Intensified by COVID-19, An Unspoken Data Crisis is Impacting Millions of Americans
There’s a silent data crisis in our country today that affects nearly every American. I’m talking about our monthly unemployment statistics. The archaic way in which those numbers are collected is resulting in inaccurate, outdated data upon which policy decisions totalling in the trillions of dollars are based. According to Felix Salmon, chief financial correspondent for news site Axios, “Never in living memory have those statistics been less reliable.” Yet, U.S. policymakers are using these unreliable numbers to try to repair an economy that’s been devastated by the pandemic.
Small business owners and hourly employees are particularly at risk because, by and large, they are NOT represented in our current unemployment statistics and so are left out of many economic recovery and stimulus solutions coming from policy makers at the federal, state and local levels. Here at When I Work, however, we see millions of real time data points every day from small businesses across the country that can fill in the gaps that now exist in the overall unemployment picture. For example, the BLS reported a 6.8% drop in the number of people employed in September 2020 compared to September 2019. However, among people employed by small businesses—which accounts for 47.5% of the nation’s workforce—we see the drop is 22% year-over-year in September. Let’s explore this gap.
What’s the problem?
In a nutshell, it’s the way in which data is gathered. Today’s survey systems are based on telephone and paper surveys, which can result in biased data as they rely on surveying long-term established households with accessible land line phone numbers (under-reporting on renters and those who use only cell phones). In terms of unemployment numbers, state and federal officials rely on these phone surveys and, in an attempt to gather additional information, turn to faxed reporting from (mostly large) businesses. In other words, it’s 2020 and we are getting data via landlines and faxes!
Furthermore, response rates for telephone surveys have been dropping for decades, as evidenced in this report from The Pew Research Center, which states that in 2018, responses “to phone polls fell to 6 percent — meaning pollsters could only complete interviews with 6 percent of the households in their samples.” Unemployment surveys are no different. Salmon reports that, historically, more than nine out of 10 Americans responded to questions about whether they worked in the past week. However, that percentage has been falling and, during the pandemic, has plummeted to just two in three. Survey results based on these slim ratios can hardly be representative of the American people.
The economic picture painted by this antiquated data collection practice is not only out-of-date by the time it’s reported, it reflects a static industrial age rather than today’s fluid gig- and service-oriented structure composed mostly of small business – the largest sector of our economy, by far. According to the U.S. Small Business Administration’s Department of Advocacy, 99.9% of U.S. businesses are classified as small; and 30.2 million small businesses employ 47.5% of U.S. employees (58.9 million individuals)*. In an environment in which more and more decisions are data-driven, this is a problem. A really big problem. And if I were a small business owner, I’d be hopping mad because it’s akin to taxation without representation.
The unemployment numbers were bad even when times were good
The last time unemployment data collection methods were significantly updated [around 1996], online shopping didn’t exist. And, while federal and state unemployment statistics have been unreliable for decades, we have an even poorer understanding of our economic reality today. That’s because we have no metrics to measure what’s happening in the small business service sector, a significant part of our economy, which has been more severely impacted by the COVID-19 pandemic than the rest.
To exacerbate the issue, the current data collection systems in the US have no metrics to measure underemployment – an area where small businesses and hourly workers have been hit hard, especially in food service and hospitality. While unemployment statistics seem to be stagnant according to federal reports, underemployment rates remain high but improving significantly relative to where they were after the initial onset of the pandemic and lockdowns. Meaning, many people are still working significantly fewer hours than they were before but trends have started to improve in the second half of the year.
You might be thinking, “If the government isn’t tracking and reporting this data, how can When I Work make these claims?” It’s because we’re seeing it first-hand and in real time.
As a platform that helps businesses schedule employees and track their time records, When I Work has billions of data points on the small business workforce, collected from a statistically significant 160,000+ workplaces every day. For years, we’ve seen differences between our unemployment numbers and those reported at the federal level. As COVID-19, hit, the numbers started to diverge at a much faster rate and to a greater degree. Not to say that the federal numbers are disingenuous, but they represent only a fraction of the country’s workforce and are at least a month old when they’re published. In other words, the federal unemployment numbers are not telling the whole story.
Why this matters now more than ever
Unemployment data permeates all levels of decision making – from the Federal Reserve deciding whether to stimulate or slow the economy, to Congress mulling financial relief to businesses and individuals, to local municipalities offering business tax incentives and banks deciding whether to grant a business loan. Whether the unemployment rate is considered low or high is the driving factor for all of these entities to fund proposals (and to what degree) or not.
And the problem today is that the current federal unemployment rate is reported at 7.9% (as of September 2020) and shows a year-over-year drop of 6.8% in total employment. But the numbers we’re seeing through our data places unemployment for hourly workers at small businesses in the double digits, which tells us that small business, retail, hospitality and restaurant workforce data is buried in the data that’s guiding policymakers as they try to resurrect commerce.
Our economy is based on capitalism, which is largely driven by entrepreneurs in small business. Everything we do is designed to try to make the economy function. If small business isn’t represented in the information we use to make the United States economy function, then we’re not building or supporting a system that will work.
The way we collect unemployment data needs an overhaul. It must be modernized and respond to the way the economy actually works today and to the direction it’s moving. The challenge lies in building political will to make that happen. After all, no administration wants to be responsible for revising a legacy system that will result in unemployment numbers looking worse than they already do.
That’s why small business operators need to have a voice. If there is no voice, there will be no change. Talk to people who have the ability to make that change. I know that can be a challenge for small business owners because there are so many other urgent tasks to perform. You don’t have the luxury that large companies do in terms of strategic planning for the next year or even the next quarter. But, have a voice when you can. Send an email or a message to your elected representatives at every level. Speak up a chamber of commerce meeting. Tell anyone who will listen that the economic numbers they hear in the news aren’t the whole story. Better awareness at all levels of government will lead to policy development that better supports small business.
* 2018 Stats from U.S. Small business administration, department of advocacy.