The Internet continues to create new jobs both directly and across other industries, according to a study by Andersen Consulting, which found the US continues to have the world’s most advanced digital economy, with Europe starting to close the gap.
The study projects that by 2002, the Internet economy will employ more than 10 million people across a variety of industries in the US, the five largest European economies, and Ireland. The report examines the impact of the Internet on the economies of the US, France, Germany, Ireland, Italy, Spain, Brazil, and the UK.
Viewed as a line of business itself, the Internet will have directly created 5.8 million jobs in the US and 3 million jobs in the six European countries surveyed by 2002. These are defined as jobs created by Internet pure-play companies, portals, software consultants, Web designers, and telecommunications and Internet Service Providers offering Internet access.
However, when Internet-related jobs in other industries are factored into the forecast, the total number of jobs created in the US and European countries jumps from 8.8 million to more than 10 million, according to the report.
“The good news is that the Internet is creating more jobs than it is destroying, even when you look at traditional business models,” said Steve Freeman of Andersen Consulting. “And this peripheral job creation is likely to be significant in the short term as established businesses invest in building up new Internet operations alongside their existing businesses.”
The report also indicates that growth of the Internet economy is accelerating in Europe, which has begun to narrow the gap that keeps it behind the US as home to the top Internet economy.
In 1998, the Internet economy employed four times as many people in the US as in the six European countries studied (2.1 million Internet economy employees in the US, compared to 517,000 in Germany, France, Ireland Italy, Spain and UK). By 2002, this ratio will be lower than two-to-one, the report projects. (5.8 million Internet economy employees in the US compared to 3 million in the European countries surveyed.)
The same trend is seen in revenues generated by the Internet economy, the report found. In 1999, the Internet economies in the European countries studied generated $132 billion in revenues — or roughly one-quarter of the $507 billion in Internet economy revenues generated in the US. But by 2002, the Internet sector will be worth $597 billion in the European countries — or roughly one-half the $1.23 trillion forecast for the US, according to the study.
The study examines the impact of the digital age on traditional business models, concluding that the number of new jobs created by the Internet in traditional businesses more than offsets current job displacement, as certain functions are replaced by automation and individuals become empowered to perform more tasks. Areas of job creation result from greater geographic reach, the development of new marketing channels, broader product and services lines, expanded customer service capabilities through call centers and customer service agents, and increased marketing and advertising. The Internet is also expanding markets geographically, particularly for banks and retailers whose products can be delivered online or by mail.
Business leaders on both sides of the Atlantic continue to see the lack of suitably skilled workers as the single greatest constraint on future economic growth, according to the report.
Many of the surveys respondents pointed to the lack of computers in schools and the lack of government-financed or government-led initiatives to change the situation. It it widely believed that the US leads the way in terms both of relevant courses offered at university level and the numbers of students enrolled in them. But the report also found that educational institutions at every level are still not doing enough to arm the next generation of workers with the appropriate skills.
While the growth of the Internet has played a major role in creating the current skills shortage, it is also becoming part of the solution at many companies, Freeman said. “Skills needed for Internet-related jobs often lend themselves to new forms of training that are accessible via the Internet and can be rolled out quickly to large numbers of employees across geographies.”
The Andersen Consulting report is based on analysis of publicly available economic data, surveys of companies, government agencies and opinion makers as well as results of interviews with 160 CEOs, senior executives, government officials and industry experts.
According to the according to the University of Texas at Austin’s Center for Research in Electronic Commerce, as of June 2000, the Internet economy directly supported 2.476 million workers, more than the insurance, communications and public utilities industries and twice as many as the airline, chemical and allied products, legal, and real estate industries. The largest provider of Internet jobs is the Internet Infrastructure layer (consisting of the telecommunications companies, ISPs, Internet backbone carriers, “last mile” access companies, and manufacturers of end-user networking equipment), which supported 778,602 jobs after 48 percent growth from 1998 to 1999.
The University of Texas study also found that the revenue per employee has continued to rise as companies leveraged the Internet to increase operational efficiencies and worker productivity. As a whole, revenue per employee jumped 19 percent from year-end 1998 to year-end 1999.
The most dramatic gains occurred in the service- and goods-based layers. For example, revenue per employee at the E-commerce and Intermediary layers grew 37 percent and 30 percent from 1998 to 1999, respectively, suggesting huge productivity gains.