The Decline in Wireless Employment – A Symptom of a Problem or Success?

Anton Troianovski’s recent article “Wireless Jobs Vanish” (WSJ, July 18, 2011) concluded that wireless carrier employment has fallen to a 12-year low.  The article compared the decline in wireless employment and the increase in revenues calling it a “disconnect” – implying that there is something terribly wrong in the wireless market.  Nothing could be further from the truth.  The decline in employment is not reflective of an industry decline, but one of burgeoning success, economic growth, innovation, operational efficiency and economic opportunity.

 

While industry revenues increase have increased, consumer wireless prices have declined even faster, meaning that the increase in revenues is entirely the result of increased consumer demand.  Since the Consumer Price Index began measuring wireless prices in late 1997, prices have decreased by 40%.  If you consider that consumers now average over 800 minutes per month on their wireless phone, since 1997, the decline in revenue per minute has been 91% (in 1997 dollars).  In other words, the “disconnect” that the article cites is really a story of consumer benefits; it is a story about impressive productivity gains – “doing more with less” – and how these gains result in lower consumer prices. 

 

The article’s comparison between industry revenues and employment is very misleading.  Labor is not the biggest input factor used to produce wireless services—capital is.  Since wireless services were introduced in the mid-1980s, nearly one-third of a trillion dollars were invested.  In addition to capital, the purchase of materials, rents, services and energy are all needed to produce wireless services.  By comparing revenues to direct employment, the article incorrectly attributes all the perceived productivity gains to labor, when in fact capital investments in automation and computerization may have achieved all of these gains. 

 

For example, assume that technological innovations lead businesses to substitute from labor to capital in order to achieve some process improvement that saves expense and lowers price.  The reality is that indirect jobs would also be created by these capital investments, but they are not being counted in the wireless industry statistics.  Similarly, increased outsourcing will mean indirect jobs as well, but not in the industry’s financial books.  An analysis of the wireless industry’s direct employment should be mindful of these indirect effects and of jobs that are created in related industries, as well as induced effects from employees who spend their wages and salaries on other things.  All of these cascading effects create jobs elsewhere in the economy.  

 

Other information technology industries are investing in platforms, devices, applications and software that use these more efficient and less costly wireless networks – thus further stimulating demand and creating jobs.  As productivity results in falling consumer prices, consumers save real dollars, which they plow back into the economy in the form of spending or investment – further stimulating economic output and jobs.  In fact, my study, co-authored by Dr. Larry F. Darby (a former bureau chief at the FCC and its chief economist) and Professor Joseph Fuhr, found that network industries (like broadband and wireless networks) produce twice the jobs per dollar of cash flow, compared to edge companies (like Google and Amazon).   But, a simple look at wireless company jobs does not reflect any of these factors.  In short, innovation, efficiency and productivity will produce more jobs, not less.  The Obama Administration and FCC Chairman Julius Genachowski are pushing for an acceleration in broadband investment and deployment to help stimulate America’s economic growth and global competitiveness.  No one can argue the merits of this.

 

While technological innovation can displace jobs, the result is always much better than the alternative.  Being unproductive does not create jobs; it raises production costs, reduces demand and creates poverty.  Yes, banning automobiles in favor of horse-drawn carriages might create demand for carriage drivers; requiring telephone companies to connect each telephone call by hand might create the need for more operators; and turning back automation and mass production may make manufacturing very labor-intensive and costly — but how poor would our society be? 

 

The reality is that innovation and productivity are the means by which society becomes better off — prices fall, innovation advances, savings are reallocated and spent (or invested) and standards of living improve.  This creates more jobs, not less.

 

There is nothing terrible about information economy’s job market.  The reality is that the sector is truly a driving force for the economy, and productivity means more for everyone, including jobs for workers and lower prices for consumers. 

 

Steve Pociask is president of the American Consumer Institute, a 501c3 educational and research institute.

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