Between 2015 and 2020, total wages and salaries in Washington state rose by 41%, the biggest gain of any state, and almost double the 21% gain for the country as a whole. (See Table 1). This was not simply a pandemic effect, since Washington wage and salary growth was also first in the country in the 2014-2019 period as well.
To a large extent, Washington’s country-leading position in labor income is being driven by job and wage gains in the tech-ecommerce sector. Building on previous research and recent blog posts, we define the tech-ecommerce sector as including five tech industries and three ecommerce industries. The tech industries are computer and electronic production manufacturing (NAICS 334); software publishing (NAICS 5112); data processing and hosting (NAICS 518); Internet publishing and search, and other information services (NAICS 519); and computer systems design and programming (NAICS 5415). The three ecommerce industries are electronic shopping and mail order houses (NAICS 4541); local delivery (NAICS 492); and ecommerce fulfillment and warehousing (NAICS 493). We draw on Bureau of Labor Statistics data from the Quarterly Census of Employment and Wages (QCEW). This dataset reports on all jobs in each industry, as well as wages, salaries, and bonuses, including ordinary income from exercised stock options.
Let’s look at jobs first. From 2015 to 2020, the tech-ecommerce sector added over 100,000 new jobs to the Washington economy. Tech-ecommerce accounted for more than three-quarters of total job creation over that span, far outpacing the contribution of the healthcare and social assistance sector, which has long been the most dependable source of job growth (table 2).
Within the new jobs created by tech-ecommerce, roughly about half of those were in tech industries, and about half were in ecommerce industries (note that the BLS generally assigns establishments to industries according to the type of work being done at that establishment, not the industry of the parent company. So that an ecommerce fulfillment center is typically categorized in warehousing, no matter who owns it).
It’s important to note that the roughly 52,000 jobs being created in ecommerce over the past five years far exceeds the 10,000 jobs lost in brick-and-mortar retail in Washington. Average annual pay in the local delivery and warehousing industries in Washington came to about 30% higher than average annual pay in brick-and-mortar retail in the state. That’s the typical spread we found nationally in past research.
Now consider labor income in the state. Total wage and salary payments in Washington’s tech-ecommerce sector rose by $34 billion from 2015 to 2020, according to BLS data. That’s compared to the $73 billion increase in total wage and salary payments across the state. To put it another way, the tech-ecommerce sector accounted for 46% of the increase in wages and salaries in Washington from 2015 to 2020. (Table 3)
Finally, we turn to the question of the impact of the tech-ecommerce sector on state tax revenues in Washington. Tax collections have come in much stronger than expected, with forecasts repeatedly being raised. In particular, taxes for the 2020-21 fiscal year are currently forecast to come in 13.4% higher than the 2019-2020 fiscal year, and roughly 60% above 2014-2015 levels (See June 2021 Revenue Review from the Washington State Economic and Revenue Forecast Council, page 27).
How much of that gain is accounted for by the tech-ecommerce sector? There are several issues with making this calculation. The state government reports and forecasts tax revenue data on a fiscal year basis, while our data on the tech-ecommerce sector is on a calendar year basis and stops with 2020. In addition, states with a personal income tax have a direct connection between wage and salary payments and state tax revenues Washington, however, has no personal income tax, and relies instead on a variety of other taxes, including a retail sales taxes, a business and occupation tax, a property tax, and a real estate excise tax.
Usually we think of taxes like these as being less immediately responsive to changes in wages and salaries than an income tax would be. Indeed, there was a stretch, around the time of the financial crisis and the years after, when the state’s “General Fund” tax revenues languished, even as the state’s wages and salaries started to rebound.
In recent years, however, the combined and diverse flows of tax revenues into the state’s coffers appear to be rising more or less in parallel with the QCEW wage and salary measure, when adjusted for fiscal years. That makes it plausible that we can use the tech-ecommerce share of wage and salary growth as a proxy for tech-ecommerce share of tax revenue gains.
There are two possible tax revenue measures we can use for our back-of-envelope calculations — either “General Fund” taxes, or a somewhat broader category of state tax revenues, which starts with “General Fund” taxes and then adds in several taxes earmarked for education and training. That broader tax concept has been growing somewhat faster in recent years. Noting that Washington is on two-year budget cycles (also known as “Bienniums”), General Fund tax revenues rose by $17.1 billion from the 2013-15 budget cycle to the 2019-21 budget cycle, while the broader measure of tax revenues rose by $18.9 billion.
We then apply the 46% tech-ecommerce share of wage and salary growth to the increases in the two measures of tax revenues. We estimate that the growth of tech-ecommerce jobs and incomes accounts for $8.0-8.8 billion in higher tax revenues funding the 2019-21 budget cycle compared to the 2013-15 budget cycle. This should be viewed as a roughly estimate and not a final figure.
Conclusion and Implications
The tech-ecommerce sector is a massive positive for jobs, incomes and taxes in the state of Washington. That suggests Washington-headquartered Amazon and Microsoft, rather than “blocking the sunlight” for other companies in the state, play a central role in a thriving ecosystem that benefits workers, raises wages and generates tax revenues. As the saying goes “if it ain’t broke, don’t fix it.”
By our analysis, Korea’s “App Economy” is one of the strongest in the world. In our 2018 study, the Progressive Policy Institute (PPI) estimated that Korea had 420,000 App Economy jobs, amounting to 1.6% of the workforce (see reproduced table below). This figure for “app intensity” was considerably higher than Japan, the United Kingdom, Germany, and even the U.S. at the time (though our latest estimate pegs American app intensity at 1.7% as of August 2020).
Moreover, as of 2020, 8 out of the top ten app companies in Korea were Korean-headquartered, according to download estimates from App Annie. By comparison, only 1 out of the top ten app companies in Germany were German-headquartered. Korea has a vibrant domestic App Economy that other countries would be envious of.
But despite this record of success, the Korean government is considering legislation that would dramatically change the app business environment. The legislation—which would amend Korea’s Telecommunications Business Act–would prohibit online app stores from requiring app developers to use the app store’s payment systems for in-app purchases. In effect, this would be equivalent to forcing a brick-and-mortar retailer to allow competitors to set up alternative checkout lanes in their stores.
The first question is: Why try to fix something that isn’t broken? Korean app developers are prospering under the current system and creating well-paying jobs. Why take the risk that a new system will turn out worse?
The second question is: Why undertake measures that would potentially accelerate “decoupling” Korea’s economy from the United States? The legislation under consideration would primarily affect U.S. tech companies, feeding the current American desire to shorten supply chains and build up internal tech production capacities. Korea and the U.S. will always be allies and friends, but in today’s political environment, lawmakers should pay attention to building bridges, not destroying them.
This table is reproduced from “Korea’s App Economy,” May 2018, Progressive Policy Institute. Data for other countries was current in 2018 when table was published. The latest numbers are available on request.
For the firms that adopt them, artificial intelligence (AI) systems can offer revolutionary new products, increase productivity, raise wages, and expand consumer convenience.[1] But there are open questions about how well the ecosystem of small and medium-sized enterprises (SMEs) across the United States is prepared to adopt these new technologies. While AI systems offer some hope of narrowing the recent productivity gap between small and large firms, that can only happen if the technologies actually diffuse throughout the economy.
While some large firms in the U.S. are on the cutting edge of global AI adoption, the challenge for policymakers now is to help these technologies diffuse across the rest of the economy. To realize the full productivity potential of the U.S., AI tools need to be available to 89% of U.S. firms that have fewer than 20 employees and the 98% that have fewer than 100.[2] An AI-enabled productivity boost would be particularly timely as SMEs are recovering from the effects of the ongoing COVID-19 crisis.
The report discusses the promise for AI systems to increase productivity among U.S. SMEs, the current barriers to AI uptake, and policy tools that may be useful in managing the risks of AI while maximizing the benefits. In short: there is a wide range of policy levers that the U.S. can use to proactively provide the underlying digital and data infrastructure that will make it easier for SMEs to take the leap in adopting AI tools. Much of this infrastructure operates as a type of public good that will likely be underprovided by the market without public support.
Benefits of AI adoption:
The central case for AI adoption is that human cognition is limited in a variety of ways, most notably in time and processing power. Software tools can improve decision-making by increasing the speed and consistency with which decisions can be made, while also allowing more decisions to be planned out ahead of time in the event of various contingencies. Under this broad framework, we can think about “AI” as being a broad suite of technologies that are designed to automate or augment aspects of human decision-making.
While many of AI’s most eye-catching use cases will likely remain the preserve of large platforms, the technology also holds tremendous promise for SMEs. The adoption of third-party AI systems will notably enable SMEs to streamline mundane (but often costly) tasks such as marketing, customer relationship management, pre- and post-sales discussions with consumers, and Search Engine Optimization (SEO). These systems can provide a lifeline for SMEs who are overwhelmed by the many challenges of running a business, and they can expand the number of businesses that are eligible for certain financial supports. For example, AI tools can be used to improve the accuracy of credit risk underwriting models and using alternative data sources and a streamlined process, they can make it easier for SMEs to take out loans they otherwise might not qualify for under traditional methods. Along similar lines, research shows that AI-driven robotics have (and will continue) to boost the productivity of SMEs in the manufacturing industry.
Importantly, this upcoming wave of AI technology can help SMEs catch up with larger, international firms because it can democratize the benefits of large information technology (IT) investments that superstar firms have been seeing over the last decade.
The economist James Bessen has argued that the top 5% of firms in many industries have been increasingly pulling away from the rest of the field because they’ve made large investments in proprietary IT systems. Their smaller rivals struggle to develop their own systems because they lack the necessary scale to hire a large stable of in-house technical talent. Amazon, for example, has a team of 10,000 employees working to improve their Alexa and Echo systems.
While AI tools can’t fully reverse this trend, they can help shrink the gap when embedded into Software as a Service (SaaS) platforms that smaller firms can make use of without the same level of investment. Essentially, through general-purpose AI tools, SMEs can have access to a host of productivity enhancements that these proprietary IT systems offer, but at a price point that is economical for SMEs. By shrinking this productivity gap, smaller firms can begin to compete in earnest while differentiating from large firms through improved customer service and greater product diversity. This will give a large leg up to SMEs who adopt these AI systems and help them better compete with large global incumbent firms.
Consider a firm like Keelvar Systems, which uses advanced sourcing automation to help businesses rapidly shift supply chains around the globe in the event of disruptions or delays. Essentially, it replaces or augments the work that a large supply chain and sourcing office would do within a firm. By using their service, or others like it, SMEs have the ability to benefit from similar levels of sophistication in their supply chain management without having employees spend hundreds of hours on tedious tasks or maintaining expensive proprietary IT systems.
There are firms like Legal Robot that have created a series of tools to help small businesses access legal services that would otherwise require a small army of in-house lawyers. With their service, SMEs can use smart contract templates based on their industry, receive instant contract analysis to make sure they are receiving fair terms and can automate certain aspects of compliance with laws like the GDPR.
Likewise, companies like Bold360 have helped SMEs improve their customer service experiences by offering a variety of AI-powered-chatbots and tools. Many basic customer concerns about products or delivery can be handled by these basic chatbots, freeing up human customer representatives to focus their time on the hard or advanced cases. Again, the pattern here is there is a service that large, multinational companies have been investing billions of dollars to create proprietary versions of, and now the customizability of AI is helping this service become more accessible to SMEs.
What are the barriers to AI adoption for SMEs in the U.S. and what can policymakers do to help create a welcoming environment?
Data investment as a public good
Depending on the context, data can often have the same traits as other public goods. First, it is non-rival—the marginal cost of producing a new copy of a piece of data is zero. Stated differently, multiple individuals can use the same dataset at almost no additional cost. The second important trait is that data is hard to exclude. Consider this report. Once it has been posted online, it is difficult to prevent people from accessing and sharing it as they see fit. This is one of the reasons why copyright infringement is so hard to stamp out.
Oversimplifying, these two features can lead to two opposite problems. On the one hand, economic agents might underinvest in public goods, absent government-created appropriability mechanisms (such as patent and copyright protection). Conversely, public goods tend to be underutilized (at least from a static point of view). Any price that enables economic agents to recoup their investments in a public good will be above the good’s “socially optimal” marginal cost of zero. Public good policies thus involve a tradeoff between incentives to create and incentives to disseminate. For example, patents give inventors the exclusive right to make, use and sell their invention; but inventors must disclose their inventions, and these fall into the public domain after twenty years.
What does this mean for data and artificial intelligence? If policymakers think that data is an essential input for cutting-edge AI, then they should question whether obstacles currently prevent firms from investing in data generation or disseminating their data.
While policies in this space involve significant tradeoffs, some offer much higher returns to social welfare. For instance, to the extent policymakers believe existing datasets are being underutilized, purchasing private entities’ data (through voluntary exchanges) and placing it in public data trusts would be a better policy than imposing data sharing obligations (which could undermine firms incentive to produce data in the first place). This is akin to the idea of government patent buyouts.
Of particular interest for policymakers, however, is the fact that some SMEs are sitting on top of data flows that are not being fully utilized because it is expensive to make data usable and these datasets may not be very valuable in isolation. As an example, industry-level manufacturing data might be quite valuable to all firms in a sector, but the dataflows from one SME are much less valuable. The U.S. could align incentives by providing investment funds to quantify various aspects of business flows and then submit them to public data trusts, which could be accessible for use by all firms in the industry. This would essentially be treating valuable dataflows as a type of public infrastructure that needs government investment to be fully realized.
This kind of public investment can happen not only through incentives for private firms but through the public sector as well. Governments at all levels (state, local, and national) have valuable dataflows regarding infrastructure development, the organization of public transportation, and general macro-level economic data that can be turned into open datasets for public and commercial use. Particularly on the national level, the U.S. should consider investment in IT infrastructure that can coordinate the submission of open datasets on the state and local level.
Indeed, if key scientific or commercial datasets do not yet exist, the public sector may be best positioned to create them in the first place as a type of digital infrastructure provision. One notable structure that may help in this regard is the idea of a Focused Research Organization, which would provide a team of researchers with an ambitious budget and a nimble organizational structure with the specific goal of creating new public datasets or toolkits over a set time period.
Provide regulatory certainty
For SMEs deciding whether to invest in adopting AI tools, regulatory and compliance costs can be a significant deterrent. Policymakers should recognize that regulation is often more burdensome for small firms that generally have less ability to shoulder compliance costs. Especially in industries with low marginal costs, such as the tech sector, larger firms can spread fixed compliance costs across more consumers, giving them a competitive edge over smaller rivals. Regulation can thus act as a powerful barrier to entry. For instance, a study found that the European experiment with GDPR led to a 17% increase in industry concentration among technology vendors that provide support services to websites.
This is not to say that additional regulation is, or is not, necessary in the first place. Indeed, there are a host of malicious or unintentional harms that can occur from improperly calibrated AI systems. Regulation can be a powerful tool to prevent these harms and, when well-balanced, can promote greater trust in the overall ecosystem. But potential regulation should follow sound policymaking principles that reduce the regulatory burden imposed on firms, notably by making regulation easy to understand, risk based, and low-cost to comply with.
In the U.S. there is to date no overriding national AI regulation. Instead, each sectoral regulator (i.e. Federal Aviation Administration, Security and Exchange Commission, Federal Trade Commission, etc.) has been steadily increasing their oversight over the use of algorithms and software in their specific area. This is likely an appropriate approach, as the kinds of risks and tradeoffs at play are going to be very different in healthcare or financial decision-making when compared to consumer applications. As this approach develops, it would be prudent to develop a risk-based framework that allows for more scrutiny of algorithmic decision-making in sensitive areas while giving SMEs confidence to invest in low-risk areas with the knowledge they will not later take on large compliance costs.
However, regulation over data protection has been far more segmented and piecemeal. And the state-by-state patchwork of rules that has developed can be a significant deterrent for SMEs when considering whether to invest in the use of certain AI tools. Policymakers should consider an overriding national privacy law that would be able to set standard rules of the road over the protection of data in all 50 states so that U.S. SMEs can invest with confidence.
Finally, U.S. policymakers should consider aggregating all this information through the creation of a dedicated AI regulatory website that provides a toolkit of resources for SMEs about the benefits of AI adoption for their business, the potential obligations and roadblocks that they need to be aware of, and best practices for cybersecurity hygiene and data sharing.
Expand the AI talent pool
A lack of skilled talent is one of the biggest barriers to AI adoption as the technical skills required to build or adapt AI models are in short supply. In the U.S., especially, smaller companies struggle to compete with the high salaries paid out by large tech firms for top-end machine learning engineers and data scientists.
In broad strokes, this skills shortage can be alleviated in two ways: through upskilling the domestic population and by improving immigration pathways for global talent.
To upskill the domestic population, one relatively simple lever would be to pay some portion of the costs of individuals and businesses who wish to upskill. In the U.S., a portion of a worker’s retraining costs may be written off as a business expense so long as the worker is having their productivity improved in a role they currently occupy. But this expense is not tax deductible if the proposed training would enable them to take on a new role or trade.
For example, if a small manufacturing firm has technically competent IT staff who wish to attend a specialized training course on using machine vision systems in a warehouse environment, this expense would not currently be deductible as it would enable them to take on a new role within the company. This inadvertently creates an incentive to spend more on capital productivity investments than labor productivity investments. Addressing this imbalance would incentivize more firms to invest in worker retraining and help speed the creation of an AI workforce in the U.S.
Secondly, the U.S. needs to urgently address the shortcomings in the U.S. immigration system which make it more difficult for startups to compete with large incumbents on the basis of talent. Approximately 79% of the graduate students in computer science (and related subfields) studying in the U.S. are international students, which means a large majority of potential AI workers U.S. firms may look to recruit must operate through the immigration system. The cost, complexity, and length of this process inevitably favors large, incumbent firms who can afford to navigate the regulatory maze of procuring an H-1B or related work visa.
A recent NBER paper showed in detail the myriad ways in which access to international talent is important for startup success. Utilizing the random nature of the H-1B lottery system, the paper compared startups that randomly received a higher percentage of their visa applications approved to those who did not. The random nature of the H-1B lottery makes an ideal policy experiment because it allows for a clean test in which other potentially confounding variables are controlled for. The study found that a one standard deviation increase in the likelihood of successfully sponsoring an H-1B visa correlated with a 10% increase in the likelihood of receiving external funding, a 20% increase in the likelihood of a successful exit, a 23% increase in successful Initial Public Offering, and a 4.8% increase in the number of patents filed by the startup.
Policymakers could begin to counter this effect by waiving immigration fees for firms of a certain size and by streamlining the application process.
Further, policymakers should look to create a statutory startup visa so that international entrepreneurs have a viable pathway into the U.S. to launch firms of their own. According to research by Michael Roacha and John Skrentny, international STEM PhD students are just as likely to report wanting to work for or launch their own firm as native-born students, but the difficulty of our immigration system pushes them towards working at large incumbent firms.
Using these two levers of upskilling and immigration reform, the U.S. should increase the supply of AI talent available to SMEs or to launch SMEs themselves and thereby spur the adoption of AI adoption.
Conclusion
Artificial intelligence systems hold great potential to streamline the costs of doing business in a modern economy, particularly for SMEs. The last 20 years of the information technology revolution have helped large, established firms reach the cutting edge of productivity while smaller firms have been left behind. But general-purpose AI tools now provide an opportunity for SMEs to take advantage of many of these IT advancements at a cost and a scale that is feasible for them. Policymakers should attempt to proactively build out the digital infrastructure that will make it easier for SMEs to take the leap in adapting AI tools.
Summary of policy recommendations:
Data investment as a public good:
Where appropriate, align incentives for the private sector to contribute industry-level SME data to public and private data trusts that could be used by everyone.
Invest in making more government datasets open to the public.
Fund Focused Research Organizations or similar groups with the explicit goal of creating new scientific and commercial public datasets.
Provide regulatory certainty:
Clarify existing regulations and the obligations that SMEs must meet when utilizing a new AI tool.
Encourage the development of a risk-based framework that allows for more stringent regulation of sensitive applications while giving certainty to SMEs on investment in low-risk applications.
Pass an overriding national privacy law so that SMEs aren’t deterred from investing by a patchwork of differing state-by-state laws.
Consider the creation of a new SME regulatory website that provides informational resources to SMEs about the benefits of AI adoption for their business and the potential roadblocks that they need to be aware of.
Expand the AI talent pool
Encourage upskilling of the U.S. population by making worker retraining deductible as a business expense.
Reevaluate U.S. immigration pathways to make them more attractive for international technical talent.
Streamline the immigration application process and waive fees for firms below a certain size to make it easier for SMEs to compete for technical talent.
[1] This report is an adaptation of an earlier paper coauthored with Dirk Auer titled “Encouraging AI Adoption in the EU”.
[2] Annual Survey of Entrepreneurs – Characteristics of Businesses: 2016 Tables, United States Census Bureau
The large tech and ecommerce companies have become massive job generating and income creating machines, hiring hundreds of thousands of workers in the United States. This is one of the great hiring surges in history, providing well-paying jobs for an unprecedented number of workers.
But just looking at hiring by the tech giants themselves does not fully answer the question of their impact on the labor market. It could be that, like tall trees, they block the sunlight and keep other tech companies and ecommerce companies stunted.
This “ecosystem dominance” would manifest as weak job and income growth in the tech-ecommerce sector as a whole. If true, this harm to workers becomes a powerful justification for strong regulatory and antitrust growth against the tech giants. In other words, chopping down the trees would help the rest of the forest grow.
Alternatively, strong job and income growth across all tech and ecommerce industries would show the tech giants–who invested a stunning $65 billion in the United States in 2020—are playing a crucial role in a thriving ecosystem that benefits workers, raises wages and generates tax revenues. Indeed, from 2015 to 2020—a period that includes the pandemic—the tech-ecommerce ecosystem generated 1.7 million net new jobs and added $289 billion in labor income. By comparison, the whole private sector lost 360,000 jobs. In that case, common sense would call for regulatory prudence. As the saying goes “if it ain’t broke, don’t fix it.”
California
For this blog post we will focus on the job, income, and tax impact of the tech-ecommerce sector on California, which is the headquarters of three out of the four tech giants. In addition, in the fourth quarter of 2020, Amazon employed more workers in California (153,000+) than it does in Washington (80,000+).
Our analysis builds on PPI’s April 2021 paper, “Innovative Job Growth in the 21st Century: Has the Tech-Ecommerce Ecosystem Become the New Manufacturing?”. The tech-ecommerce ecosystem includes five tech industries and three ecommerce industries. The tech industries are computer and electronic production manufacturing (NAICS 334); software publishing (NAICS 5112); data processing and hosting (NAICS 518); Internet publishing and search, and other information services (NAICS 519); and computer systems design and programming (NAICS 5415). The three ecommerce industries are electronic shopping and mail order houses (NAICS 4541); local delivery (NAICS 492); and ecommerce fulfillment and warehousing (NAICS 493).
We draw on Bureau of Labor Statistics data from the Quarterly Census of Employment and Wages (QCEW). This dataset reports on all wages, salaries, and bonuses, including ordinary income from exercised stock options. We look at the five-year period from 2015 to 2020, which includes the pandemic year.
Table 1. Strong Job and Labor Income Growth in California’s Tech-Ecommerce Sector
Percentage change, 2015-2020
Tech-ecommerce sector
California
Core tech counties*
Rest of California
United States
Jobs
38%
30%
43%
31%
Total wage and salary income**
76%
77%
74%
56%
*San Francisco, San Mateo, Santa Clara
**Includes exercised stock options
Data: BLS QCEW
Table 1 shows the growth of jobs and labor income in California’s tech-ecommerce sector from 2015 to 2020. Tech-ecommerce jobs rose by 38% over the five-year stretch in California, compared to 31% in the United States as a whole. Meanwhile, private sector jobs rose by 0.3% in California and fell by 0.3% nationally (not shown on table).
Wages and salaries in California’s tech-ecommerce sector rose by an astounding 76% from 2015-2020, compared to 56% nationally. Meanwhile, private sector wages and salaries rose by 31% in California, and 21% nationally.
Table 2 shows the importance of the tech-ecommerce sector for California’s economy. The tech-ecommerce sector added 350,000 jobs between 2015-2020 in the state, and $100 billion in additional wage and salary income. That means the tech-ecommerce sector accounted for 38% of the entire increase in private sector wages in the state over that period.
Table 2. Tech-Ecommerce Sector Powers California Income Growth
Tech-ecommerce sector
California
Core tech counties
Rest of California
United States
Increase in jobs, 2015-2020 (thousands)
350
113
237
1738
Increase in wage income, 2015-2020 (billions of dollars)
$100
$62
$37
$289
Share of private sector wages, 2020 (percent)
21%
45%
11%
11%
Share of private sector wage growth, 2015-2020 (percent)
38%
56%
25%
22%
*San Francisco, San Mateo, Santa Clara
**Includes exercised stock options
Data: BLS QCEW
Note that Table 1 and Table 2 break out the core tech counties, San Francisco, San Mateo, and Santa Clara, from the rest of the state. Taken together, the two tables show that both the core tech counties and the rest of the state have shown roughly equal rates of income growth from the tech-ecommerce sector.
Table 3 looks specifically at ecommerce and retail jobs in California. Obviously, the pandemic forced a dramatic decline of brick-and-mortar retail jobs in the state. At the same time, the number of ecommerce jobs increased by more than enough to counteract the decline of brick-and-mortar retail. Moreover, the ecommerce jobs were substantially better paid on average.
As a result, when we combine brick-and-mortar retail with ecommerce industries in California, the number of net jobs rose by 28,000. Average annual pay rose by 22 percent.
Table 3. California’s Ecommerce Industries Create Net New Jobs and Boost Average Pay
Brick-and mortar retail
Thousands of jobs
Average annual pay
2015
1611
33229
2020
1475
40199
Change, 2015-2020
-136
Ecommerce industries
2015
207
54078
2020
372
55882
Change, 2015-2020
164
Brick-and-mortar retail plus ecommerce
2015
1819
35608
2020
1847
43360
Change, 2015-2020
28
Data: BLS QCEW
Finally, we turn to the question of the impact of the tech-ecommerce sector on personal income taxes in California. Tax collections have come in much stronger than expected, with personal income tax collections in the first nine months of the 2020-21 fiscal year running at 17% or $14 billion above forecast. Personal income tax revenues in the 2020-21 fiscal year are now forecast to be 54% about 2015-2016 levels.
How much of that gain is accounted for by the tech-ecommerce sector? There are several issues with making this calculation. The state government reports and forecasts tax revenue data on a fiscal year basis, while our data on the tech-ecommerce sector is on a calendar year basis and stops with 2020. Second, our definition of the tech-ecommerce sector includes a wide variety of industries, with average annual pay that runs from roughly $50,000 to well over $300,000. Third, much of the surge in personal tax revenues is coming from capital gains, which is directly connected with the success of the tech-ecommerce sector but is not reported in the BLS QCEW data.
Nevertheless, we can make a back-of-the-envelope estimate of the personal tax revenue generated by the tech-ecommerce sector. First, let’s start by looking the increases in personal tax revenues coming from wage and salary income (included ordinary income from exercised stock options) over the 2015-2020 period. By our estimate, the increase in tech-ecommerce wages and salaries accounts for roughly 37% of the increase in personal tax revenues from wages and salaries in the 2015-2020 period.
But of course, there has been a surge in capital gains revenues as well. If we attribute half the unanticipated increase in capital gains in 2020 to the tech-ecommerce sector, then tech-ecommerce accounts for roughly 42% of the increase in California personal tax revenues from 2015 to 2020. This should be viewed as a rough estimate rather than a final number.
On Wednesday, the House Judiciary Committee is going to mark up five tech antitrust bills. Collectively, the bills mark a major departure from the traditional consumer welfare standard that has governed antitrust law over the last few decades. Instead of focusing on consumers, these new laws would single out just five large tech platforms and apply an entirely different set of standards. One bill would effectively ban them from making any future acquisitions, which might have the unintended consequence of reducing startup investment, and therefore reducing competition. Most concerningly, another one of the bills would lead to breakups of all five major tech companies. Vertical integration would effectively be prohibited because, according to the bill’s authors, it presents an irreconcilable conflict of interest.
But what this framing misses is all the consumer benefits that flow from integrated ecosystems. Many digital products are free to access because they are subsidized by ads elsewhere in the ecosystem. A hallmark of a seamless user experience is being able to switch between devices, websites, and apps without needing to re-enter all your information. Crucially, these integrated experiences are also safer for users because fewer players in the market have direct access to user data (which is why most government agencies do not allow federal employees to “jailbreak” their smartphone devices or sideload apps from unapproved app stores). And of course, private label goods on Amazon work just the same as they do in Walmart or CVS — they offer consumers similar quality to name brands at lower prices.
Here’s a more detailed breakdown of the five bills and what they would do to tech platforms (in order from most reasonable to least reasonable):
The budgets for the FTC and DOJ to conduct antitrust enforcement have fallen by 18% between 2010 and 2019, after adjusting for inflation. Over the same period of time, the economy has grown by 22%. To properly enforce the antitrust laws on the books, the DOJ and FTC need resources that match the scope of the problems they face. This bill would increase their enforcement resources by almost 30% and change the merger filing fee structure to fall more heavily on larger deals. There is significant bipartisan support for this bill and it is urgently needed.
For the next four bills, you need to understand what a “covered platform” is. All four bills define them the same way (and these new rules would only apply to covered platforms). A covered platform is a “website, online or mobile application operating system, digital assistant, or online service” that meets all three of the following conditions: (1) 50 million U.S.-based monthly active users or 100,000 U.S.-based monthly active business users; (2) greater than $600 billion in net annual sales or market capitalization; and (3) is a “critical trading partner” that can restrict business users access to customers.
As of today, there are only six companies in the U.S. that meet the $600 billion market capitalization threshold. Every commentator assumes Amazon, Apple, Facebook, and Google will qualify as covered platforms, and most agree that Microsoft will be included as well, considering it operates multiple large-scale platforms, such as Windows, Office, Xbox, and LinkedIn. It remains to be seen whether the “net annual sales” metric will be interpreted to cover financial services companies like Visa, JP Morgan Chase, and PayPal, which process a large volume of payments.
What seems clear, however, is that the subcommittee bills target big tech firms instead of probing economic concentration across the U.S. economy.
The ACCESS Act would require platforms to provide third parties with APIs, software that allows access to platform data. The bill leaves the definition of “data” up to the FTC to determine. Data portability done right can lower switching costs and improve competition in an industry. Consider the enormous success of telephone number portability in the telecom industry. Letting consumers own their telephone number lowers the cost of moving to a new provider. And because telephone numbers are a necessary and discrete piece of data that all carriers must use to operate a network, there was no risk of decreasing the incentive to invest in creating this data.
For tech platforms, there might be similar discrete, static, and critical data sets that should be subject to mandatory portability rules. For example, the social graph — the list of all your friends or connections on a social network — is a very important dataset for new startups to have access to. Users are more likely to use a new app if during the onboarding process they are able to share a social graph from another social network and find all their friends on the new platform with a single click.
However, the problem with this bill is that it is not narrowly tailored to discrete and critical data sets like the social graph. It merely says that “a covered platform shall maintain a set of transparent, third-party-accessible interfaces (including application programing interfaces) to enable the secure transfer of data to a user, or with the affirmative consent of a user, to a business user at the direction of a user, in a structured, commonly used, and machine-readable format.” The bill leaves it to the FTC to define what “data” means for the purpose of the bill. It would be very helpful if Congress offered more guidance on what kinds of data it intends to be covered by these rules.
If data is defined too broadly, then there might be unintended consequences for investment incentives. For example, tech companies are all racing to build the next great computing paradigm. Will it be virtual reality? Blockchain technology? Augmented reality? Smart devices? Or something else no one can predict? Regardless of which paradigm wins out, if the future winner is forced to give every one of its competitors access to all of its data, then that would decrease the incentive to invest in the next big platform today. The most tragic part of the scenario is that these will be unseen costs — we won’t know what we lost out on. The future will just be somewhat dimmer because a well intentioned policy backfired due to poor drafting and a rushed process.
The Platform Competition and Opportunity Act is effectively a ban on all mergers and acquisitions by platform companies. This bill would ban platforms from acquiring companies that:
“compete with the covered platform … for the sale … of any product or service”;
“constitute nascent or potential competition to the covered platform … for the sale … of any product or service”;
“increase the covered platform’s … market position”; or
“increase the covered platform’s … ability to maintain its market position”
Given how broad this language is, the bill would effectively ban all acquisitions by platform companies. Since more than 90% of startups provide a return for their founders, employees, and investors through an acquisition as opposed to going public, this bill has the potential to backfire and decrease investment in startups. A recent study found that “VC activity intensifies after enactment of country-level takeover friendly legislation and decreases following passage of state antitakeover laws in the U.S.” This bill would qualify as an antitakeover law.
This bill is aimed at remedying the perceived conflict of interest by platforms and businesses that leverage those platforms to reach consumers. In essence, this bill bans self-preferencing by requiring platform owners to refrain from any conduct that gives their own products an advantage over competitors’ products. Section 2 of the bill makes it clear how all encompassing this rule aims to be (emphasis added):
“It shall be unlawful for … a covered platform … to engage in any conduct that … advantages [its] own products, services, or lines of business over those of any other business user, excludes or disadvantages the products, services, or lines of business of another business user relative to the covered platform operator’s own products, services, or lines of business, or discriminates among similarly situated business users.
The bill then provides 10 examples of discriminatory conduct, including tying, anti-steering provisions, retaliation, and restrictions on pricing.
But those specific examples aren’t really necessary when the bill includes a blanket ban on any conduct that “advantages” the platform’s products over those of third parties. While this attempt to fix a conflict of interest may seem intuitive at first glance (think of Elizabeth’s Warren’s baseball analogy), the more you think about the idea, the less it makes sense. For example, consider how this rule would apply to Apple. The iPhone runs on Apple’s proprietary iOS operating system. Apple wouldn’t be allowed to “advantage” its App Store in any way, which means it can’t be pre-loaded on devices and it can’t be the default app store unless users select it. This same logic applies to every layer of the tech stack. Apple makes dozens of popular first-party apps, including FaceTime, iMessage, Mail, and Music. As the bill is currently written, Apple would not be allowed to pre-install those apps on iPhone devices because that would “advantage” them over other video conferencing, messaging, mail, and music apps.
Now consider how this law would apply to Google. If a user typed in “restaurants near me” on Google, the search engine wouldn’t be able to directly offer map results at the top of the page from Google Maps because that would give it an “advantage” over other mapping services. Google would be forced to merely provide links to competitive mapping services rather than give consumers the answer to their question. The same rule would apply to Google Shopping if a user searched for sneakers. Instead of showing the user sneakers, Google would have to show users links to shopping websites that sell sneakers. This would represent a huge loss to consumer convenience that makes these products so popular (91% of Americans have a favorable opinion of Amazon, 90% have a favorable opinion of Google, and 81% have a favorable opinion of Apple).
Most concerningly, this bill would break the safety and security of many features of the iPhone. If Apple has access to a piece of hardware, such as a sensor or communications chip, then it has to give equal and fair access to that same hardware function to all third parties. That sounds like a laudable goal if you want more options when it comes to payments (i.e., access to the NFC chip) or location services (i.e., access to GPS) or the microphone (e.g., the way say Siri is always listening for “Hey, Siri”). But the flip side of more competition in this context is that every bad actor with the intent to defraud consumers or invade their privacy now also has access to sensitive data by law.
Lastly, some argue that the affirmative defense section of this bill would allow some pro-consumer conduct by the platforms to continue (such as continuing to pre-install apps on phones). The platforms can “advantage” their own products so long as they “would not result in harm to the competitive process by restricting or impeding legitimate activity by business users; or was narrowly tailored, could not be achieved through less discriminatory means, was nonpretextual, and was necessary to prevent a violation of, or comply with, Federal or State law; or protect user privacy or other non-public data.” But pre-installation and default settings clearly give a leg up to the products controlled by the platform owner and therefore might “result in harm to the competitive process.” If the intent of the drafters is not to ban this type of conduct, they should clarify this section.
The most extreme and economically destructive of the five bills is The Ending Platform Monopolies Act. It tries to address the same problem as the American Innovation and Choice Online Act — conflicts of interest between platform owners and platform competitors. But instead of requiring platform owners to operate their platforms in a neutral fashion as the non-discrimination bill does, this bill bans vertical integration outright and would lead to the break up of every large tech company across multiple dimensions.
Google would have to spin off YouTube, Android, Chrome, the Play Store, and its apps (Gmail, Google Maps, Drive, etc.) into separate businesses. Of course, that would destroy Google’s current business model where revenue from search and display advertising is used to subsidize an ecosystem of free products for consumers. Post-breakup, the newly independent entities would likely need to start charging subscription fees or create their own advertising business from scratch (and add more ad units to their respective products).
Amazon would be forced to spin off its private label goods business (e.g., Amazon Basics) and Amazon Marketplace because those two lines of business compete with the traditional retailing model where Amazon takes inventory of the product from wholesalers and then resells it at a markup. Amazon would also be forced to spin off its Amazon Prime Video streaming service and Amazon Web Services.
It has not yet been properly appreciated that this bill is aimed at addressing the same alleged conflict of interest issue as the American Choice and Innovation Online Act. If they are passed together, this bill would obviate the other one. As independent technology analyst Ben Thompson pointed out, this could mean that Chairman David Cicilline is attempting to make his bill seem reasonable by comparison even though it also has radical implications for tech ecosystems. Legislators shouldn’t fall for this obvious gambit.
The DOJ and FTC desperately need more resources to adequately enforce the antitrust laws on the books, and a narrowly tailored data portability mandate could enhance digital platform competition. But blanket bans on acquisitions, self-preferencing, and vertical integration would destroy many of the consumer benefits that make the tech giants world leaders in their respective markets. Hobbling America’s tech giants without adequate evidence of consumer harm would be a capitulation to the populists on the far left and far right at a time when we need to be focused on economic recovery.
Tomorrow morning, the House Judiciary Committee will mark up a series of antitrust bills that, taken together, would stifle digital innovation and hinder the United States in economic competition with China.
Alec Stapp, Director of Technology Policy at the Progressive Policy Institute (PPI) released the following statement:
“Economic concentration in many sectors of the U.S. economy is a serious issue that demands scrutiny and creative responses from lawmakers. Unfortunately these five bills fail to grapple responsibly with this challenge. Instead, they single out a handful of America’s most innovative and globally competitive tech companies for divestiture and draconian regulation. These bills would be a major blow to job creation and innovation even as our economy struggles to recover from the pandemic recession.
“We hope the Members of the House Judiciary Committee will stand up for American workers, consumers and entrepreneurs by refusing to join in an ideological crusade to dismantle “big tech.” While well-tailored regulation is certainly worth debating, the extreme provisions written into these bills would do more harm than good, and set us back in our fight against foreign dominance in the tech/e-commerce industry.”
Earlier this year, PPI released a new report on job growth in the tech/e-commerce sector, which found that this sector is now the top job creator in the U.S. economy. The sector generated more than 1.2 million net new jobs from 2016 to 2020, including during the pandemic. On average, pay in the tech/e-commerce ecosystem was 44% higher than average pay in the private sector and 21% higher than average pay in manufacturing nationally. The report also found that the growth of tech/e-commerce jobs has expanded beyond the coasts and regions known as tech innovation hot spots, including growth during the pandemic in Arizona, Ohio, Texas, Indiana, and Florida.
TO: Pro-Growth Democrats
FROM: PPI President Will Marshall
RE: How to Lose to China
President Joe Biden says that America is locked in a “strategic competition” with China for global economic and political leadership in the 21st century. Keeping the United States on the leading edge of technological innovation and entrepreneurship is how we win this contest between liberal and autocratic systems.
It’s also the key to generating more good jobs that can help our country close stark income and opportunity gaps at home, as well as demonstrating the strength and resilience of liberal democracy to doubters around the world.
That’s why it’s baffling and dismaying to see some anti-tech Democrats unveil late last week a flurry of bills aimed at breaking up and otherwise handcuffing America’s most innovative and globally competitive companies. These bills narrowly target a handful of large online platforms whose offerings are eagerly sought by people everywhere.
Nonetheless, both right-wing and left-wing populists have drawn a bead on “Big Tech” companies, the former for supposedly muzzling conservatives, the latter for alleged abuses of market power. The bills are based on a tendentious and deeply flawed report by the House Antitrust Subcommittee.
As the Progressive Policy Institute and other analysts have documented, the evidence supporting the report’s claims of systemic antitrust abuses is remarkably flimsy. It mostly consists of misleading anecdotes and alarmism about conjectural rather than actual harms.
In contrast, the benefits Americans get from big internet companies like Google, Amazon, and Apple are tangible and easy to measure. These include lower consumer prices (monopolies typically are supposed to raise them), high capital investment in the U.S. economy, and robust creation of high-wage jobs, a rare bright spot in the pandemic recession. All of these emerge from a hotly competitive and innovative digital ecosystem.
Fresh in the public mind is the essential role the major tech and e-commerce platforms played in keeping the U.S. economy afloat during the pandemic shut-downs. They enabled millions of us to work from home, stay in touch with friends and family, shop online for goods delivered swiftly and safely to our homes, learn and have medical appointments remotely, and entertain ourselves while homebound.
Of course, private companies are run by humans, not saints, and some will make errors or cheat to gain competitive advantage. Large and powerful companies of all kinds certainly merit close scrutiny, as well as government penalties and regulation if they break the law. But on close examination, the populist indictment singling out a few “Big Tech” firms mostly boils down to a vague discomfort with bigness itself.
That’s not enough to justify wrecking the most vibrant part of the still-recovering U.S. economy. We urge pragmatic Democrats to stand firm against these ill-conceived bills and instead craft well-tailored remedies where there is solid evidence of antitrust violations or other public harms arising from market concentration.
In short, as pro-growth progressives we believe there are two compelling reasons why Democrats should not allow themselves to be stampeded into an ideological crusade to break up America’s most dynamic and successful companies:
First, it would be bad for our country. Hobbling America’s most formidable competitors would be tantamount to shooting ourselves in the foot as the race with China for economic and technological primacy intensifies.
Second, it would be a serious political blunder. With razor-thin majorities in Congress, and a challenging midterm election next year, Democrats shouldn’t let the left’s antipathy to competitive markets, private enterprise, and disruptive innovation — aka economic progress — define their party.
It’s important to note that there is no public groundswell for eviscerating the nation’s leading tech companies. On the contrary, they are highly popular with working and middle-class Americans — including swing voters inkey battleground states that helped Biden win in 2020. The pressure to do so comes mainly from right-wing conspiracy theorists and left-wing academics and activists besotted with anti-capitalist and neo-socialist posturing.
China’s Drive for Tech Dominance
China has made no secret of its determination to be first to scale what President Xi Jinping calls the “global peaks of technology.” The Chinese Communist Party’s (CCP) new five-year plan identifies mastery of cutting-edge technologies as a matter of national security, not just economic development, and allocates massive state resources accordingly.
The plan aims to boost spending on research and development by 7% annually, slightly more than budget increases (6.8%) for China’s military. Premier Li Keqiang has offered state support for speeding development of quantum computing, artificial intelligence, advanced semiconductors, and cloud computing.
The government clearly intends to extend its industrial policy model from manufacturing to vanguard technologies like artificial intelligence, robotics, and semiconductors. That means subsidizing national champions and steering government procurement contracts to Chinese companies. The China Development Bank recently announced plans to deploy $60 billion in loans to 1,000 firms developing key innovations.
According to a Brookings Institution report, China sees leadership in 5G technology and other emerging technologies as a way to expand its global power. Stung by the Trump administration’s blacklisting of Huawei and other Chinese tech companies, Beijing has proclaimed a goal of “technology independence.”
Just how realistic that is in a world of intertwined supply chains remains to be seen. But knowledgeable observers believe we are headed for “bifurcated” U.S. and Chinese digital ecosystems over the next decade. In any case, Beijing has set its sights on being the global standard setter for the next generation of high-tech industries.
In addition to its advantages on 5G, China leads the world in electric car sales and is investing heavily in biotech. Then there are the CCP’s chilling efforts to harness high tech to Xi’s totalitarian political aspirations, such as the use of AI surveillance technology to monitor its people’s “social profile” and modify “antisocial” behavior.
Meanwhile, Chinese hackers who apparently are backed by the central government are unrelenting in their attempts to steal intellectual property from U.S. tech companies
(Microsoft has reported recent attacks on its email server), defense contractors, universities, infectious-disease researchers, and U.S. government agencies.
Unlike the backers of the anti-tech bills, the Chinese understand that competing on a global scale requires large-scale companies. In fact, about half the world’s largest tech companies are Chinese, including Huawei (with 197,000 employees, bigger than any U.S. tech company except Amazon), Alibaba (117,000), and Tencent (86,000).
With strong backing by the Chinese government, these companies all are — like America’s tech giants — making big capital investments in future growth. “If we don’t get moving, they are going to eat our lunch,” President Biden has warned, in making the case for his ambitious jobs and families bills.
Now is the time for Democrats to embrace economic patriotism — and optimism. By boosting public investment in science and applied research, encouraging private companies to boost their capital spending, and unleashing the inventive and entrepreneurial genius of a free people, the United States can out-innovate and out-compete an increasingly repressive China.
But the anti-tech bills released last week point in the opposite direction. They are a formula for losing to China. Democrats and true progressives should reject them.
Progressives are supposed to care about jobs. Yet the collection of anti-tech bills just released by members of the House Judiciary Committee go after the companies and industries that have been the most reliable source of job creation in recent years.
Using the methodology developed in our April 2021 paper, Innovative Job Growth in the 21st Century, we calculate that the tech-ecommerce sector has replaced the healthcare sector as the biggest creator of jobs in the U.S. economy. In the five-year stretch from 2015 through 2020, the tech-ecommerce sector added more than 1.7 million jobs. That’s compared to almost 1.2 million jobs for the healthcare sector, including social assistance.
Moreover, these tech-ecommerce jobs are spread over the entire country. Tech-ecommerce job growth from 2015 to 2020 exceeded healthcare job growth in 36 states, including the District of Columbia. The top ten states for tech-ecommerce job growth start with California, Texas and Washington, but also include Florida, Georgia, Ohio, Pennsylvania and Illinois (see table below).
In terms of jobs, the top tech-ecommerce companies compare well to the great manufacturing companies of the past. The top five tech-ecommerce firms—Apple, Alphabet, Microsoft, Facebook, and Amazon—employed 1.8 million workers globally as of early 2021. By comparison, the top five industrial firms by stock market value in the peak manufacturing employment year of 1979—GM, GE, IBM, Kodak, and Dupont—had a total global employment of 1.9 million, just slightly more.
What about pay? The average annual pay in the tech-ecommerce sector is higher than average annual pay in healthcare in every state except for one (Oklahoma). This includes all positions and roles, across the whole universe of tech-ecommerce jobs, from fulfillment center workers to software developers. Average tech-ecommerce pay is higher than average manufacturing pay for 43 states, including the District of Columbia.
Note that these figures include a large number of non-college workers. Our analysis of government data shows that roughly 40% of workers in tech-ecommerce industries have less than a bachelor’s degree. On average, they are earning at least as much or more as they would be making in manufacturing, with the big difference that tech and e-commerce firms are hiring non-college workers without experience at a much faster rate than manufacturers are.
As the saying goes, if it ain’t broke, don’t fix it. Progressives should appreciate the job creation record of the tech-ecommerce companies rather than trying to break them up.
Top states for tech-ecommerce job creation
Job change, thousands, 2015-2020
Tech-ecommerce
Healthcare and social assistance
California
331.8
267.7
Texas
170.7
109.8
Washington
107.1
40.2
Florida
100.8
95.1
New York
85.4
142.6
Georgia
63.9
39.4
New Jersey
61.7
5.9
Ohio
60.4
6.0
Pennsylvania
57.2
56.6
Illinois
57.0
6.3
North Carolina
51.3
16.7
Arizona
46.8
56.8
Colorado
41.9
22.6
Virginia
40.4
16.7
Tennessee
37.1
16.5
Maryland
35.9
3.4
Massachusetts
34.6
2.6
Indiana
33.8
25.7
Michigan
29.3
-2.5
Nevada
26.3
20.3
Missouri
24.3
18.2
Oregon
24.2
42.8
Utah
24.1
20.2
Kentucky
20.9
11.7
South Carolina
17.8
14.8
Note: The tech-ecommerce sector includes four tech industries and three ecommerce industries. The four tech industries are software publishing (NAICS 5112); data processing and hosting (NAICS 518); Internet publishing and search, and other information services (NAICS 519); and computer systems design and programming (NAICS 5415). The three ecommerce industries are electronic shopping and mail order houses (NAICS 4541); local delivery (NAICS 492); and ecommerce fulfillment and warehousing (NAICS 493).
New legislative package would be a devastating blow to American technological leadership
Today, Members of the House of Representatives introduced a new package of bills aimed at stifling digital innovation through extreme antitrust legislation.
Alec Stapp, Director of Technology Policy at the Progressive Policy Institute (PPI) released the following statement:
“The package of bills proposed by Members of the Judiciary Committee would be a devastating blow to American technological leadership at a time when that leadership is more necessary — and more at risk — than ever. While the current system isn’t perfect — the FTC and DOJ urgently need more resources, for example — our antitrust institutions are part of the overall pro-innovation ecosystem that has enabled the United States to produce technology companies that are the envy of the world. These companies create good jobs for American workers — both directly and indirectly — as well as provide innovative products for consumers around the world.
“It makes no sense to apply a drastically different set of rules to a small handful of companies without clear evidence of consumer harms, and a compelling story for how these new rules would remedy those harms. On the contrary, radical measures such as line of business restrictions and bans on self-preferencing would destroy many of the integrated products consumers currently enjoy.
“Apple would no longer be allowed to make its own apps (the iPhone would arrive out of the box with an empty home screen). Google would no longer be allowed to offer Google Maps on Android devices or use it to show map results in search. Amazon would no longer be allowed to offer generic goods at lower prices (just as Walmart, Costco, and every other large retailer do). It’s hard to see how these rules would benefit anyone other than the small handful of competitors that have been trying to use regulation to kneecap America’s most successful companies.
“Lastly, the bill related to mergers is written so broadly that it would effectively ban all future acquisitions by large tech companies. This might have the unintended consequence of decreasing investment in startups because acquisitions are by far the most common way that founders, investors, and employees earn a return on their equity. Reforms are certainly necessary, especially on issues related to privacy, misinformation, and election interference, but these bills would do nothing to address those concerns and would cause more harm in the process.”
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
While other companies cut back on spending as the coronavirus pandemic took hold last year, e-commerce giant Amazon boosted its domestic capital investments by 75% to nearly $34 billion—and helped set the stage for a robust economic recovery, according to a new report from the Progressive Policy Institute.
KEY FACTS
Capital investment by Amazon and its peers in the e-commerce, broadband and tech industries helps spur job creation, boosts production and distribution capacity and combats inflation by shoring up supply, the report’s authors argue.
In Amazon’s case, the extra investment on property and equipment last year was driven by the need to meet an enormous surge of demand during the pandemic, the report notes.
Those investments put the firm in PPI’s top slot on its list of “Investment Heroes.”
Verizon was second on PPI’s list with $16.1 billion in domestic capital investment last year, AT&T was third on the list with $15.6 billion invested, and Alphabet and Intel rounded out the top five with $14 billion and $12.5 billion invested, respectively.
BIG NUMBER
500,000. That’s how many workers Amazon added in 2020, according to the report.
CRUCIAL QUOTE
“The willingness of these companies to keep spending essentially made it possible for large chunks of the economy to move forward, despite the pandemic,” the report states.
KEY BACKGROUND
Despite its major investments in the U.S. economy last year, Amazon’s business practices have also been the target of criticism. The firm was recently sued by the attorney general of the District of Columbia over allegations that it engaged in anticompetitive practices that “have raised prices for consumers and stifled innovation and choice across the entire online retail market.” Rep. David Cicilline (D-R.I.) said Amazon’s recent purchase of film studio MGM is a sign that the company is “laser-focused on expanding and entrenching their monopoly power.” And that’s not to mention criticism over the way the company handled safety protocols for workers and drivers during the pandemic.
Amazon’s $34 Billion Makes It an ‘Investment Hero,’ Study Says
The e-commerce giant was far and away the leader in U.S. capital spending in 2020, according to a Progressive Policy Institute analysis.
By Peter Coy
Democratic and Republican politicians alike are dumping on Amazon.com Inc. over its ceaseless expansion—marked most recently by its agreement to buy the movie studio with the roaring lion logo, Metro-Goldwyn-Mayer. Representative David Cicilline, a Rhode Island Democrat, says “they are laser-focused on expanding and entrenching their monopoly power,” while Senator Josh Hawley, a Missouri Republican, tweets that Amazon “shouldn’t be able to buy anything else. Period.”
But not everybody is mad at Amazon. A new study from the Progressive Policy Institute, which was founded in 1989 as a centrist Democratic think tank and promises “radically pragmatic thinking,” calls Amazon its No. 1 “investment hero.” It estimates that Amazon boosted its U.S. capital spending by 75% in 2020, to $33.8 billion, from the year earlier, which was more than twice that of any other company.
The study names 25 investment heroes based on their U.S. capital spending. The rest of the top five for 2020 are Verizon Communications, $16.1 billion; AT&T, $15.6 billion; Google’s parent Alphabet, $14 billion; and Intel, $12.5 billion.
“The willingness of these companies to keep spending essentially made it possible for large chunks of the economy to move forward despite the pandemic,” says the report. “Investment by broadband and tech companies kept people connected at home during the shock of the lockdown; and the investment by e-commerce firms helped keep essential goods flowing while many Americans could not go out shopping.”
The report is by Michael Mandel, the institute’s chief economic strategist, and Elliott Long, a senior economic policy analyst. Mandel was chief economist of BusinessWeek, the predecessor to Bloomberg Businessweek (making him my former boss). He is also a senior fellow at the Mack Institute for Innovation Management of the Wharton School at the University of Pennsylvania.
Critics of Amazon say it costs jobs by putting smaller retailers out of business. But in an email exchange, Mandel wrote that “the number of workers added by e-commerce exceeds jobs lost by brick and mortar.” The main reason, he wrote, is that e-commerce customers are creating jobs for drivers, warehouse workers, and others, who are freeing them from having to shop in person. “Investment in e-commerce is job-creating because it replaces unpaid household shopping hours, which have fallen dramatically,” Mandel wrote.
This is the 10th annual edition of the investment heroes report by the Progressive Policy Institute. It’s based on gross investment—i.e., before accounting for the effects of depreciation. The numbers come from company reports. The authors made estimates when the companies didn’t break out U.S. investment separately. Most financial companies, excluding health insurance companies, were excluded. For Amazon, which relies heavily on finance leases, the report included principal repayment on those leases as a form of investment.
The report takes a shot at critics in the camp of Cicilline and Hawley, without naming names. “It seems odd that Congress seems more interested in sharply questioning companies that are investing heavily in America, rather than those that have reduced investment or actually disinvested in this country,” it says.
The Progressive Policy Institute gets general funding from some of the companies on the heroes list, Mandel wrote in an email. But he says “the methodology only uses publicly available data and a consistent procedure that can be replicated.”
The MGM deal was announced after the report was completed. (Acquisitions don’t count toward companies’ capital spending numbers in the report.) In an email, Mandel wrote, “This deal potentially increases the level of competition in the growing market for streaming content. The key is to watch Amazon’s investment behavior. If Amazon invests in producing more content based on MGM intellectual property, as seems likely, that means lower prices for consumers and more content production jobs.”
In announcing the deal on May 26, the company stated, “Amazon will help preserve MGM’s heritage and catalog of films, and provide customers with greater access to these existing works.” Amazon didn’t immediately respond to a request for comment on this story.
The PPI report is lukewarm on President Joe Biden’s American Jobs Plan. The authors praise its provisions for investment in infrastructure, research and development, and manufacturing. But they write that the corporate income tax increases in the plan “could discourage business investment at a time when capital spending is already weak.”
Not every economist agrees with that. Thomas Philippon, a finance professor at New York University’s Stern School of Business, argues that for many companies, a higher tax on their profits would not induce them to decrease investment significantly because a substantial share of their profits are “excess”—meaning they’re above what companies require to justify investment for growth. (Excess profits, an economic concept rather than an accounting one, are generated by companies with monopolies or near-monopolies in their market sectors.)
Mandel wrote, “The weight of the evidence shows that corporate tax rates adversely affect investment.”
Tech platforms should be judged on how well they foster consumer welfare, innovation, investment, productivity and job creation. Sometimes these values will conflict with each other, but they provide a good framework for thinking about the benefits and costs of platforms that go beyond the usual antitrust issues.
From that perspective, a recent opinion piece in Wired levies a criticism of the current design of Apple’s App Store that is important, if true. The authors, the legal director of Public Knowledge and then executive director of the Coalition for App Fairness, argue that when “Apple demands 30 percent of developers’ revenue, it limits their freedom to offer novel and innovative customer experiences.” They go on to say that the “biggest loss” from the App Store “has nothing to do with developers and users who have to work around Apple’s restrictions—it’s those apps and services that don’t exist at all because app store rules make them impossible.”
However, this criticism—that the pricing structure of the App Store results in too little app innovation and too few apps–is an odd one. As of the end of 2020, the App Store stocked 1.8 million apps. According to marketing research firm Sensor Tower, 85 percent of those apps were “free” to users, in the sense developers did not charge for downloads or collect in-app charges.
But note that these apps are “free” to developers as well, in the sense that Apple receives no other revenue other than the fee for the developer account ($99 per year for an individual account, with a waiver for nonprofits, accredited educational institutions and government entities that will distribute only free apps ). This pricing structure creates very low barriers to entry for new apps, spurring both innovation and competition.
Free apps are responsible for much of the consumer welfare, innovation, investment and job creation enabled by the App Store. For example, consider the banking apps which are offered by virtually every large and small bank today. Despite the large amounts of financial transactions flowing through these apps, they fall into the “free” category to both consumers and the banks. Banking apps were absolutely essential during the pandemic, enabling customers to do banking transactions including depositing checks, without having to go into branches. Indeed, banks compete to see what new functions can be added to their apps to make them more useful for their customers.
Another growing category of free apps are designed to control and interact with connected devices–the “internet of things.” These connected devices can be anything from electric bikes to power tools to automobiles to smart homes to agricultural sensors. The variety is nearly infinite, but one common characteristic is that their associated apps are directed toward innovation and making the connected device more useful. These apps are often a key selling point for the product, with the customer getting them as part of the purchase rather than paying to download separately.
Free apps also run the gamut of nonprofit organizations, from innovative educational organizations such as Khan Academy to nonprofit health service providers such as Kaiser Permanente to churches and other religious organizations. Donations can be made through these apps as well.
In an era of rampant ransomware and supply chain attacks, a free or nearly-free distribution channel that is carefully vetted for malware would seem to be a plus for innovative apps. Especially as the internet of things becomes more important, apps associated with connected devices will become the leading edge of innovation. Despite what the authors of the Wired piece argue, the pricing structure of the App Store fosters rather than impedes innovation and creativity.
Replacing gasoline cars with electric vehicles is a pillar of President Biden’s strategy for tackling climate change. But even if the administration sets a deadline to sunset sales of gas-powered passenger vehicles, the export of used cars abroad could stall the global reductions needed to stave off catastrophic warming.
Every year, the United States ships hundreds of thousands of its oldest and dirtiest cars overseas to predominantly poor countries in a trade that is largely unregulated. In other words, cars that would fail safety, fuel economy and emissions standards in the United States or Europe are dominating the roads in countries that rely on imported vehicles.
In Kenya and Nigeria, for example, more than 90% of vehicles are foreign imports.
“The pollution and gas guzzling continue on even after the vehicle is removed from America’s roads,” said Dan Becker, head of the safe climate transport campaign at the Center for Biological Diversity. “It’s essentially a Cheshire cat issue.”
Worldwide, there are about 1.4 billion cars on the road. That figure is expected to more than double by 2050, with 90% of growth coming from the sale of used vehicles in lower-income countries. That means emissions from the global transportation fleet — which currently account for a quarter of total carbon dioxide emissions worldwide — also could double.
If left unchecked, the global trade in secondhand cars could have bleak consequences for climate change, air quality and, by extension, public health, according to a pioneering U.N. report released last year.
The study found that between 2015 and 2018, the United States, Japan and the European Union exported 14 million used passenger cars, with 70% winding up in developing countries in Africa, Eastern Europe, Asia, the Middle East and Latin America. Two-thirds of countries surveyed in the study lacked adequate policies to regulate the quality of imported cars. Consequently, the majority of used vehicles imported were inefficient, unsafe and old.
In Uganda, for example, the average age of a used diesel import in 2017 was more than 20 years.
“The majority of the vehicles being exported do not have a valid road worthiness certificate,” said Rob de Jong, head of the U.N. Environment Programme’s Sustainable Mobility Unit and an author of the report. “The trade in used vehicles is not a bad thing per se, but in the total absence of standards, it’s a free-for-all.”
A few countries have started cracking down on dirty, unsafe imports. Some countries, such as Egypt, India and Brazil, have outright banned the import of used vehicles. Others, like Iran and Iraq, have implemented age limits, while still others, such as Singapore and Morocco, have issued vehicle emissions standards.
Mauritius, a small island nation in the Indian Ocean, banned used vehicles over 3 years old and issued a vehicle carbon tax. As a result, the country has seen a major increase in the import of used electric and hybrid cars.
Still, there is no regional or global standard to regulate the flow of used vehicles as a climate mitigation or air pollution control mechanism. De Jong of the U.N. said there needs to be a streamlined approach to curbing the sale of unsafe and inefficient vehicles.
“The risk of not doing this,” he said, “is not meeting the Paris climate agreement,” which aims to keep warming below 2 degrees Celsius.
Roger Gorham, a transport economist and urban development specialist with the World Bank, said there is an emerging consensus that regulating the secondhand vehicle trade should be a joint responsibility between exporting and importing countries.
“Exporters need to be able to distinguish between legitimate exports of vehicles that can actually be used safely, reliably and in line with environmental and climate objectives in their destination countries, as opposed to cars and trucks that do not meet even the most basic safety and environmental standards,” he said in an email. “But importer countries also have an obligation to be clear about the acceptable performance thresholds of cars (and fuels) they will allow to be imported into their country.”
In the United States, the export of used cars and trucks accounts for a small fraction of the domestic used vehicle market. In 2019, more than 40 million used vehicles — and 17 million new ones — were sold, according to Edmunds. Of those 40 million, less than 1 million were exported overseas, according to Commerce Department data.
Still, the United States is the third-largest exporter of used vehicles, behind the European Union and Japan. Additionally, dramatic action is required in the next decade if humanity is to stave off catastrophic warming, according to an International Energy Agency report released this week (Climatewire, May 18).
Electric vehicles currently make up 5% of global automobile sales. That number will need to increase to 60% by 2030, IEA said, and the sale of traditional gasoline- and diesel-powered cars will need to end by 2035.
Ray LaHood, who served as Transportation secretary under former President Obama, said the Biden administration should try to regulate the export of dirty vehicles.
“Part of our responsibility is to clean up the environment in whatever ways we can, not only for our own country but for the world,” he said in an interview. “That has to be a priority.”
Biden administration officials “are going to have to think about whether they take these cars in as trade-ins,” added LaHood, who now serves as co-chair of the Building America’s Future Educational Fund, a bipartisan infrastructure coalition.
Under the Obama administration, LaHood oversaw a federal program called the Consumer Assistance to Recycle and Save (CARS) program — also known as Cash for Clunkers — which provided financial incentives for car owners to trade in their vehicles for new, more fuel-efficient cars and trucks. The program, which was intended to stimulate the post-recession economy and promote the sale of cleaner cars, was enormously popular.
Consumers who traded in their older automobiles and purchased new ones received cash rebates on the spot. Within six weeks of authorizing a $1 billion disbursement, Congress appropriated an additional $2 billion for rebates.
According to a Congressional Research Service report, more than 677,000 rebates were processed, increasing the U.S. gross domestic product by billions of dollars, creating or saving thousands of jobs, reducing fuel consumption by millions of gallons, and significantly slashing carbon emissions.
Traded-in vehicles were supposed to be smashed or otherwise destroyed, but a 2010 Transportation Department Office of Inspector General report found disposal hard to verify. Of the disposal facilities surveyed, the report found that 32% were not in compliance with DOT standards, which required facilities to report the disposal to the National Motor Vehicle Title Information System (NMVTIS).
But at the time of the OIG report’s release in 2010, only 15 states fully participated in the NMVTIS database, which was created to deter vehicle theft and fraud. After Hurricane Katrina, for example, cars that had been declared total losses to be scrapped were resold in other states with forged titles, a process known as title washing. Today, 48 states participate in the program, according to its website. Hawaii, Kansas and the District of Columbia are listed as “in development.”
“[O]ne facility, which received 357 CARS vehicles at the time of our audit, was not aware of NMVTIS and therefore, had not reported any information on the status of those vehicles,” the investigation found. “In addition, one facility we visited did not sign or date the disposal certification forms for the 27 trade-in vehicles it handled.”
Paul Bledsoe, who served as a Department of Energy consultant under Obama and worked on climate change in the Clinton administration, said he worries that many Cash for Clunkers vehicles may have ended up being exported.
“They were shipped overseas to Africa or South America,” Bledsoe, now a strategic adviser for the Progressive Policy Institute, said in an interview last month. “So the Biden team has to make sure [retired vehicles] are permanently retired.”
Today, the Innovation Frontier Project (IFP), a project of the Progressive Policy Institute, released a new report from James Bessen, an economist and Executive Director of the Technology & Policy Research Initiative at Boston University School of Law.
In the report, Bessen argues that new information technology has delivered more and unprecedented convenience for consumers, and good-paying jobs that contribute to overall economic growth. However, limited access to the technology is also contributing to the major economic and social issues of the day: the growing dominance of large firms and the struggle to increase the flow of knowledge, slow productivity growth, rising economic inequality, and the failure of regulation. The challenge for policymakers is to mitigate these negative effects while preserving as many of the benefits as possible to consumers, to workers, and to the economy.
“James Bessen provides a policy framework for thinking about the diffusion of these important digital technologies. The productivity gains that have resulted from proprietary IT investments are vitally important, but now we need to make sure the whole economy can benefit from these advancements.” said Caleb Watney and Alec Stapp, co-leads of the Innovation Frontier Project.
The report draws from his forthcoming book, “Superstar Capitalism”, to be published by Yale University Press.
Based in Washington, D.C. and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is co-led by Caleb Watney and Alec Stapp.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
In this blog, we update our November 2018 estimate of Canadian App Economy jobs. Much the same as other countries, the Canadian economy has suffered an economic shock from the Covid-19 pandemic, with Statistics Canada estimating the country’s output contracting by 5.4 percent in 2020. But the App Economy, which has a history of being recession resistant, has been a steady source of job growth through the economic turbulence. As of November 2020, we estimate the Canadian App Economy included 309,000 App Economy jobs, an 18 percent increase from our November 2018 estimate of 262,000 jobs (Table 1). By comparison, overall Canadian employment declined over the same stretch.
We also estimate Canadian App Economy jobs by mobile operating system. As of November 2020, we estimate the iOS ecosystem included 243,000 App Economy jobs and the Android ecosystem to have 247,000 App Economy jobs. That’s an increase of over 20 percent for both the iOS and Android ecosystems compared to our last estimates. The iOS and Android numbers sum to more than the total because many App Economy jobs can belong to both ecosystems.
Methodology
For this research, a worker is in the App Economy if he or she is in:
An IT-related job that uses App Economy skills—the ability to develop, maintain, or support mobile applications. We will call this a “core” App Economy job. Core App Economy jobs include app developers; software engineers whose work requires knowledge of mobile applications; security engineers who help keep mobile apps safe; and help desk workers who support use of mobile apps.
A non-IT job (such as sales, marketing, finance, human resources, or administrative staff) that supports core App Economy jobs in the same enterprise. We will call this an “indirect” App Economy job.
A job in the local economy that is supported either by the goods and services purchased by the enterprise or by the income flowing to core and indirect App Economy workers. These “spillover” jobs include local professional services such as bank tellers, law offices, and building managers; telecom, electric, and cable installers and maintainers; education, recreation, lodging, and restaurant jobs; and all the other necessary services. We use a conservative estimate of the indirect and spillover effects.
We estimate the number of App Economy jobs by combining annual data on ICT professionals in Canada from Statistics Canada and Employment and Social Development Canada with comprehensive counts of “App Economy” job openings in Canada from ca.indeed.com. Our methodology is described In detail in the Appendix to our 2017 paper on the European App Economy, including our technique for combining both French and English terms for App Economy jobs.
Geography
Our methodology enables us to estimate App Economy jobs at the provincial level by ecosystem. Not surprisingly, Ontario leads with 139,000 App Economy jobs (Table 2). Coming in second and third, respectively, was Quebec with 64,000 App Economy jobs and British Columbia with 63,000 App Economy jobs. Since our last estimate, total App Economy jobs in Ontario remain nearly the same, while App Economy jobs in Quebec are up 20 percent. British Columbia was the fastest growing province among the top three, with over a 50 percent increase compared to our November 2018 estimate.
Our methodology allows us to make international comparisons as well. Compared to our estimates of total App Economy jobs in other countries, Canada’s 309,000 App Economy jobs is nearly double the size of Australia’s App Economy (Table 3). In absolute terms, Canada’s App Economy is significantly smaller than the United States.
Adjusting for country size, Canada is doing very well. “App intensity” is defined as the number of App Economy jobs divided by total employment. Canada’s app intensity of 1.7 percent ties with the United States and outpaces Australia, two countries where we have recent “pandemic” estimates. Note that app intensity has risen during the pandemic because the number of app economy jobs has risen even as the broader employment numbers have shrunk.
Finally, we note that many core App Economy jobs require familiarity not only with iOS or Android, but with one of the app development languages or frameworks, such as Swift (iOS) or Kotlin (Android).
Table 4 below presents a list of app development language and frameworks, ranked by the number of mentions on App Economy job postings. Java is first, followed by Swift. Because the methodology is new, we are not yet ready to quantify the list.
Examples
In this section we note some current examples of companies and sectors that have been recently in the market for workers with App Economy skills. One sector which is attracting a wave of App Economy jobs is finance. As of March 2021, Sun Life Financial was hiring a senior iOS developer in Montreal, Quebec. Fintech company Paytm, which reached 1.2 billion global monthly transactions in February, was searching for a mobile iOS engineer in Toronto, Ontario. Royal Bank of Canada was seeking a senior iOS developer in Toronto, Ontario. The National Bank of Canada was looking for a mobile product designer to design and prototype iOS and Android mobile experiences in Montréal, Quebec. Cryptocurrency exchange firm Exchangily was hiring a mobile app developer proficient in Dart or Flutter in Markham, Ontario. Payment processor Square was searching for an engineering manager with expertise in Kotlin and Swift in Toronto, Ontario.
Equitable Bank was seeking a senior development manager with knowledge of iOS and Android in Toronto, Ontario. Fintech company Mogo Finance Technology, which recently acquired saving and investing app Moka Financial Technologies, was looking for a senior iOS engineer in Vancouver, British Columbia. Neo Financial was hiring a software development engineer to run automated iOS and Android tests in Calgary, Alberta.Tangerine Bank was searching for a senior mobile product designer with knowledge of iOS and Android interfaces in North York, Ontario. Olympia Financial Group was seeking an IT service desk analyst with experience troubleshooting iOS in Calgary, Alberta. Financial advisory company BDO was looking for a senior cybersecurity consultant with iOS and Android experience in Ottawa, Ontario. PayBright was hiring a test engineer with experience in iOS and Android mobile testing in Toronto, Ontario.
The health and wellness sector is spurring App Economy employment as well, due in part to Covid-19. For instance, mental health company LivNao, which developed contact tracing app ConTrac in response to the Covid-19 pandemic, was looking for an Android software engineer in Vancouver, British Columbia. Toronto East Health Network was hiring a junior technical associate responsible for the deployment, maintenance, and support of iOS and Android applications in its vaccination clinic in Toronto, Ontario. Charlie Wellbeing, which specializes in mental health counseling for teens, was searching for an iOS developer in Vancouver, British Columbia. Medical supply company Natus Medical Incorporated was seeking a senior firmware engineer with Android experience in Ottawa, Ontario. Carefor Health & Community Services was looking for an IT telecommunications administrator with knowledge of the Android operating system in Ottawa, Ontario. Jump rope company Crossrope was hiring a senior backend software developer to support Android app development in Toronto, Ontario.
Audiometry company SHOEBOX Ltd. was searching for an engineering manager with experience developing and deploying iOS apps in Ottawa, Ontario. Dermatology technology firm MetaOptima was seeking an Android developer in Vancouver, British Columbia. Medical device company Flosonics Medical, which developed the wireless peel-and-stick sensor FloPatch that allows doctors to monitor patients’ bloodflow, was looking for a senior iOS developer in Toronto, Ontario. Repair Therapeutics was hiring an IT support specialist with experience in iOS and Android in Montreal, Quebec. Healthcare technology firm AceAge, which developed medication organizer Karie, was searching for a software developer with experience building mobile applications for Android. Cercacor Laboratories, which develops and licenses non-invasive hemoglobin monitoring systems for athletes and trainers, was seeking a senior iOS engineer in Vancouver, British Columbia. Custom vitamin and supplement manufacturer VitaminLab was looking for a UX designer to support Android and iOS development in Victoria, British Columbia.
Summary
Canada’s App Economy stands poised to be a powerful force for job growth as the country recovers from the Covid recession. Its 309,000 App Economy jobs are only the start.
The COVID-19 pandemic undoubtedly disrupted peoples’ way of life, both in terms of health and the economy. For Mexico, more than 2 million cases have been confirmed as of this writing, with economic output declining by 8.5 percent in 2020 – the country’s biggest annual contraction since the 1930s.
As people have engaged in social distancing and work from home to mitigate the virus, wireless connectivity has never been more critical. Smartphones and apps are increasingly becoming a part of daily life, allowing consumers and businesses to interact and be productive from a distance.
In this paper, we focus on Mexico’s App Economy: those app developers and other workers who create, maintain, and support an ever-expanding range of apps for health, communications, ecommerce, education, transportation, banking, and smart homes. The size of an App Economy workforce in a country is indicative of the rate at which that country is embracing the digital transformation and how well it will be positioned as the global economy recovers from the pandemic.
