Tuesday 12 May 2020

Cable-ready infrastructure

My column in Newsroom this week ($) suggests that the government might look to some of its own necessary infrastructure upgrades, particularly around back end servers. We could be getting so much better and more timely data on what's all going on. 

A snippet:
More timely data is possible. But it would require unclogging the pipe running from Inland Revenue to Statistics New Zealand.

Income tax in New Zealand is delightfully simple. The Pay As You Earn (PAYE) system has firms submit income tax to IRD on workers’ behalf, rather than the workers themselves.

It has an additional advantage. Inland Revenue is receiving daily updates on the state of the economy. Every day, IRD receives PAYE from companies on behalf of workers across the country. It knows which companies are sending in payments on behalf of which workers. If a worker’s PAYE stub comes in a bit light this week, as compared to last fortnight’s pay, it either means the worker put in fewer hours or took a pay cut.

From that data, it would be simple – at least in principle – to produce daily updates on the state of the economy. How did today’s PAYE earnings compare to the same day in the pay cycle last year? How much worse is it today than it was a month ago? Or a fortnight ago? Daily data would be noisy – Covid-related pressure can make for late filing. But rolling weekly averages could smooth out some of that noise. GST data could be similarly useful.

Jobseeker benefits data is a lagging indicator of the real state of the economy. It’s like sitting out at the Basin Reserve, watching the cricket, and listening to an audio feed that’s two balls behind the play. Payroll data would be more up-to-date. Hopefully the IRD is already providing some of those updates to Cabinet. If it is, it would be very nice if the results were released more broadly.

But it could be even better. Statistics New Zealand (SNZ) maintains the Linked Employer-Employee Dataset (LEED) tying together tax data provided by IRD with company data from SNZ’s “Business Frame.” It uses that data to provide updates on average and median earnings in different industries. Unfortunately, the most recent update to LEED is from December 2018. In a few years, it might show what’s been going on at the industry level during the current pandemic – interesting for academic researchers who are not in a hurry, but useless for current policy purposes.

It surely is not beyond the wit of the boffins, with a bit of encouragement and funding, to fix the pipes so that daily data could make its way from IRD to SNZ for rapid economic updates detailing just what is going on with payroll at the industry level, and possibly even the occupational level, in each city and region.
The amount of resource that Stats NZ poured into the useless IANZ project is especially galling when you consider what they could have been doing instead.  

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