Hon. ARNOLD OLSEN,

NATIONAL ASSOCIATION OF MANUFACTURERS
OF THE UNITED STATES OF AMERICA,
New York, N.Y., March 3, 1964.

Chairman, Subcommittee on Census and Government Statistics of House Com mittee on Post Office and Civil Service, Washington, D.C.

DEAR REPRESENTATVE OLSEN: It is a privilege to present the views of the National Association of Manufacturers in these hearings on the 1963 economic census program. Good as the Bureau's programs may be, improvements are always possible in such areas as sample design, field operations, and the editing and tabulation of data. We assume that the Bureau is aware of such opportunities and will make the necessary changes as the occasion warrants.

One problem that is of increasing importance to industry, however, is the cost of providing the masses of information that are requested by Government agencies. According to the National City Bank of New York, the Federal Government currently has some 5,300 forms in use for regular reporting, not including reports to the IRS, certain other agencies of the Treasury Department, and the banking authorities, which are exempted from the Federal Reports Act. Another dimension of the problem is revealed by a table on page 13 of the February 1964 issue of the American Statistician which details the "Obligations for Principal Current Statistical Programs." This table shows that the obligations have increased from $76.3 million in 1963 to an estimated $85.2 million in 1964 and to $94.3 million in 1965.

While it is true that much of the increase is to be devoted to improvement and strengthening of existing series, the fact of the increase arouses some apprehension that a still greater burden may be imposed on industry for providing ever more detailed data. Similarly, while it is true that the figures quoted above include all agencies, it can be expected that the Census Bureau will share in the expansion.

Our association has no inclination to criticize necessary efforts to strengthen current series. We believe, however, that there is a very real danger that requests for information will become so frequent and numerous that the sheer cost of assembling the data will outweigh its possible value. We urge, therefore, that both this committee and the Census Bureau, in planning future programs, bear constantly in mind the costs involved in supplying data.

In this connection, we would like to suggest two possible steps that may be worthy of further exploration. One is the idea of announcing new or expanded questions substantially in advance of their inclusion in a questionnaire. The other is the possibility of eliminating questions of marginal or questionable value from the questionnaires.

Some of our members have suggested that the growth of computer operations in industry makes it possible to provide certain kinds of data readily if they are programed in advance. The suggestion follows, therefore, that if those who are to be asked for information are given sufficient advance warning they will be able to program the necessary material and provide the data with relative ease. This, of course, implies a delay between the time it is decided to include a given question and the time that data becomes available, but it would seem that in a substantial number of cases such delay is of little importance compared to the potential cost savings involved.

The second suggestion is based on our own experience in connection with a survey that the Census Bureau conducts annually for the National Science Foundation. In that survey two questions are asked relating to expenditures for research and development and the proportion which is Government financed. These provide the basis for material included in both the census of manufacturers and the NSF study. Supplemental questions are also asked, however, relating to a breakdown of expenditures between applied research and development. Members of our research committee have repeatedly pointed out that data of this latter sort can be no more than an estimate and of little value. We suggest, therefore, that savings are possible through the elimination of questions where substantial problems arise as to proper definitions or where the data supplied must, of necessity, be largely estimated.

The foregoing should not be taken as a recommendation for the noninclusion of new questions or the coverage of new areas. Clearly, each suggestion must be evaluated on its merits. The association's conservation committee, for example, has been highly pleased with the results of the inclusion of questions on water use in the census of manufacturers. The data provided has been of sub

stantial value in providing a factual basis for recommending public policy in an important area.

Another point that is frequently mentioned is the need for prompter publication of final reports. We recognize the problems of processing the large number of individual forms that are involved. At the same time, it is pertinent to note that much of the value of Census Bureau reports stems from their timeliness and currency.

To summarize, then, we may say that our association has little in the nature of specific criticism of the Bureau's activities. Industry does have a growing cost problem resulting from the steady increase in requests for data from various Government agencies. We urge that this committee and the Census Bureau do whatever they can to ameliorate that problem. We also recommend that the Census Bureau continue to work with industry-oriented groups such as the Advisory Council on Federal Reports in planning expansions of their current programs. Any new programs should, in our opinion, meet the twin criteria of providing only data that cannot be made available by private sources and of being based on readily available company records.

Respectfully,

GEORGE G. HAGEDORN,
Director of Research.

Mr. OLSEN. I want also to announce that, without objection, I will keep the record open until February 28 in order to include additional letters and statements concerning the economic censuses.

Mr. Secretary, we are very glad to have you with us and want you to know that we appreciate your coming here this morning to discuss the census. Proceed as you wish, Mr. Secretary.

STATEMENT OF HON. RICHARD H. HOLTON, ASSISTANT SECRETARY FOR ECONOMIC AFFAIRS, U.S. DEPARTMENT OF COMMERCE

Mr. HOLTON. Thank you very much, Mr. Chairman. I am very grateful to the committee for this opportunity to comment on the work of the Bureau of the Census.

You might appreciate knowing first the organizational context in the Department of Commerce within which the Bureau of the Census is now operating. A year ago this month Secretary Hodges reorganized the Department so that he could have, for the first time, an Assistant Secretary for Economic Affairs. The function of this Assistant Secretary is to assume policy direction over the Bureau of the Census and the Office of Business Economics, to review and coordinate all economic research throughout the Department, to provide the principal liaison with the Council of Economic Advisers and with other agencies on longrun economic policy problems, and to serve as the chief economic adviser of the Secretary. One of the two deputies to this Assistant Secretary concerns himself primarily with program matters pertaining to the Bureau of the Census and the Office of Business Economics.

I am the first to occupy this newly created position in the Department and this occasion is my first opportunity to discuss before the committee the role of the Bureau of the Census in the Federal statistical system.

Mr. Scammon, the Director of the Bureau of the Census, has presented a statement to this committee. I believe that most of the discussion thus far has centered upon some of the technical aspects of the conduct of the economic census program. I would like to address my remarks today primarily to your interest in the uses of the census data by the business community.

I wish I could report to you today some accurate figures showing how often various types of census data are used by the different kinds of business. I wish I could tell you how much greater our GNP is, or how much greater corporate profits or personal income is, because of the better business decisions made possible by census data. But as you know, it is impossible to measure accurately the economic value of the census programs.

Nevertheless we do know a great deal about the use of these data. They are widely used by business in general economic or sales forecasting; in the analysis of market potentials; in the analysis of distribution, the layout of sales territories, and of sales performance; in deciding on the location of plants, warehouses, and stores; in the determination of samples for market research; and there are many other specific areas of application.

The business community is becoming very sophisticated in its use of statistical information; increasingly, one finds business decisions being based on a study of the hard facts rather than on a snap judgment. As we seek more rapid economic growth of the economy, we should continue to press for improved data for decisionmaking in business. One of the more curious features of the whole problem of assessing the use of census data concerns what we might call the "wholesaling of census data. The wholesaling of census data is good; we welcome it. But typically in this process the data lose their identification with the Bureau of the Census and the user does not realize the source of the information. Census data reach the ultimate users by a variety of routes. Some, of course, get their data direct from census publications. But many others receive census data or information reflecting census data-through the articles in the business magazines and business press generally, which draw so heavily on census reports. The ultimate users receive bank letters, financial newspapers, and weekly business newsletters which essentially repackage and interpret census data. The executives in a company may base a major decision on a staff paper which used census data. So many, if not most, ultimate users of census data do not recognize the origin of the information.

The private enterprise system rightly looks to the Government for many of these facts needed for decisionmaking in modern business. There is no need at this juncture to repeat the reasons why data of sufficient scope and reliability cannot be generated by private resources and initiative alone. Previous testimony before this committee has covered this ground thoroughly.

It is important to appreciate one way in which the regular series generated by the economic census increase the value of countless other series of data generated privately. The census data are used extensively in checking and revising privately available data. A privately produced time series of annual estimates of retail sales for a given kind of business in a given area, for example, needs the census of business data on retail trade every few years to provide a new "benchmark." Thanks to the census benchmark data, the private series can be produced for the intervening years at a lower cost than would otherwise be possible.

Mr. OLSEN. Mr. Secretary, I wonder for the record if you couldn't give us an example of the use of the census by an industry like shoes, automobiles, bicycles.

Mr. HOLTON. I can give you a general example, Mr. Chairman. The Sales Management magazine publishes every June a survey of buying power which is typical of the way in which census data are really repackaged and expanded for use by the business community. The publication I have here gives estimated sales data, for example, for different kinds of retail trade, for all of the individual counties in the country, and all of the principal cities.

Mr. OLSEN. Does it tell us anything about shoe sales in a county in the United States?

Mr. HOLTON. They have a particular category. The categories they use are food, general merchandise, apparel, furniture and household appliances, automotive, gas stations, lumber, building and hardware stores, and drugstores. They do not give any breakdown in more detail than that.

Mr. OLSEN. Someone said at one of our hearings some time or other that shoe manufacturers knew how many shoes to make, even of given sizes, because of information from the census. That is what I wanted you to tell me about if you could.

Mr. HOLTON. The Bureau of the Census produces production statistics which will give the shoe manufacturers that kind of detail. The shoe manufacturers, I think, are not getting that from retail sales data out of Census, or retail sales data out of the survey of buying power. The Bureau of the Census conducts many special surveys of production for industry and for small segments of industry, and for the shoe manufacturer there is quite detailed information available on production.

Mr. OLSEN. How about the market? Doesn't the Bureau of the Census give the shoe manufacturer any indication of how many people have two feet and would buy shoes and what their ages are?

Mr. HOLTON. The Bureau of the Census through the current population survey provides this information, to update the decennial census. Mr. OLSEN. I am trying to make the census very popular with the Congress and I wish you would help me. All of what you say is very good, but it makes the person who reads it draw on his own imagination on how someone draws up a sales territory. Why not give us some examples of what a company does?

Mr. HOLTON. Certainly one of the most common uses of the census of business, let's say, is to look at the geographical distribution of retail sales for a particular kind of business that a manufacturer is interested in, and by this means he can set his sales quotas. In the case of the census of manufactures, and a lot of the special work which the Bureau of the Census does for individual industries, the industry is provided with data on shipments which permit the individual firms in the industry to determine how their own performance is as compared with the performance of the industry as a whole, for example.

Mr. OLSEN. I have in mind that the trade associations could just as well gather together the statistics on production in a given trade as you can, but you folks are the ones who can get information about the general public that the trade associations can't get.

Mr. HOLTON. Yes. On population data, certainly it would be very difficult indeed for any trade association or any other private group to conduct any work that would be even remotely comparable with the

work which the Bureau of the Census does. And certainly there are plenty of trade associations that realize this, as we know. And we use the trade associations a great deal, as I am sure the committee has been told, in advising the Census on the nature of new programs and what industry needs are. So we think the Bureau of the Census is very closely in tune with the needs of the business community.

Furthermore, private studies often begin where the censuses leave off and develop additional valuable detail: such studies are typically much more useful because of their relationship to the basis census data.

One can talk at length about the variety and importance of the use of these data, but I think it is much more important for us to realize that the demand for these data is apparently burgeoning, and widening the gap between the country's need for data and our ability to provide them. I think that the remarkable improvements we have been able to provide in our economic census materials in recent years may tend to disguise the fact that, relative to needs, we may be getting further behind.

There are a number of important reasons why the demand for economic data is increasing rapidly. First, and most obvious, is the fact that the economy is growing rapidly, so that there are simply more firms in existence, and therefore more business decisions made each year. Second, the average firm in the country is growing all the while as well. Consequently it is probably accurate to say that typically there is more money riding on any given decision today in American business than was the case a decade or two ago, even after allowing for changes in the price level. With more money hanging on the outcome of a given decision, the firm obviously values more highly any information which will help in the decision. Third, analytical methods for making business decisions have been improving. Here, I am thinking of such improvements as we have seen not only in market research but also in such fields as inventory management, location of new capacity, and capital equipment replacement. There is a whole series of new management techniques generally lumped under the heading of "Operations Research" that have come to be applied to the areas of production, marketing, and materials handling in business. So the demand for economic data has increased in part because we now have better analytical processes at hand for using it and they, in turn, place a premium on having more and better data.

Fourth, as American management has become more astute over the years, more decisions have had to be made with greater care in order to maintain one's competitive position. Just as U.S. businessmen are continually trying to get the jump on the other fellow by improving the quality of their product, so also are U.S. businessmen continually trying to improve their profit margins and relative positions by improving their management techniques. Many firms are no longer willing to set salesmen's sales quotas without a careful look at the rate of growth of potential sales in each individual territory, for example; and many businessmen feel that they can no longer maintain their competitive position by following old rules of thumb for inventory management or for the replacement of capital equipment. In short, business rivalry now encompasses a scope and variety of forms almost unimaginable a short time ago. This same intensification of the competitive process has placed much greater emphasis upon long-range planning an exercise that places new strains on data.