The NZ Initiative's Rachel Hodder says Statistics New Zealand's new Integrated Data Infrastructure is a rich source of information

By Rachel Hodder*

Good treatment requires good diagnosis. As it is with medicine so it is with policy. It is hard to make something better without a good understanding of the problem in the first place.

This is where data can make a big difference.

Developments such as Statistics New Zealand’s Integrated Data Infrastructure (IDI) are integral to implementing evidence-based policy. The IDI is a collection of data sets from various ministries and other sources that hold information on individuals.

Most of the data in the IDI was already being collected long before the IDI existed. By linking the information on individuals in these siloed data sets, the IDI becomes a rich source of information. A perfect case of the whole being greater than the sum of its parts.

The IDI allows researchers to identify how individuals interact with various ministries and how policies that affect individuals in one area may have large flow-on effects in many other areas. For example, researchers could identify how expanding Pharmac coverage of a new treatment may benefit the recipients of the treatment not only in their use of health services, but also in their educational attainment, their use of welfare benefits, their income, etc. 

This frame of thinking has driven the Government to invest heavily in the social investment approach. The idea behind social investment is not just to bring data analysis to the forefront of policy-making but also to identify where policy change could make the most difference in long run outcomes of people’s lives. It recognises that early intervention can save the Government money later on, not to mention improving life outcomes for New Zealanders. 

In other words, it identifies where policy intervention can get the most bang for its buck.

The Government’s plan to replace the school decile funding system is an example of how this can work in practice. The school decile funding system works by evaluating how many students at a given school came from low socio-economic communities. It is a blunt tool but for a long time it was the best tool available.

Now the Government is planning on basing school funding on the predictive risk index. This will work by assessing the number of students at each school who themselves exhibit risk factors for low educational outcomes. Identifying these risk factors would not have been possible without the IDI.

This should result in a more effective and responsive allocation of funding to schools which have the most need for it.

The social investment approach has not been given a warm reception by all. Critics worry that such targeted funding may stigmatise individuals or that the use of data intrudes on privacy rights.

These concerns are understandable but probably over-blown. The implementation of social investment approaches is unlikely to stigmatise individuals nor is it likely to erode citizens’ rights to privacy. The predictive risk index that will be used for school funding will not reveal to schools which students are at risk, it will merely change the schools funding allocation. Statistics New Zealand takes its custodial role in protecting individual confidentiality very seriously. Access to IDI data is tightly controlled and it would be very difficult to smuggle out any damaging information.

But the social investment cheerleaders can also be guilty of exaggerating its promise. Better data allows researchers to ask more questions and get more precise answers. But the quality of the answers can only be as good as the quality of the questions.

Data is to policy analysts what an X-ray is to a doctor. It allows policy researchers to detect what would otherwise have been obscured. However, just like you would need a doctor to administer and interpret an x-ray, the potential that can be realised from bigger, better data relies on the ability of the policy researchers.

Policy researchers are now even more important in using their skills to figure out what the problem is and how best to fix it.

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*Rachel Hodder is a research fellow at The NZ Initiative. The NZ Initiative writes a fortnightly column for interest.co.nz.