Steve Jobs is rightly hailed for the software design innovations of Apple products, but the citing of his corporate leadership as epitomizing the modern economy may also reflect some unfortunate truths as well. Apple has the highest market capitalization of any company on Wall Street, yet it only employs 50,000 employees worldwide--a rounding error in job measurerments.
Similarly, Google employs only 30,000 workers and even a heavyweight software employer like Microsoft has only 90,000 employees. Compare the employee numbers at Apple or Google or other symbols of the "new economy" to the massive employment numbers by corporate leaders of yesteryear like General Motors or U.S. Steel and you get an inkling of why our economy is having so much trouble generating jobs.
Tens of millions of Americans don't have jobs, yet the business press and even popular imagination tends to focus on companies that don't deliver broad-based job creation. Economist Tyler Cowen recently wrote in his book, The Great Stagnation, that "out major innovations are springing up in sectors where a lot of work is done by machines, not by human beings" which "is one reason why we have been seeing a 'jobless recovery.'" While jobs are created indirectly through such innovation, a lot of jobs are eliminated as well by all the new Internet-based technology.
A story last month actually found it newsworthy that Google actually has 1000 customer service representatives on staff to provide email and phone support for 60 countries. Google has used every tool of innovation to automate any process it can in its operations, enriching shareholders mightily but not actually creating many new jobs overall with its revenue growth.
Adding to the problem for U.S. workers is that even many of the jobs created by these companies get outsourced globally. Actually getting what percentage of these employees are in the US is sometimes a challenge, since companies like Apple won't disclose what percentage of their jobs are in the United States. According to an analysis by the Washington Post, the latest data show that multinationals cut 2.9 million jobs in the United States and added 2.4 million overseas between 2000 and 2009. Many of the employees a company like Apple has, especially those involved in manufacturing, are employed oversees in often horrible work conditions.
Wires of Broadband are Job Creators: So is the job picture from the "new economy" hopeless? Not exactly, if you look away from the flashier software and user interfaces produced by Google and Apple to the seemingly more boring area of the broadband wires and physical infrastructure of the Internet. Companies like AT&T and Verizon actually employ vastly more people and have invested far more cash into job-creating investments in the last decade. The chart below compares the market capitalization of AT&T, Verizon, Microsoft, Apple and Google in descending order of employment. What's remarkable is that AT&T and Google have roughly similar value in the stock market, yet AT&T actually employs over eight times as many people.
The jobs in the broadband infrastructure sector are not just jobs maintaining old infrastructure but include a massive expansion of job-creating investments in the last decade. In a paper by the organization Broadband for America, the authors estimate that nearly $190 billion was invested in broadband deployment between 2003 and 2009 with an average of 434,000 additional jobs supported each year by those investments during the period. (Crandall and Singer 2010: 12) See chart below with the blue line showing the annual dollars invested in billions of dollars and the red bars showing the jobs supported each year.
Remarkably, this level of investment has continued into the recession itself. The Progressive Policy Institute estimates that telecom and broadcasting companies have stepped up their investment in new equipment and software by 45 percent since 2005, after adjusting for inflation, compared to only a 6 percent overall increase in private real spending on nonresidential equipment and software in the rest of the economy. And leading the nation in the last fiscal year in capital spending according to PPI were AT&T and Verizon, which invested $19.5 billion and $16.5 billion respectively in capital expenditures in 2010. In the wireless sector alone, both carriers invested over $30 billion in capital expenditures from 2006 to 2010. And as I noted in a past column, these kinds of unionized telecom jobs are good jobs often available to non-college educated workers, exactly the folks left unemployed across the rest of the economy.
Software can go overseas, manufacturing can go overseas, but digging up the ground and laying fiber optic wires or building wireless towers are permanent investments that increase the competitiveness of U.S. firms and people located near that infrastructure. One study by the Brookings Institution found that for every 1 percentage point increase in broadband deployment, employment rose between 0.2 and 0.3 percent--or about 300,000 jobs nationally for each 1 percent increase in deployment.
But U.S. is Lagging Internationally in Broadband Investments: Unfortunately, the U.S. investment in broadband is still lagging what we need to remain internationally competitive. This year's Broadband Progress Report by the Federal Communications Commission found that 26.2 million Americans living in 9.2 million households are not served by high-speed broadband, either without access altogether or at such low speeds that they cannot really take advantage of all aspects of the increasingly graphic-rich Internet. A separate report found that the U.S. is not only lagging many developing nations in access to broadband, but that businesses and residents even in major cities have slower broadband available.
What's needed is not just the investments to provide high-speed wires into communities across the country , but the associated investments in smart grid technology in the homes to increase the efficiency of our energy systems and investments in our medical facilities to make telehealth available for rural clinics and for home-based monitoring of patients.
Create a Broadband-Based Jobs Program: What's needed is actually hundreds of billions of dollars in new broadband-related infrastructure investments, but estimates are that the long-term economic returns will be in the multi-trillion dollar range. And those hundreds of billions of dollars in immediate costs would actually translate into a massive jobs program for our nation's unemployed--with any debt taken on to pay those costs paid back with the returns our nation would reap in lower energy and medical costs as well as the jobs attracted to our country based on top broadband technology being available.
The Obama Recovery act made a small downpayment on broadband investments in both the smart grid and telehealth, but that money has largely been spent and we are instead seeing almost no new public money coming down the pipeline from this Congress. The private sector can do some of that investment--and encouraging that is one reason I do support the AT&T - T-Mobile merger, but it's not enough for addressing both the technology gap and the unemployment crisis we face as a nation.
Whether our policymakers can muster the will to commit the resources needed to make the investments needed for long-term economic growth is uncertain, but a first step might be a bit less worship of companies delivering nice consumer software but few jobs, and a bit more focus on the industries like telecom infrastructure that, while less glamorous, are actually the job-drivers of the economy.
Follow Nathan Newman on Twitter: www.twitter.com/nathansnewman
Wake up America, we must adjust for the reality of the future; and new types of businesses, and "industries . . . but just like the buggy whip manufacturers, our entrenched, corrupt financial institutions and Wall Stree "insiders" have destroyed the sources of their future welath . . . there is only so much that they can exploit. Things have to change for recovery; and it will be a long hard process. Those who live off the day dreams of what was will not be prepared to adjust to the future.
A better comparison would be the size of AT&T in the '50s to AT&T today. All those switchboard operators are now long gone.
Let's not put much hope in ANY industry coming to the rescue -- it ain't gonna happen.
I don't know if it was your intention, but you hit on what I think is an important point. The world is evolving, and one of the realities of the evolving world is that some companies don't need factories full of people to solve productions problems anymore. Even if all of the outsourced jobs came back, they'd eventually be engineered out of existence. Then what? I think companies could be hiring more now, but what about in 50 years or 150 years when there really just isn't enough work to go around? How do we maintain our consumer driven economy? What happens when unemployment rates are a reflection of the amount of work to be done relative to the size of our population?
So its a joke when Obama consults with executives from Facebook and Google about jobs creation strategy. The New Economy isn't going to save us.
It's hardly a silly question. Not only are manual workers being replaced, much of the mundane work is too. Typists, long an office staple, are no more. The corporate mail room? Down to a few people with email. Filing clerks and office libraries? Replaced by computer automation. The only jobs that are safe from automation are the ones that require creating content - artists, media, analysis, or technical information spawned from the brain of the worker.
What, then, will happen to the millions (or billions) of people who would have been manual laborers in yesterday's world? Some few will make it as technicians, but most will not. I think this will be one of the most pressing questions of the next century, but don't expect any politicians to address it until it is a crisis: there's no political gain to be had by telling people things they don't want to hear.
The potential of those workers is incredible - it'd be a shame to waste it.
They have high-end manufacturing, and everyone is occupied. They see China as an opportunity, not a problem: they sell China high-end products such as Audis, and also sell them the machines that they need for their factories.
We need to do the same thing : no more unlimited free trade, and start making beautiful things.
Mr. Newman is right. Lets be optimistic - with industrial policy we can be great again !
Look at Germany !!!
No more Apple plus Kentucky Fried Chicken economy. Apple plus Audi instead
First step : publicly financed elections !
Further, Germany is even more in need of free trade than the US. The first thing to get targeted in trade wars are luxury goods (because most people will never know they are being taxed). That's one thing Germany's economy, driven my luxury exports, can't afford.
There is no substitute for industrial policy, and this is one area where the public and private sectors can collaborate.
Industrial policy NOW !!!!!
Thanks Mr. Newman
http://www.youtube.com/watch?v=AZ4bx4r1VeQ
Those outcomes aren't what we particularly want. The only reason I can see for Mr. Newman advocating them is because of the 26 million Americans (approximately 8% of us) who don't have access to broadband. Assuring the last 8% has broadband won't improve our economic prospects much, but it will cost a lot of money, and for the same reason the US is "lagging" other countries in this area: the US is huge, with a population density roughly half of what Europe is and lower still than SE Asia. It's expensive to run fiber optic lines to middle-of-nowhere towns like the one I grew up in. Absent any specific need, the government doesn't have any business using taxpayer money to provide that service.
Because the spending is concentrated on profit rich zones but not upon areas likely to respond with job creation --- see rural electrification for a historical explanation
oh....wait....wasn't someone supposed to apply reasoning to your statement?
sry....
But as noted in the article, we still lag other countries in speed even in major cities, so private investments haven't done the trick by themselves. And there are large areas of public investments and incentives in the smart grid and health care technology that can translate into massive economic gains for the economy-- and which few think will happen by themselves.
The government funds don't have to be giveaways. They can be structured as long-term loans to jumpstart the investments, with the government reaping interest on the back end to pay down any debt. But the bottom line is that we have tens of millions of people unemployed, so we need more done to get the economy moving and people employed.
As for trailing other countries, I'll drop this challenge: name another country with ten million people who do not live within 100 miles of a major metropolitan area of approximately 1 million people. Maybe India, with it's 1.2 Billion people, but that's about it. There's no country on Earth that is more wired with equivalent (or even remotely close) population density except Canada - where over 90% live within 100 miles of the US border, making it very easy to reach nearly everyone.
I simply can't believe that wiring up the last 8% of the US is a significant job creator when industry has been spending billions wiring up (and re-wiring) the other 92% with no appreciable gain. It doesn't make any sense.
Unions kept management salaries in check. Management got greedy and started shipping jobs out of this country, they downsized and took the difference.
We need to go forward but with union representation.
Unions exist in workplaces ranging from janitors to teachers to engineers to the National Football League, so there is little to argue that unions are particular to any kind of work. The determinants of unionization have far more to do with various historical contingencies, often when the industry came into strength (ie. strong industries in the 1930s are largely unionized because public policy supported unions; more recent industries are less union because of policy hostility).
Audis, Mercedes, VW, BMW, Opels and Porches are union-made. The car companies are profitable and the workers do well ( and drink beer in their lunch breaks).
How about doing the same in the U.S.?
Or great broadband infrastructure?