Low-tech Proves Its Worth in Jobs Creation Race

September 24, 2001

John Schmitt
The Guardian (London), September 24, 2001

As the first business cycle of the new economy comes to an end, many of those who were financially – and ideologically – invested in the hi-tech sector are reluctantly reaching the conclusion that much of what they believed about the new economy and financial markets was wrong.

The recent sharp increase in unemployment will inevitably draw attention to labour markets, where the new economy has also been tremendously oversold.

Three of the biggest lessons from the “new” American labour markets contradict much of the self-congratulatory rhetoric that accompanied the burst of job creation in the United States at the end of the 1990s.

The first lesson is that the hi-tech sector has not been much of a jobs generator. Between 1989 and 2000, employment in the US grew at an annual rate of 1.8%.

During the same period employment in the state of California – the home of Silicon Valley – grew slower than the national average, at 1.6%.

Of the five top-ranked states in the Washington-based Progressive Policy Institute’s new economy index, three – Massachusetts, California and Connecticut – had job growth below the average during the 1990s. Massachusetts, the country’s highest-tech state, in fact, had the same job creation rate between 1989 and 2000 as France, both 0.6% a year.

Job growth probably would have been worse without the hi-tech sector, although even this is not a certainty since investment in hi-tech businesses, many of which ultimately failed, diverted investment funds that could have produced jobs elsewhere.

In any event, the experience of these hi-tech states clearly establishes that the high-tech sector is not the employment panacea that many inside and outside the US seem to believe. The second lesson to be derived from the “new” labour markets is that the importance of education and life-long learning as contributors to job growth has almost certainly been exaggerated.

Again, the regional data for the US are instructive. The south is the US region where the workforce has the highest rate of high school dropouts – 22% in 2000 – and the lowest rate of university graduates -20.8%; the north-east region has fewer dropouts and the most graduates – 25.5%.

Nevertheless, over the 1990s, average annual job growth in the more poorly educated south – at 2.4% a year – far exceeded the rate in the much better educated north-east, at 0.4%.

Part of the reason that education does not seem to matter for job creation in the new economy is related to the final labour market lesson of the last decade: that the new economy is still creating plenty of low-paid, less-skilled jobs.

In 2000, the top five occupations for those aged 18-24 in the US were, in descending order: cashiers, waiters and waitresses, cooks, sales workers and stock handlers and baggers.

New economy or no new economy, the pervasiveness of low-tech jobs is not likely to change at any time soon. Many hi-tech jobs are growing rapidly – but so too is low-tech employment.

According to projections by the US bureau of labour statistics, the biggest growing occupation in the US between now and 2008 will be systems analysts. Retail salespersons and cashiers, however, are a close second and third.

Despite the hype, hi-tech has not been a jobs machine.

In the US, at least, job growth over the last decade has actually been strongest in low-tech, low-education, states and regions.

All the data suggest that these “bad” jobs still make up a large share of current employment – and will do so into the foreseeable future.

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