Jobs, Jobs, Jobs: Communications Policy and Employment Effects in the Information Sector
Phoenix Center Policy Bulletin No. 25
23 Pages Posted: 9 Oct 2010
Date Written: October 5, 2010
The Federal Communications Commission has recently proposed a wide assortment of regulations for both wireline and wireless providers that may affect the investment decisions of firms. A number of recent studies conclude that employment, both in and outside the communications industry, is highly responsive to capital expenditures by communications firms. Consequently, it is argued that, depending on the response of firms to regulatory interventions, public policy may have significant positive – or negative – employment effects. In this BULLETIN, we present a new approach to measuring employment effects by estimating an “employment multiplier” using advanced time-series econometrics. Statistical testing indicates a causal relationship between capital expenditures and jobs in the Information sector. A 10% negative shock to expenditures in the Information sector results in an average loss of about 130,000 information-sector jobs per year in the ensuing five years. Including indirect jobs, these job losses could be as high as 327,600 jobs. Our econometrically estimated employment effects are 40% greater than many earlier studies on this topic. The estimated employment multiplier is 10 Information sector jobs for each million in expenditure, and perhaps 24 jobs per-million across the entire economy. Lost earnings over a five-year period are estimated to be $100 billion. Moreover, we demonstrate that communications jobs are not typical jobs – these jobs (i) have median earnings 45% higher than the typical private-sector job; (ii) have proven relatively resilient to recessionary forces; and (iii) have a union membership rate over twice the national average, a statistic some policymakers will consider significant when evaluating regulatory policies that threaten investment incentives.
Keywords: Multipliers, Telecommunications, Regulation, Network Neutrality, Net Neutrality, Title II Regulation, RIMS
JEL Classification: C22, K2, L5, L96
Suggested Citation: Suggested Citation