Monday, July 16, 2018

GAO: Limited Puerto Rico data hinders economic analysis

By on June 29, 2018

SAN JUAN – There is limited federal data on Puerto Rico’s economy and labor, limiting an evaluation on the island’s fiscal condition and the impact of applying a 2016 Overtime Rule that made certain workers eligible for overtime pay, a General Accountability Office (GAO) report issued Friday found.

The report recommended that federal agencies include Puerto Rico in their statistics.   

After Puerto Rico defaulted on more than $1.5 billion in public debt since 2015, the GAO said, Congress passed the Promesa law to establish oversight of fiscal affairs. The debt crisis coincided with Department of Labor (DOL) finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. Promesa included a provision for GAO to assess the rule’s impact on Puerto Rico and examine its economic condition.

The report examined the economic conditions in Puerto Rico from 1990 to 2016 and assessed the potential effects of applying the overtime rule to Puerto Rico. GAO replicated the Department of Labor’s (DOL) impact analysis of the 2016 Overtime Rule using 2015 American Community Survey (ACS) data, the same year used by DOL in its analysis.

GAO also reviewed federal laws, regulations, court documents, “agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups.”

The authors also found that Puerto Rico’s gross domestic product (GDP) has been trending down since 2000 and that the overtime rule “would have affected about 4.5% of the workforce, but limited data hindered full analysis.”

According to the report, Puerto Rico Planning Board data show that from 2005 to 2016 the island’s GDP decreased by more than 9 percent, after adjusting for inflation, and the “devastation brought by Hurricane Maria” in 2017 has worsened economic conditions.

“While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories.

“For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico’s GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so,” the report says.

Puerto Rico has limited labor statistics, the authors argue, because it is not included in the Current Population Survey (CPS), which is produced by the Census Bureau and Bureau of Labor Statistics (BLS). CPS provides information about employment, such as hours of work and earnings.

“The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL’s 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS,” the report reads.

GAO used a different dataset—American Community Survey (ACS)—to assess the potential effects of applying the Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay, the report says.

“GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected—that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers’ salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal,” the report adds.

In sum, GAO recommends that BEA include Puerto Rico in its reporting on GDP and that the Census Bureau study the feasibility of including Puerto Rico in the CPS.

“Commerce agreed with our recommendations and DOL did not have any comments on the report,” the GAO wrote.

See the report here.

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