TMCnews Featured Article

February 24, 2011

Rural Wireless Broadband Creates Jobs, Maybe

By Gary Kim, Contributing Editor

Rural wireless broadband investment in 19 states with the lowest broadband availability and penetration in the United States could "create or save" 117,000 jobs, say researchers at Telecom Advisory Services.  

The new study suggests jobs will be primarily concentrated in the wholesale trade, health and financial services sectors. Some might argue the data suggests broadband development of any sort, using fixed or wireless networks, "creates or shifts" jobs. That is not to say some new jobs can be created. The issue is that much of the measured change could be explained by jobs that are simply shifted from where they are, to new locations, with zero net job creation. 

That is not to say it is unimportant for 200 jobs to shift from Michigan to Texas, for example. But the shift does not represent "new jobs." Rather, jobs simply move from one place to another, with zero net new job creation. 

Of the total 117,000 jobs, approximately 38,500 will be new jobs created as a result of the economic boost provided by wireless broadband in rural areas.

The perhaps more contentious claim is that 78,500 jobs "will be saved" as a result of the combination of economic growth and increased capabilities resulting from the ability to gain access to broadband services. The assertion can be made, but some would argue the claim cannot be validated.

Some would argue that broadband deployment in fact follows development, but does not create it. Job growth and broadband might be correlated, but not causal, in other words. 

Perhaps oddly, the study does not talk much about jobs that likely will be lost, despite the fact that one of the researchers who wrote the latest paper also wrote an earlier paper that said job gains would be balanced by some number of lost jobs, precisely because of the new broadband facilities.

The latest study does, however, note some evidence that broadband deployment was the primary driver of employment in only two areas: the information sector, and the “administrative, support, waste management, and remediation” sector.  

For the information sector, the study pointed to the necessity of broadband to IT companies and the increased possibility of telecommuting as the likely mechanisms by which broadband supported employment growth. 

In the “administrative, support, waste management, and remediation,” they point to telecommuting and promulgation of call centers in rural areas where business inputs, including labor, become affordable when broadband infrastructure is available. 

However, although the increased possibility to telecommute is common to both sectors and is cited as a major reason for employment growth, at least one study found no statistically significant economic benefit to telecommuting as a whole besides the consumer surplus of being able to work from home. "In other words, telecommuting cannot yet be proved to create jobs or increase GDP."

Likewise, at least a couple of studies argue that growth in employment in businesses enabled by broadband may just as easily be “cannibalism” of jobs from elsewhere in the state or in the country instead of the creation of truly “new” rural jobs. In the case of call centers in particular, it is easy to imagine a net loss scenario where urban, higher-paying jobs are cannibalized by lower-paying rural jobs made possible by government-sponsored deployment of rural broadband, the latest study does note. 

Raul Katz, adjunct professor at the Columbia Business School, has argued in the past that it isn't entirely clear that new rural broadband networks necessarily will create net new jobs. Research on the productivity impact of broadband indicates the potential for capital-labor substitution and consequently, the likelihood of job destruction resulting from broadband deployment, as well as some incremental job creation. So the issue is whether net job creation exceeds net job destruction, and by how much.

Since broadband tends to enable the outsourcing of jobs, a potential displacement of employment in the service sector from the area targeted for deployment might also occur, says Katz. Still, Katz says, the study results indicate that some job creation aside from the actual construction jobs is feasible.

“Our estimates indicate that over four years the network effects could range from zero to 270,000 jobs over four years (approximately 67,500 jobs per year), although anecdotal evidence would point to the lower end of this range,” says Katz.

Some case studies indicate that broadband can facilitate some job creation, and more importantly, counter rural-urban migration trends by enhancing social inclusion through communications and information access, the latest study indicates. 

The research results do indicate a positive contribution that broadband makes to economic growth and job creation in rural areas. The effects appear to be most significant in the rural peripheries of metropolitan areas, where broadband operates as an enabler of spatial spill-over, resulting in an expansion of labor markets. 

However, it is important to emphasize that job creation in the rural peripheries might result from labor displacement from either the metropolitan areas or other regions, the latest study says, meaning that "net job creation" might be a shift of existing jobs from one area to another. On the other hand, the technology facilitates the redeployment of industries to the rural peripheries to gain access to lower real estate costs, and better link to transportation networks, the study argues.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Janice McDuffee