Tech/telecom/ecommerce sector grew by 7.3% in 2018: Political Implications

By / 4.22.2019

Is there room for a presidential candidate who stresses innovation and growth? Voters quite naturally want to see benefits from technology before they enthusiastically embrace more. As we have written in earlier reports, there are signs that digitization is starting to create new businesses and jobs in physical industries like manufacturing.

Another political argument for innovation and growth: The tech/telecom/ecommerce sector is still expanding at a rapid rate, benefiting both consumers and workers.

The tech/telecom/ecommerce sector grew by 7.3% in 2018, triple the 2.4% growth of the rest of the private sector. These figures–calculated by PPI based on the BEA’s newly-related 2018 industry GDP data— update our previous research that showed the tech/telecom/ecommerce sector far outperforming the rest of the private sector between 2007 and 2017.

Prices in the tech/telecom/ecommerce sector fell by 0.8% in 2018, compared to a 3% price increase in the rest of the private sector. That’s good news for consumers.

Perhaps more important is what we see on the labor side. Job growth in the tech/telecom/ecommerce sector exceeded job growth in the rest of the private sector, propelled by ecommerce fulfillment and delivery jobs, which added 178,000 FTE positions in 2018.  If these new jobs are all assigned to the ecommerce sector, then  tech/telecom/ecommerce FTE employment grew by 4% in 2018, compared to 2.1% growth in the rest of the private sector.

Finally, our preliminary calculations suggest that labor share rose in the tech/telecom/ecommerce sector in 2018, while falling in the broader private sector.  We compared the percentage change in value-added with the percentage change in wages and salaries in the first three quarters of 2018, as reported by the BLS QCEW data. We found that value-added rose by 5.6% in the broader private sector, compared with a 5.4% increase in wages and salaries. To the extent that these trends continue in the fourth quarter and are reflected in compensation, labor share fell slight in the broader private sector.

By contrast, the available data points in favor of a rising labor share in the tech/telecom/ecommerce sector. For the purposes of this calculation we separated out tech/telecom from ecommerce, since the eventual ecommerce results will be greatly driven by the fourth quarter. For tech/telecom–computer and electronics manufacturing, software, telecom, communications, and Internet–value-added rose by  6.7% in 2018, compared to a 7.7% rise in wages and salaries. To the extent that these trends continue in the fourth quarter and are reflected in compensation, labor share rose in the tech/telecom sector in 2018.

We could not do a full  analysis of labor share in ecommerce without the fourth quarter QCEW data, which is not available until June. However, we can look at warehousing, which is where ecommerce fulfillment centers are generally classified.  We find that value-added in warehousing overall rose by 10.1% in 2018, while wages and salaries rose by 14.2% through the first three quarters. Assuming that these trends continue, there was a significant rise in labor share in the warehousing industry in 2018.

To emphasize: These are preliminary results, which may be revised substantially as new data comes in.

Political implications: In 2018, both consumers and workers were benefiting from the tech/telecom/ecommerce sector. Consumers were getting falling prices, and workers were getting faster job growth and a bigger share of the economic pie. 

As digitization spread to other sectors, consumers and workers in those sectors will start sharing the fruits of faster growth. We suffer from too little innovation, not too much.