sufficiency and effectiveness of these programs. The committee found that the CSCF was not adequately ensuring that credit was available to smaller originators of leases and loans for vehicles and equipment.

The designers of the EFF had done a brilliant job of providing an effective mechanism for only the largest players, which available data had permitted them to identify.

The public servants had missed the small guys, whose existence and economic functions had not been captured by information in any data base.

The Advisory Committee heard from the largest independent automobile dealer in Toronto, who could not qualify for the “small business tranche” of the CSCF, which required $100 million of paper to be securitized as an entry condition. This dealer pointed out that, while he generated about $120 million in sales and lease contracts in a year, he could not afford to accumulate them until they reached the $100 million level, but needed to roll his paper about six times per year, so that he never was required to finance more than $20 million at a time.

The data bases of the Finance Department and the BDC had missed this phenomenon. Faced with these new facts, Finance Minister Flaherty created a $500 million facility in Budget 2010, to be matched by the private sector, which provided much-needed relief for these smaller enterprises.

The moral of this story is that, despite the howls of protest at the suppression of the long-form census and the great relief expressed upon its restoration, we have overestimated the usefulness of lagging data. At the same time, we have underestimated the need for leading indications of the structure of our economy that demonstrate where it is going. We need that latter information if we are to make policy development responsive to more than past events and capable, instead, of anticipating future developments and trends.

So, pace, to the adherents of the long form. Enjoy your “victory” by all means, but let us keep this in context.

Stanley Herbert Hartt, OC, QC, is a lawyer, lecturer, businessman, and civil servant. He currently serves as counsel at Norton Rose Fulbright Canada. Mr. Hartt also served as chairman, president and CEO of Campeau Corporation, deputy minister at the Department of Finance and, in the late 1980s, as chief of staff in the Office of the Prime Minister.

 

 

 

 

 

 

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