Features | From Pivot Magazine

Why bad data creates bad public policy

To make better decisions, Canada needs better data. CPAs can help.

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woman looking over charts in her living roomStatistics Canada requires monthly collection cycles where households are asked to fill out questionnaires and keep literal diaries of their spending. How likely is it that you’d be willing to do that? (JGI/Jamie Grill/Getty Images)

Canada is faced with all sorts of difficult economic questions that we can’t answer. Some are quite old, and we just can’t seem to solve them. Others are newer, but equally difficult to crack. Still others are somewhere in the middle, where we have some evidence for a possible answer, but not one that’s clear-cut. How do we solve chronic homelessness, or how do we prepare Canada’s workforce for a future labour market where AI and automation are ubiquitous? How does a reduction in the corporate tax rate affect business investment? 

Regardless of the question, though, at the heart of every unsolved economic quandary is the issue of data. Or rather, our lack of data. Let’s consider an example: designing a GST/HST tax credit for lower- and middle-income households. The idea behind the credit is that, since sales taxes are regressive, some households should get a break by getting some money back. But how much do we give? 

The problem isn’t that there’s no data—obviously, since the GST/HST tax credit has been around for ages. The problem is that our data needs aren’t static. For years, the government has used its Survey of Household Spending to collect information on how much people spend on a range of goods and services. This data can then be broken down by income cohort so we can figure out how much lower- and middle-income households spend on key necessities in order to design a tax credit that accurately reflects that spending.

Simple, right?

Not so fast. That survey requires households to accurately track how much they spend on all sorts of goods and services for an entire year. Statistics Canada requires monthly collection cycles where households are asked to fill out questionnaires and keep literal diaries of their spending. How likely is it that you’d be willing to do that?

Actually, I already know the answer—not likely. In the 2017 survey, the response rate to the questionnaire portion was a decent 67 per cent. The response rate for the diary portion was considerably lower at 41 per cent. High response rates are critical because Statistics Canada spends an enormous amount of effort ensuring that their data accurately reflects Canada as a whole. 

41% are falling. That’s the response rate for a key StatsCan survey of household spending habits.

Statistics Canada called the decline in the diary portion concerning, noting that it had been falling over time. This obviously raises questions about the reliability of the data. How can we be confident in using this data and basing policy decisions around it?

This is not a good situation, and Statistics Canada knows that. This brings us to last October when it was revealed that the statistical agency was planning to go directly to the banks for “individual-level financial transaction data.” It’s difficult to say with certainty that the move was related to the low response rate of the household spending survey, but it’d be a hell of a coincidence if it wasn’t.

Statistics Canada ultimately dropped the idea due to a widespread public backlash. And that points to exactly the problem we face with data today. 

Our data needs are getting more complicated as the questions we’re asking get more complicated. Yet our attitude about data is a constantly moving target—especially today given concerns about how our data is being used. So how do we find that balance between getting deeper, more granular data than we have in the past and privacy concerns that are paramount in today’s environment?

There’s no easy answer. The federal budget this year includes numerous measures aimed at getting dollars in the hands of Statistics Canada and other agencies for the express purpose of collecting better data. Everything from the real estate sector to the health care and energy sectors are getting much-needed investments in this area, and it is here that the CPA profession has an important role to play. 

Unbeknownst to most, the accounting profession is responsible for a cross-section of data that we use every day. When Statistics Canada asks firms for data on expenditures and financial disclosures, the data is directly aggregated into what we know more commonly as GDP, or gross domestic product. The individuals providing that data are typically in the financial reporting areas, which are stacked with accounting professionals. Though it’s under-appreciated work, accountants are largely responsible for the single most important statistic used by economists everywhere.

And it’s not just financial data. All kinds of data at the firm level are in the hands of accountants, and that data is going to be looked upon in the near future to answer some of those very tough policy questions. That’s a positive thing, because what’s needed now in managing that data is trust—trust that we are using and managing that data in good faith—and the accountancy profession is well-positioned for that, too. 

A recent Gallup poll in the United States noted that accountants are consistently rated as one of the most honest and ethical professions, behind only nurses, doctors, pharmacists, school teachers and police. Accountants have a real opportunity to play a leadership role in the future of how we manage our data. Our economic futures depend on it.