Signing On for Employment: The Impacts of Broadband Internet Expansion

Imagine a United States without any paved roads. Seventy five years ago, that wouldn’t have been so strange a hypothetical. Now imagine a United States without any telecommunications infrastructure, including fiber optics used for the Internet. In 1999, only 54.2 percent of US zip codes had broadband access, a number that skyrocketed by 2007 to 96 percent of the population. This was a culmination of a largely successful policy platform aimed at improving the electronic superhighways of the United States, as described by Hilal Atasoy in her 2013 piece, “The Effects of Broadband Internet Expansion on Labor Market Outcomes,” featured in the Industrial Labor Relations Review. Atasoy demonstrates – quite convincingly – how continued investment in telecommunications networks spurs job creation, particularly in rural areas.

Substantial increases in broadband Internet expansion took place in rural settings in the period of analysis, 1999‐2007. Atasoy examines, using a number of overlapping and contingent control variables, how expansion ultimately affected job growth. As she acknowledges, however, the measurement of growth rates is heavily debated even among professional empiricists because of unobserved or confounding dependent variables. Across the many different models tested as a means to overcome this obstacle, the overwhelming conclusion is that broadband Internet expansion drove job growth and not the other way around (a situation where businesses helped establish a demand for broadband access). It helped “isolated markets by integrating them with the rest of the national economy,” the author explains.

As Atasoy emphasizes, policies crafted for job growth are important in both rural and urban settings. She is not alone in this opinion, based on at least two perspectives. Firstly, rural populations have become progressively more impoverished according to some scholars, most recently by Elizabeth Kneebone and Alan Berube of the Brookings Institution. Internet access is not a panacea, but it can help offset some of the economic degradation experienced in many parts of the country in recent years, much of which is pre‐recessionary. As the fifth anniversary of the crisis passes, it is impossible to ignore higher inequality and impoverishment in addition to what existed prior to 2008. Policies that have demonstrable effects – in quantitative research terms such as Atasoy’s – should therefore be encouraged.

After years of slow employment growth and reluctant acceptance of national unemployment rates that constantly hover around seven to eight percent, a 2.24 percent increase in employment can make a huge difference in a rural community. This is precisely what Atasoy found when examining growth across 1,349 US counties. Her results also show that employment rate increases in urban areas took place when broadband expansion occurred nationally, albeit to a lesser degree (1.52 percent). The value of 2.24 percent reflects a calculation that takes time fixed effects into account, thereby discounting preexisting levels of broadband availability, such as those that exist in urban areas. This is important for the comparison between rural and urban counties, and ultimately allows Atasoy to draw strong conclusions about both effects.

Growth in both the rural and urban settings tended to take place in firms employing skilled labor, in sectors “such as professional and technical services, finance, and information.” Additionally, scale increases in existing firms, rather than a proliferation of new enterprise, were the chief source of employment.

This indicates that policies designed to expand broadband services and give support to related industries do positively affect job growth but might disadvantage Small Medium Enterprises (SMEs) faced with larger, more-established competitors. What it does not hurt, contrary to possible intuition, is the overall composition of rural economies; because broadband expansion also augments production activity in non-skilled sectors such as agriculture and mining, there is no “crowding‐out” of workers in these industries when internet access comes to areas where these sectors represent a large share of the local economy. In short, broadband Internet access helps create new jobs in existing skill based sectors and boosts commercial performance in non‐skilled industries. It’s a win-win policy intervention.

Feature Photo: cc/(uSwitch.com)