Puerto Rico:

Limited Federal Data Hinder Analysis of Economic Condition and DOL's 2016 Overtime Rule

GAO-18-483: Published: Jun 29, 2018. Publicly Released: Jun 29, 2018.

Additional Materials:

Contact:

Cindy Brown Barnes
(202) 512-7215
BrownBarnesC@gao.gov

 

Oliver M. Richard
(202) 512-8424
RichardO@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

View Spanish version of Highlights  (PDF, 1 page).

After Puerto Rico defaulted on $1.5 billion in debt payments, Congress established federal oversight of the U.S. territory's fiscal affairs. This debt crisis coincided with a new Labor Department rule that made more people eligible for overtime pay. A federal court invalidated the rule and that decision has been appealed.

We found:

Puerto Rico's GDP has been trending down since 2000

There is limited federal data on its economy

The 2016 Overtime Rule would have affected about 4.5% of its workforce, but limited data hindered full analysis

We recommended that agencies work to include Puerto Rico in more federal economic and labor data reporting.

Estimate of workers in Puerto Rico eligible for overtime pay under the 2016 Overtime Rule

Diagram showing the population of all workers, those ineligible or unaffected, then those directly affected.

Diagram showing the population of all workers, those ineligible or unaffected, then those directly affected.

Additional Materials:

Contact:

Cindy Brown Barnes
(202) 512-7215
BrownBarnesC@gao.gov

 

Oliver M. Richard
(202) 512-8424
RichardO@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

View Spanish version of Highlights  (PDF, 1 page).

What GAO Found

Unreliable economic and limited labor data make conditions in Puerto Rico difficult to evaluate.

  • Puerto Rico Planning Board data show that from 2005 to 2016 Puerto Rico's gross domestic product (GDP), a principal economic indicator, decreased by over 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 While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic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.
  • Further, Puert Rico has limited labor statistics because it is not included in the Current Population Survey (CPS), which is produced by Commerce's Census Bureau (Census) and Department of Labor's (DOL) Bureau of Labor Statistics (BLS). CPS provides detailed 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.

GAO used a different dataset—American Community Survey (ACS)—to assess the potential effects of applying the 2016 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. 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.

Why GAO Did This Study

Puerto Rico, the largest and most populous territory of the United States, is subject to congressional authority, although it has broad authority over matters of internal governance. After it defaulted on over $1.5 billion in public debt since 2015, Congress passed PROMESA to establish federal oversight of fiscal affairs. This debt crisis coincided with 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.

This report (1) examines the economic conditions in Puerto Rico as of the end of 2016, and (2) assesses the potential effects of applying the 2016 Overtime Rule to Puerto Rico. GAO analyzed 1990-2016 economic data and replicated DOL's impact analysis of the 2016 Overtime Rule using 2015 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.

What GAO Recommends

GAO recommends that BEA include Puerto Rico in its reporting on GDP and that Census and BLS 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.

For more information, contact Cindy Brown Barnes at (202) 512-7215 or BrownBarnesC@gao.gov or Oliver Richard at (202) 512-8424 or RichardO@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Commerce should ensure that the Bureau of Economic Analysis includes Puerto Rico in its reporting on gross domestic product, as it does for four other U.S. territories. (Recommendation 1)

    Agency Affected: Department of Commerce

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Commerce, in cooperation with DOL's Bureau of Labor Statistics, should conduct a study on the feasibility of including Puerto Rico in its reporting of the Current Population Survey. (Recommendation 2)

    Agency Affected: Department of Commerce

  3. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Labor, in cooperation with the Commerce's Census Bureau, should conduct a study on the feasibility of including Puerto Rico in its reporting of the Current Population Survey. (Recommendation 3)

    Agency Affected: Department of Labor

 

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