Forrester: Is IT Investment Hurting US Job Growth?

Forrester released today a report called Caution: IT Investment May Be Hurting US Job Growth. The report’s author – Andrew Bartels, Christopher Mines and Sarah Musto – note that despite record corporate profits, unemployment remains unchanged. Forrester notes that poor job growth both causes and is caused by poor economic growth. It’s a vicious cycle.

The report suggests that corporations are investing in IT instead of hiring workers. The analysts looked at research from 62 industries to find out what’s going on. The report says that the industries with the highest IT investment are also the ones with the biggest decline in jobs. The analysts conclude that there is a causal connection between IT investment growth and the lack of employment growth.

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Forrester is not the first to suggest this. Gartner VP and fellow Tom Austin’s blog post on the same subject lead us to ask last year “What Can IT Do To Stimulate the Job Market?” And AMI Partners claimed last year that cloud computing would result in 200,000 – 250,000 job losses over the next decade.

Here’s some of what Forrester found:

• In 2/3 of industries raised IT investment while cutting jobs.,.
• In 1/5 of industries cut deep into employment while investing heavily in IT.
• In 1/4 of industries, IT investment was up and job losses were small.
• In 1/3 of industries both IT investment and employment were down.
• In five industries, IT investment was reduced and employment was increased.
• In 1/10 of industries, federal stimulus increased both IT investment and employment.

“Looking across these 62 private sector industries, we found a modest but statistically significant inverse or negative correlation between IT investment and employment,” the report says. The effect was most pronounced in manufacturing.

The industries that cut IT spending and boosted employment were: social assistance, computer systems design and related services, transit systems, performing arts and spectator sports and waste management.

Industries that were able to raise both IT spending and employment were: ambulatory healthcare, education, nursing and residential care, hospitals, oil and gas extraction, mining support activities, petroleum, pipeline and utilities.

What can be done? Forrester’s report is aimed at vendors who need to avoid the stigma of being bad for jobs. Forrester also warns that the perception that IT could be bad for jobs could cause political problems as well. “While the republican takeover of the US House of representatives does reduce the risk of congressional hearings, resolution, and legislation on technology as a killer of jobs, republicans will be none too happy if the tax incentives for new business investment that they support end up in companies buying more technology instead of hiring more workers.” Therefore, Forrester’s advice for vendors is to done down rhetoric about cost savings and emphasize technology’s ability to grow top-line revenues.

But changing rhetoric won’t necessarily solve the actual problem. Forrester suggests that technology will lead to new jobs. That’s very likely – but will it lead to enough jobs to make up for the ones we lose? As Austin wrote, it’s 50 years since the IT revolution began. “Where all the new jobs for the ones displaced?”

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