Software Creates More Jobs Than It Destroys, Study Says - InformationWeek

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9/18/2014
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Software Creates More Jobs Than It Destroys, Study Says

How is software affecting the overall US economy? Study from Software Industry & Information Association provides new data points.

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Most people realize that our lives have come to be dominated more and more by software -- in our cars, smart phones, and thermostats. But it's been hard to get a look at how software is affecting the overall US economy.

The effect is dramatic, according to a report, "The U.S. Software Industry: An Engine for Economic Growth and Employment," sponsored by the Software & Information Industry Association. The SIIA is an organization of 800 software companies.

Software's overall impact has been positive, even though new software periodically replaces people in jobs that become obsolete as more sophisticated software is implemented. An obvious example was how software-driven ATMs eliminated many bank teller jobs. It's been less clear that software also creates jobs at a faster rate than it destroys them.

"The study found a connection between investment in software and job growth. An industry that's investing in software is adding jobs overall, not shedding them," even though some jobs may be eliminated by the new software, Mark MacCarthy, VP of public policy at the SIIA, said in an interview.

On the one hand, software production is an industry that is steadily fueling its own job growth. The average software job pays $86,457. The industry employs 2.5 million workers, up from 778,000 in 1990. That represents 2.2% of the workforce today compared to 0.9% in 1990. As software jobs are created, they outstrip the rate of pay offered in the other leading sectors for job creation: home health care, retail, restaurant, and individual and family services. The average software job pay "is three times as much" as workers' pay in the other four industries, the study concluded.

[But it isn't always smooth sailing for software. Read Don't Let Privacy Fears Stifle Big Data, SIIA Urges.]

The figures used by the report's author, Robert Shapiro, principal of Sonecon LLC, a research firm often used by business and government leaders, were drawn from US Department of Commerce and Department of Labor statistics, not from surveys or records kept by the SIIA. The results can be duplicated by other researchers using government figures, MacCarthy said.

Another example of software's direct contribution is that between 1997 and 2012, the industry's production increased in value from $149 billion to $425 billion. That increased its GDP share from 1.7% to 2.6%. The industry grew at a rate of 7.2%, or two-thirds faster than the overall economy, the study concluded.

"Software has become an enormous driving force, creating significant economic output and jobs and serving as a catalyst across almost the entire economy," MacCarthy said. The study found that every 10 software jobs support five jobs in other industries.

The use of modern software produces additional strong effects on the economy. It tends to drive productivity higher in the industries where it is frequently adopted. Between 1995 and 2004, increased reliance on software drove 12.1% of US labor productivity gains. From 2004 to 2012, that rate increased to 15% of labor gains.

The productivity increase represented $101 billion in the 2012 economy. Combined with the $425 billion in direct software value, software's addition to the economy that year was $526 billion, or 3.2% of GDP, Shapiro's report said.

In addition, software exports and related services have grown 9% to 10% each year since 2006, a rate that outpaces most other exports.

"The central role of software in business operations is clear, but the role it plays in driving the American economy has not been well understood," said MacCarthy.

The report was released to the press Wednesday in an event on Capitol Hill in Washington attended by MacCarthy, Under Secretary of Commerce Bruce Andrews, and representatives of Oracle, Intuit, and General Motors. Henry Lightsey, executive director of the global connected consumer at GM, said at the event that savings from productivity gains due to new software had allowed the company to bring 4,000 jobs from Mexico back into a GM facility in Tennessee.

Shapiro, the report's author, is a former undersecretary of commerce for President Bill Clinton.

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Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio

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SaneIT
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SaneIT,
User Rank: Ninja
9/22/2014 | 7:44:23 AM
Re: What? Why I would do this study....
@Charlie, while there might be a net loss of jobs in Mexico or in one particular plant/division/department I think the bigger picture is that a company or an industry that is spending money on software is in a growth stage.  If   the cuts in positions in Mexico came without investment elsewhere I would be worried, but this looks like a shift in focus not a dumping of workers.  I know that when times are tough one of the first things that get sidelined are software projects because they typically roll out over the course of a few years, take a lot of resources and tend to be bigger investments.  A company looking to protect themselves financially isn't making purchases in things that they can't sell off later.
TerryB
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TerryB,
User Rank: Ninja
9/19/2014 | 10:50:52 AM
Re: What? Why I would do this study....
I'm sure you are probably right, Charlie, but they obviously could have implemented the software in Mexico and not moved jobs. The jobs were in Mexico because of labor rates, taxes, etc. Even the higher food chain jobs pay less in Mexico. So the software may have provided a convenient excuse to move them back but was not a direct cause/effect.

You just hear stupid stuff like this way too often in manufacturing. I remember being at seminar once and person claimed software cut their order cycle time from 2 days to 15 minutes, something like that. When I questioned that, they then admitted that extensive process reengineering took place first and then they implemented new software to support that. But since it was software oriented seminar, person tried to imply all the credit went to the software. This sounded very much like same thing from GM guy.
Number 6
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Number 6,
User Rank: Moderator
9/19/2014 | 10:37:12 AM
Re: What?
Agreed. If it was that simple, why wouldn't GM deploy that magic software in Mexico and get the best of both worlds- cheap labor plus productive software?
jries921
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jries921,
User Rank: Ninja
9/19/2014 | 10:32:09 AM
Conflict of interest
I'm always suspicious of these sorts of studies as it is unimaginable that an institition like the SIA would release a study that found that the impact of software on the job market was anything but positive.  If the results had been anything but what they were, the study would have certainly been buried.


I don't disagree with the premise (computers put food on my family's table both when I was growing up and through most my adult life), but a less partial set of researchers needs to follow up.

 
Charlie Babcock
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Charlie Babcock,
User Rank: Author
9/18/2014 | 2:37:08 PM
What? Why I would do this study....
TerryB, I don't know all the details of what GM's Henry Lightsey said because I wasn't there. But it was along the lines of improved software in GM's robotic assembly lines lead to savings that allowed the creation of 4,000 jobs in Tennesee and the closure of 4,000 in Mexico. Reading between the lines, I'd say baseline assembly jobs in Mexico were eliminated by better software; higher level jobs -- assembly line management, inspection? design? quality control? -- were created in the U.S. It's an arbitrary alignment, saying the jobs resulted from better software -- but not entirely witless on GM's part. Doug, I think the SIIA did the study to illustrate the importance of software in the economy. Technology in general is constantly accused of eliminating jobs --and it does. What's better understood after the study, at least by me, is that it creates a new round of higher level jobs that outnumber those eliminated. If I were trying to represent 800 software companies to the press, Congress and administration policy makers, this would be a good thing to know. We all already suspected it was true; SIIA has tried to factually prove it.
WesR180
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WesR180,
User Rank: Apprentice
9/18/2014 | 1:59:54 PM
Re: Why does the software industry need to defend itself?
Mind numbing. The very premise of the computer is that it can perform tasks... faster... than humans. Why would business fund or purchase software that did not result in less--less time, less errors, less cost--less people. The only place you can find where technology has not resulted in a reduced need for humans is government.
TerryB
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TerryB,
User Rank: Ninja
9/18/2014 | 12:51:31 PM
What?
Productivity gains from software at GM allowed moving 4000 jobs back from Mexico to US.

That statement makes no sense on so many levels it is not even that funny. I realize he was talking to Washington morons but are they even that stupid?
D. Henschen
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D. Henschen,
User Rank: Author
9/18/2014 | 12:02:26 PM
Why does the software industry need to defend itself?
Why did SIIA feel compelled to do this study and why the high-profile event in DC? Is the software industry under attack by Luddites who want to do away with software because they think it's killing jobs? Does software somehow have a bad name? Or is this chest thumping by the industry in pursuit of, say, more funding for STEM education or research of some sort? Lots of cities and regions are already giving tax breaks to software companies hoping to build mini Silicon Valleys. So is SIIA on offense or defense here?
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