THE BLOG
10/11/2011 02:30 pm ET | Updated Dec 11, 2011

Job Creation Will Come from the Wires, not the Software of Broadband Internet

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.