Information technology spending may be allowing companies to put off hiring and prolonging the jobless economic recovery, according to Forrester Research. If IT spending does start taking some of the employment blame, tech vendors may want to tone down their cost savings rhetoric because a political backlash may ensue.
- From 2003 to 2007 IT spending and employment went together.
- The most recent recession changed all of that as enterprise IT spending surged 11 percent in 2010, corporate profits jumped 28 percent and the employment rate was unchanged.
- A study of 62 industries shows that industries with the highest growth in IT investment have seen the biggest declines in jobs.
- Two-thirds of industries raised IT spending and cut workers. In one-fifth of industries, IT investment was way up and employment way down.
In other words, technology isn't putting people back to work. It's eliminating their work.
It is much more likely that there is a causal connection between IT investment growth and employment growth. One scenario is that a reluctance to hire given uncertain future sales growth caused an increase in tech investment to support whatever growth was occurring. Another is that an investment in technology allowed companies to grow without hiring new employees. But either way, the affect is the same — tech investment is likely to have contributed to the jobless recovery we have seen so far in the U.S.
The Forrester argument is fascinating on a few fronts, but the findings aren't that surprising. Anyone who has listened to any of the big tech vendors talk about automated data centers and self-healing networks knows there is an unemployed admin on the other side of the equation. The other factor to add to the mix. IT spending may be going up, but so is the globalization of employment. Companies may be hiring more workers offshore. That hiring wouldn't show up in U.S. employment data.
Bartels' political argument is also notable. The technology industry could ultimately be seen as a job killer and you can almost hear the populist rhetoric now. More ironic: President Obama had dinner with tech bigwigs about innovation and putting folks back to work. What innovation takes away employment?
Forrester's data is an analysis of government data from the Bureau of Economic Analysis and Bureau of Labor Statistics.