At my daughter’s graduation from the University of Delaware this June, University President Patrick Harker warned that “the machines are coming for you.”
An unsettling message, especially for a parent who just paid for a college education. But President Harker is not alone in this opinion. There is a prevailing opinion that we are in an era of technological unemployment – that technology is increasingly making skilled workers obsolete.
The specter of losing jobs to automation has haunted us since the 19th century Luddites tried to protect their livelihoods by smashing machines. In the 1980s, economist Wassily Leontief feared that new technology would displace workers just as it had replaced horses.
But widespread, long-term technological unemployment simply hasn’t materialized. Instead, technology-driven increases in productivity are leading to the creation of less-expensive goods and services, and the resulting demand is increasing employment throughout the U.S. economy. Technology and job creation have gone hand-in-hand – with productivity and employment rising together over the decades.
It’s time to examine the facts and begin to, hopefully once-and-for all, kill the myth that technology harms job creation.
SIIA asked the economist and former Under Secretary of Commerce Robert J. Shapiro to conduct a thorough and extensive analysis of the latest government statistics to assess the software industry’s economic impact. It shows that software-related businesses, directly and indirectly, are responsible for $450 billion of output, 15.4 percent of our nation’s growth-generating productivity gains, and 12.2 percent of our annual total fixed capital investments.
The study also clearly shows the global leadership of U.S. software companies. About 12 percent of U.S. software production is exported, totaling over $50 billion in 2012. Since 2006, exports of software and related services have grown nearly 50 percent faster than all U.S. exports.
What about the big question – the impact on jobs? The study shows that the software industry contributes to employment in three important ways.
Currently, it directly employs 2.5 million workers, up from 778,000 in 1990, a growth rate consistently surpassing overall job growth. The software industry’s direct contribution to employment has grown from 0.9 percent in 1990 to 2.2 percent today. In addition, software companies generate jobs by purchasing the products and services needed to run their operations. U.S. software companies consumed $212 billion in goods and services produced by other industries, supporting an additional 1.1 million jobs. Shapiro found that every 10 software jobs supports five more jobs in other industries.
Finally – and this is the real myth-killer – the software industry creates jobs in industries that purchase and use software. Shapiro analyzed the relationship between investments in software and job creation by industry, from 1997 to 2012, and found a significant correlation between those investment and employment gains.
By increasing productivity – enhancing an industry’s efficiency and expanding its capacity for innovation – software helps companies expand their production and, in many case, increase their employment.
Just look at how all these factors worked together to increase employment in 2012. In that year direct employment in the software sector grew by 128,000 positions. In addition, demand by software companies for goods and services produced by other industries increased by about $8.2 billion; helping create another 43,800 new jobs. Increases in productivity associated with the use of software expanded the GDP of other industries by over $100 billion, supporting 850,000 new jobs.
The widespread fear that robots will take our jobs simply isn’t borne out by the facts. The use of software both creates and displaces some jobs, and the net result has unquestionably been more jobs. Of course, the jobs created by investments in software often require different skills than those possessed by existing workers – and this dynamic should be seen as strong justification for policymakers to expand access to job retraining programs and investments in scientific, technical, engineering and mathematics education.
Delaware University’s president concluded his address with the advice “embrace and to exercise the creativity that is our human domain alone." Indeed – and also, remember that technology plays a vital role in allowing us to exercise that creativity – and thus is here not to take our jobs, but to help us do them better.
MacCarthy is vice president of Public Policy for the Software & Information Industry Association (SIIA) and an adjunct professor at Georgetown University.