issue: Economy

The Case for Online Vision Tests

Posted on by The Progressive Policy Institute

Healthcare faces three major issues: access, cost, and productivity. Telemedicine — the use of technology to help treat patients remotely – can help address all three. Broadband allows many underserved rural and minority communities that previously had limited access to medical services to remotely access high-quality medical care. Telemedicine reduces the need for expensive real estate and enables providers to better leverage their current medical personnel to provide improved care to more people.

But, despite its benefits, there is an ongoing struggle about how to regulate telemedicine: who can practice it, what services can be delivered via telemedicine, and how it should be reimbursed. As is the case with any innovation, policymakers are looking to find the right balance between encouraging new technologies and protecting the health of patients. These are real issues. In too many cases, however, state and local legislators have erred on the side of too many restrictions on telemedicine, driving up prices and “protecting” patients from cheaper, better care.

In particular, online vision tests have come under attack in some states. Online vision tests use your computer and smartphone to assess your near and distance vision. When used correctly, they complement rather than substitute for in-person eye exams. Their main benefit is that they make it easier and less costly to get prescriptions for glasses or contacts. That’s especially helpful in states with large rural or poor urban communities. Indeed, more than 800 counties nationally have no optometrist offices or optical goods stores, according to figures from the Bureau of Labor Statistics. That’s fully one-quarter of the counties in the country.

In this report, we provide background on the health and economic benefits of telemedicine, analyze recent legislation proposed regarding online vision tests, and illustrate the impact online vision tests have on poor and rural communities.

Kim for The Hill, “Giving tax cuts to the companies that deserve them”

Posted on by The Progressive Policy Institute

A recent White House press release boasted that as many as one million Americans have gotten what it called ‘Trump Bonuses” and “Trump Pay Raises” from their employers the purported result of lower corporate tax rates in the tax cut legislation rushed through Congress in December.

In reality, however, shareholders, not U.S. workers, are likely to be the Trump tax cuts’ biggest beneficiaries. In earnings calls last fall, reported Bloomberg, most big companies assured investors they would pass along their windfalls in the form of share buybacks and dividends.

Democratic Senate Minority Leader Chuck Schumer (N.Y.) recently circulated a list of 30 large companies that have announced a total of $83.7 billion in share buybacks in expectation of the new law.

Continue reading on The Hill. 

Bledsoe for The Hill, “Solar case shows climate protection requires globalized economy”

Posted on by The Progressive Policy Institute

Responses to President Trump’s imposition of tariffs on Chinese solar panels fall into two general camps.

One holds that Chinese solar manufacturing subsidies are so egregious as to require U.S. tariffs to deter additional subsidies by Beijing. Others believe the action is really just free-trade political posturing by Trump, and in practice, amounts only to a self-inflicted wound on the rapidly growing U.S. solar installation sector.

Neither perspective accounts, however, for the recent history of U.S. and Chinese solar subsidies, or indeed new subsidies for carbon capture and other clean energy sources that became law in the recent budget agreement.

Continue reading at The Hill. 

Wage Winners in 2017: Ecommerce and Retail?

Posted on by The Progressive Policy Institute

Overall, 2017 was still a weak year for wage growth. In the private sector, real hourly wages for production and nonsupervisory workers rose only 0.2% in 2017, the slowest rate since 2012.

However, production and nonsupervisory workers did do significantly better in some industries. The table below lists the top 2017 increases in real hourly wages for large industries, defined as 3-digit industries with more than 500K production and nonsupervisory workers.

The top large industry for real wage growth in 2017 was warehousing, where a 4.9% gain in real hourly wages  for production and nonsupervisory workers was likely driven by the growth in ecommerce fulfillment center employment.

Other big winners were some retail industries and restaurants. These gains in part reflect increases in minimum wages for 21 states in 2017. But the other driving force is the need for brick-and-mortar retailers to upskill their workers to better compete with ecommerce.

2017 Wage Leaders for Large Industries*
Real hourly wage gain for production and nonsupervisory workers, 2017
Warehousing and storage 4.9%
Chemical/pharma manufacturing 4.7%
Sporting goods, hobby, music, and book 2.8%
Food services and drinking places 2.5%
General merchandise stores 2.5%
Heavy and civil engineering construction 2.2%
Repair and maintenance 2.2%
Clothing and clothing accessory stores 2.1%
Personal and laundry services 2.0%
Building material and garden supply stores 2.0%
Health and personal care stores 1.6%
*3-digit industries with more than 500K production and nonsupervisory workers
Data: BLS

 

If we just focus on warehousing for a moment, we see that real hourly wages in the industry started to rise after 2013, just as employment started to soar from the big expansion of ecommerce fulfillment centers. The left hand axis (red line) is real hourly wages for production and nonsupervisory workers, in 2017$, and the right hand axis (blue line) is employment of production and nonsupervisory workers.

 

 

 

 

 

Six Charts That Reveal the Absurdity of the Trump Budget

Posted on by The Progressive Policy Institute

The president’s budget proposal – the official document that lays out his administration’s tax and spending wish list – usually contains a mix of dubious economic assumptions and ambitious policy ideas that are dead on arrival in Congress. But while the president’s budget is usually somewhat estranged from reality, Donald Trump’s Fiscal Year 2019 Budget is utterly divorced from it. The budget proposal also guts critical public investments such as infrastructure and scientific research, slashes the social safety net, and – even under the most charitable economic assumptions – still proposes to run budget deficits significantly larger than they would have been under President Obama’s final budget proposal.

Gutting Public Investment

The delusion starts with a proposal for discretionary spending levels far below those in the budget deal passed just last week. That deal set spending caps for non-defense (domestic) discretionary programs to $579 billion in FY2018, which is just under 2.9 percent of gross domestic product. This represented a significant increase over the caps imposed by the Budget Control Act of 2011 but would still result in domestic spending below its historical average.

The Trump budget, by contrast, would radically lower these caps at a time when Congress seems more inclined to increase them. As this chart shows, the domestic discretionary caps proposed in the Trump budget would fall to less than half the levels ­– both in dollars and as a share of the economy – that they would be if Congress continued growing spending at the rate they did in last week’s deal. While Trump’s budget did include an addendum to reflect the higher spending levels, it is still noteworthy that he would have proposed a budget so divorced from the political realities in Congress – especially when that Congress is controlled by members of his own party.

Trump’s desire for sharp cuts to domestic discretionary spending are deeply problematic when one considers the programs it funds. Discretionary spending is the part of the budget that Congress has the flexibility to appropriate annually, and the non-defense portion includes critical public investments such as infrastructure and scientific research that contribute to the long-term health of our economy. The next chart depicts the Trump budget’s steep cuts to these investments, slashing the share of spending for non-military research to just over half its historical average by 2023.

It is not surprising that the Trump administration ­– the most anti-science in recent memory – would propose deep cuts to scientific research. What should be surprising, however, is that even the kinds of domestic public investment that Trump ostensibly supports would suffer under his budget proposal.

Trump’s budget was accompanied by a “$1.5 trillion” proposal to boost investment in infrastructure over the next ten years. The details, however, reveal that this “plan” amounts to little more than empty Trump bluster. The administration suggested using $200 billion in federal investment to somehow leverage an additional $1.3 trillion from cash-strapped state and local governments, as well as the private sector. But where exactly would this $200 billion come from? Cuts to existing infrastructure programs.

Transportation spending, for example, would fall under the Trump budget over the next 5 years. And to be clear: the issue isn’t just that it would fall as a percentage of the economy, or that it wouldn’t keep up with inflation – the following chart shows that the Trump budget actually proposes a reduction in nominal dollars spent on transportation infrastructure. The expectation that billions of dollars in hard cuts to federal investment will spur trillions of dollars in outside spending is outlandish.

These cuts to domestic discretionary spending should be considered in the context of what the budget proposes for mandatory spending as well. Mandatory spending is the part of the budget that that grows on autopilot because spending is determined by previously established formulas. Unlike discretionary spending, some mandatory programs are projected to grow much faster than the economy under current law and are greatly in need of reform if they are going to be sustainable over the long-term. Unfortunately, most of the reforms proposed in the Trump budget are precisely the wrong ones.

Slashing the Safety Net While Deepening Deficits

The two largest – and fastest growing – mandatory spending programs are Social Security and Medicare. Demographic pressures caused by the aging of the baby boomer generation are resulting in program spending that grows faster than the dedicated revenue needed to finance it. There have been many proposals with bipartisan support to curb the growth of these programs without impacting vulnerable beneficiaries who depend on them most. Unfortunately, the Trump administration eschewed any major Social Security reforms and included only modest proposals to rein in the growth of Medicare.

The mandatory reforms the Trump budget did propose take the form of deep cuts to vital safety net programs that serve the most vulnerable in our society. Spending on the Temporary Assistance for Needy Families and Supplemental Nutrition Assistance Programs would be cut by 13 and 31 percent, respectively. Other programs, including many that assist lower- and middle-income Americans with housing costs, are eliminated entirely. Altogether, the Trump budget proposes to cut spending on safety net programs by over $1 trillion throughout the next decade – at least two-thirds of which would come from cuts to Medicaid and the Affordable Care Act that Congress rejected several times last year.

Trump’s approach is particularly wrong-headed given that mandatory spending outside of Social Security and Medicare is growing at roughly the same rate as the economy under current law. The Trump administration is avoiding addressing the real drivers of our deficit – demographic changes and his administration’s reckless tax cuts – and instead using it as a pretext for deep cuts in critical public investments and vital safety net programs. The result is that Trump’s latest budget, in his own OMB’s assessment, leads to significantly larger budget deficits over the next five years than those proposed in President Obama’s final budget over the same period (2019-2023).

This comparison, however, assumes OMB’s economic projections are correct. The final, and perhaps most, absurd aspect of the Trump budget is its economic assumptions. The budget projects real economic growth that is nearly 50% higher than those of other independent experts. Unreasonably high growth projections mask deficits by depicting higher tax revenues, lower spending on safety net programs, and a bigger GDP estimate that makes the deficit look smaller as a percentage.

OMB also understates the impact of deficits under the Trump budget proposal with its interest rate projections. OMB estimates the average interest rate on a 10-year Treasury Note in 2018 will be 2.6 percent. But the rate on this form of government debt already exceeds 2.9 percent and is continuing to rise rapidly following the passage of Trump’s budget-busting tax bill. This is exactly what economists would expect in a healthy economy such as the one we face today, as large budget deficits force the government to increasingly compete with the private sector for capital.

Under more realistic assumptions, the budget deficits in Republican Donald Trump’s budget proposal could be more than double those in the final one offered by Democratic President Barack Obama. When that budget was released, Republicans including House Speaker Paul Ryan rejected it while saying: “We need to tackle our fiscal problems before they tackle us.” Two years later, the only thing this absurd Trump budget tackles is any pretense that those concerns were sincere.

Billy Stampfl contributed to this post. This post has been edited to remove an extrapolation based on recent interest rate spikes.

Thoughts About A Pro-Worker, Pro-Consumer, Pro-Growth Competition Policy

Posted on by The Progressive Policy Institute

In light of the FTC confirmation hearings tomorrow, we’ve been thinking about competition policy. We would like to propose a different approach to competition policy, one that goes far beyond Chicago-style antitrust analysis.

There’s little doubt that recent research has conclusively demonstrated increased concentration across almost every sector of the US economy over the past thirty years. Using data from 1982 to 2012, MIT economist David Autor and a group of distinguished colleagues (2017) find a “remarkably upward consistent trend in concentration” across manufacturing, finance, retail trade, wholesale trade, utilities and transportation, and services. Furman (2016) noted that evidence for rising concentration has been found in such diverse industries as agriculture and hospitals. Somewhat less pessimistically, White and Yang (2017) notes there has been a “moderate but continued increase in aggregate concentration since the mid 1990s.“

Researchers have linked this rise in concentration to declining economic performance across a wide variety of measures. A 2016 report from the Council of Economic Advisers (2016) argued that “monopolists may be less rigorous in pursuing efficient cost reductions” implying that concentration may lead to weaker productivity growth. Loeckery and Eeckhout (2017) find a rise in average markups from 18% above marginal cost in 1980 to 67% today. That’s consistent with the idea that concentration leads to higher prices, as theory suggests.

Economists have also looked for evidence that concentration has helped hold down wages. Autor et al (2017) link the increase in concentration to a fall in the share of labor. Azar, Marinescu, and Steinbaum (2017) argue that an increase in employer concentration on the local level reduces pay levels significantly.

So the question is: What should the government do about increased concentration across a wide range of industries? Like a bulldozer, competition policy is a powerful tool. It can be used to reduce market power and clear a way for innovation and growth. Or it can be used to turn beneficial industries into rubble.

Before applying the bulldozer of competition policy, we need to have a systematic framework for identifying which industries are most harmful to workers, consumers, and growth. To that end, we propose that antitrust regulators assess the performance of industries across a wide range of measures. Potential measures we’ve been analyzing include:

  • Job growth of college-educated workers
  • Job growth of non-college-educated workers
  • Change in the share of industry income going to labor
  • Change in prices charged (adjusted for productivity growth)
  • Multifactor productivity growth

A pro-worker, pro-consumer, pro-growth competition policy would focus on industries that fare poorly on these measures.

In our initial analysis, legal services, air transportation, paper products, and the securities industry fare poorly on these measures. Conversely, warehousing and storage does well on these measures, reflecting the rapid growth of ecommerce jobs for workers without a college education, as does the industry that includes data processing, internet publishing, and other information services.

This analysis is far from complete. We are still considering the appropriate measures and how to weight them. But we think worker-oriented measures such as job growth and change in the labor share, consumer-oriented measures such as price changes, and growth-oriented measures as productivity growth, should be important considerations for competition regulators. We need a consistent and systematic framework for applying competition policy.

References

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson and John Van Reenen. “Concentrating on the Fall of the Labor Share,” American Economic Review: Papers & Proceedings 2017, 107(5): 180–185.

José Azar, Ioana Marinescu, and Marshall Steinbaum. “Labor Market Concentration,” December 2017.

Council of Economic Advisers. “Benefits Of Competition And Indicators Of Market Power,” May 2016.

Jason Furman. “Beyond Antitrust: The Role of Competition Policy in Promoting Inclusive Growth,” Searle Center Conference on Antitrust Economics and Competition Policy, September 16, 2016.

Jan De Loeckery and Jan Eeckhout, “The Rise of Market Power and the Macroeconomic Implications,” August 24, 2017.

Lawrence White and Jasper Yang, “What Has Been Happening to Aggregate Concentration in the U.S. Economy in the 21st Century?”, New York University, draft, March 2017.

 

 

Don’t Help GOP Budget Busters

Posted on by The Progressive Policy Institute

The Republican Party, led by self-proclaimed “King of Debt” Donald Trump, is embracing fiscal profligacy on an epic scale. First, the Trump Republicans broke their promise of “revenue-neutral tax reform” and instead rammed through a bill that will grow deficits by at least $1.5 trillion last December. Now they’ve struck a deal with Senate Democrats that, combined with the tax bill, would add more than $3 trillion to the deficit over the next decade. It’s a one-two gut punch to fiscal responsibility.

It’s regrettable that Senate Democrats have made themselves complicit in the Republican raid on the U.S. Treasury. Yes, this deal would avoid a federal shutdown, which is a good thing. But the pricetag is simply too steep. We support funding disaster relief, health care programs and other critical public investments, and we support adequate defense spending as well. But we’re against unnecessary borrowing to pay for it, which represents an abdication of Congress’s core Constitutional responsibility: paying for government without passing the bill to the next generation.

From the Brownback debacle in Kansas to the tax bill and this latest budget deal, Republicans are proving to be the most reckless and incompetent managers of public finances. All their fiscal posturing and brinksmanship during the Obama years stands exposed as rank hypocrisy. But Democrats can’t effectively make that case to voters if they join in a bipartisan conspiracy against fiscal discipline in Washington.

It would be one thing if this budget deal merely repealed the sequester, which was never meant to take effect and has hamstrung important investments in both defense and domestic initiatives. The Senate budget deal, however, would raise spending above the original levels agreed to by both parties in the Budget Control Act of 2011. It would also cut taxes for corporations by an additional $17 billion and repeal important cost-control measures imposed by the Affordable Care Act – all without paying for them.

If policymakers are going to abandon the BCA, they need to replace it with another plan for controlling America’s massive public debt. The Senate deal places America on the fast track to trillion-dollar deficits as far as the eye can see. That’s the opposite of the fiscal policy our country needs today. When the economy is expanding, we should be unwinding the debt, not using the threat of a government shutdown to make it worse. Otherwise, young Americans will face higher tax and debt payment burdens, and the federal government will have little “fiscal reserve” to tap the next time the economy goes into recession.

PPI 2017 Ecommerce Job Review

Posted on by The Progressive Policy Institute

In this note we summarize the growth in ecommerce jobs in 2017, based on the methodology described in our September 2017 report,  “How Ecommerce Creates Jobs and Reduces Income Inequality.”

  1. We find that the number of ecommerce jobs rose by 133K in 2017, with half of that amount coming from the growth of ecommerce fulfillment centers in the warehousing industry.  Local delivery contributed 38K jobs, found in the ‘couriers and messenger’ industry. These numbers do not include the ecommerce deliveries done by the USPS, or any temporary workers that fulfillment centers might hire.
  2. We estimate that brick-and-mortar retail jobs rose by 13K jobs in 2017.
  3. Measured as FTEs (fulltime equivalent), the number of ecommerce jobs has risen by 592K since 2012.
  4. Measured as FTEs, the number of brick-and-mortar retail jobs has risen by 456K since 2012 (yes, you read that right).
  5. Combined, the brick-and-mortar retail and ecommerce sectors have added more than 1 million FTE jobs since 2012.

Ecommerce Job Growth, 2016-17
     
  Change in jobs, 2016-17
  (thousands)  
Brick-and mortar retail 13  
Ecommerce 133  
       Electronic shopping 29  
       Couriers and messengers 38  
       Warehousing 66  
     
Data: BLS    

 

The Amazon Jobs Effect: Kenosha County, Wisconsin

Posted on by The Progressive Policy Institute

Amazon is the fastest US company–and perhaps the fastest company anywhere–to 300,000 workers. Its rapid expansion is creating tech-enabled work in virtually every corner of the country, with our estimates showing that fulfillment center jobs pay 31% more, on average, than brick-and-mortar retail jobs in the same area.

Now, there are all sorts of interesting questions about what happens next. Some people have worried that the fulfillment center jobs will fade away as the operations get increasingly roboticized. By contrast, our view is that fulfillment centers will become critical hubs for the new “Internet of Goods“: By lowering the cost of shipping and creating a pool of tech-enabled workers, areas with ecommerce fulfillment centers will  have a head start in attracting the next wave of manufacturing startups.

The answers to these questions, of course, bear on the important debates about the value of tax and other public incentives for Amazon fulfillment centers and the company’s HQ2. I haven’t gotten involved in these discussions directly, because they really are about the shape of the future economy. If you think that robots are going to eat all of our jobs, then tax incentives never make sense. If you think that we are just at the beginning of the transformation of  physical industries and the creation of a new wave of tech-enabled jobs in physical industries such as distribution, manufacturing, and agriculture, then offering tax incentives to get a piece of the future is far-sighted thinking.

However, in the midst of all of these very interesting discussions, I really must address a new study from the Economic Policy Institute which purports to show no employment gains from the opening of an Amazon fulfillment center. More precisely,  “[t]wo years after an Amazon fulfillment center opens in a county, overall private-sector employment in the county has not increased.”

Really?  This result does not pass the smell test. You can raise all sorts of long-term questions. But in the short-term, if you build a giant new fulfillment center, first you get construction jobs in the years before the center opens. Then you get the workers themselves. There’s no plausible mechanism by which those jobs can crowd out other jobs in the samecounty in the short-term.

And I’m not sure about their sample of counties. I look on their list of ‘Amazon’ counties (Appendix Table 3), and it doesn’t include Kenosha, Wisconsin, where the construction of an Amazon fulfillment center in 2013 and 2014, and its opening in June 2015, added thousands of jobs into the local economy.

The chart below plots private sector jobs in Kenosha County against private sector jobs in all of Wisconsin.

 

You can see that right around the time that Amazon arrives in Kenosha, county employment turns up, driven in large part by the increase in warehouse jobs.

Indeed, Kenosha County is effectively becoming a tech-enabled distribution-manufacturing hub. After Amazon opened its doors, the county attracted companies like Haribo, the German candy giant (and originator of gummy bears), which is building its first North American factory in Kenosha.

 

 

 

 

 

 

 

 

 

 

 

The App Economy in Thailand

Posted on by The Progressive Policy Institute

When Apple introduced the iPhone in 2007, that initiated a profound and transformative new economic innovation. While central bankers and national leaders struggled with a deep financial crisis and stagnation, the fervent demand for iPhones, and the wave of smartphones that followed, was a rare force for growth.

Today, there are 5 billion mobile broadband subscriptions, an unprecedented rate of adoption for a new technology. Use of mobile data is rising at 65 percent per year, a stunning number that shows its revolutionary impact. More than just hardware, the smartphone also inaugurated a new era for software developers around the world. Apple’s opening up of the App Store in 2008, followed by Android Market (now Google Play) and other app stores, created a way for iOS and Android developers to write mobile applications that could run on smartphones anywhere.

Tax Cuts for the Companies That Deserve It: It’s not too late to put people on par with profits.

Posted on by The Progressive Policy Institute

Corporate tax cuts have long been on the wish list of American businesses, which have rightly argued that both the rates and structure of the U.S. corporate tax code hurt America’s ability to compete globally. U.S. companies are now on track to see dramatic reductions in their tax rates, thanks to the $1.5 trillion tax cut package just passed by the GOP-led Congress and signed by President Donald Trump.

Trump and GOP Congressional leaders claim this relief will spur economic growth through new jobs and higher wages. As proof, they point to a series of commitments by companies such as Boeing and AT&T to provide their workers with bonuses and more worker training.

Unfortunately, it’s far more likely that shareholders, not U.S. workers, will reap the biggest benefits from the Trump tax cuts. According to Bloomberg, for example, many major corporations reportedly told investors in earnings calls this fall that they plan to “turn over most gains from proposed corporate tax cuts to their shareholders” through share buybacks or higher dividends. The Washington Post reported in December that, among America’s 20 biggest companies, just two explicitly promised to hire more workers – and no one committed to raising wages.

The App Economy in Vietnam, 2017

Posted on by The Progressive Policy Institute

When Apple introduced the iPhone in 2007, that initiated a profound and transformative new economic innovation. While central bankers and national leaders struggled with a deep financial crisis and stagnation, the fervent demand for iPhones, and the wave of smartphones that followed, was a rare force for growth.

Today, there are 5 billion mobile broadband subscriptions, an unprecedented rate of adoption for a new technology. Use of mobile data is rising at 65 percent per year, a stunning number that shows its revolutionary impact.

More than just hardware, the smartphone also inaugurated a new era for software developers around the world. Apple’s opening up of the App Store in 2008, followed by Android Market (now Google Play) and other app stores, created a way for iOS and Android developers to write mobile applications that could run on smartphones anywhere.

Regulation and the Productivity Revolution in Japan’s Handset Market

Posted on by The Progressive Policy Institute

The Progressive Policy Institute has long been focused on the interaction between regulation and innovation across the United States, Europe, and Asia. We are particularly concerned with the broad class of pricing of innovative products and services.

From this perspective, we note that the Japanese government, acting through the Ministry of Internal Affairs and Communications (MIC) and the Japan Fair Trade Commission (JFTC), has required or encouraged mobile providers to reduce or eliminate their subsidies for consumer purchases of smartphone handsets. The government’s explicit goal is to persuade the providers to use the money saved from reduced subsidies to lower rates for long-term consumers.

Marshall for the NY Daily News, “How Democrats can connect with middle America again: Advice from successful rural pols from left of center”

Posted on by The Progressive Policy Institute

Washington Democrats employ legions of political consultants, entrail readers and data-crunchers to help them figure out how to sway voters. They could save a lot of money by listening instead to Democrats who win elections in red and purple states.

That’s the idea behind a trenchant new report that should be required reading for national party strategists. Despite its optimistic title, “Hope for the Heartland,” the study shines a pitiless light on how badly Democrats have lost touch with rural and working-class America.

Its authors are Rep. Cheri Bustos, a rising star in Congress who represents a mostly rural district in Illinois won by Donald Trump in 2016, and Robin Johnson, an acute observer of heartland politics who hosts a radio show in Iowa on the topic.

Continue reading at NY Daily News.

Press Release: PPI Report Highlights How Policy Can Drive New, Digitally Enabled Manufacturing Growth & Economic Revitalization

Posted on by The Progressive Policy Institute

Report uses Upstate New York as case study for potential economic boon from ‘Internet of Goods’

WASHINGTON —The Progressive Policy Institute (PPI) today released a new report by Chief Economic Strategist Michael Mandel highlighting how the next wave of digitally-driven manufacturing – an essential part of what he calls the “Internet of Goods” – has the potential to revitalize local economies across the country under the right public policies. The report uses the conditions in Upstate New York – particularly the region from Buffalo to Rochester to Syracuse – as a real-world test bed to determine best practices for attracting and retaining Internet of Goods industries.

“Because new Internet of Goods industries incorporate real-time data and advanced analytics into their business practices, high-speed high-capacity mobile broadband is essential. … What’s needed are policies that encourage broadband companies to bring high-speed broadband networks to these areas of the country that are ideally suited for digitally-driven manufacturing companies, while not taking actions that delay or depress the build-out of these networks by making it cost prohibitive to build them.”

“With its world-class universities, access to interstate highways and shipping routes, educated workforce, and ample building space vacated by former manufacturing plants and other industries, [Upstate New York] possesses many essential qualities to forge a robust Internet of Goods economy,” Mandel writes.

Mandel argues the next generation of wireless broadband networks, usually called 5G networks, are essential infrastructure for the Internet of Goods. They provide enough bandwidth to power driverless trucks, guide drones without interruption, and support digital manufacturing. These networks will be built on millions of small cells throughout the country — in buildings or outdoors on utility poles, light poles, traffic lights, or exterior walls of buildings — and can transmit a lot of data over a short range. Thus, a robust broadband network needs to have many cells.

However, in terms of attractiveness for small cell build-out, Mandel writes, Upstate New York starts out with a handicap relative to comparable regions due to lower GDP density. On top of that, local government policies are hindering the deployment of small cells or 5G networks by imposing or considering new and prohibitive costs on the installation of the equipment needed to bring high-speed mobile broadband to the region.

“As a result, broadband companies will find alternative sites for building out their networks, jeopardizing not only the future of new industries that have located Upstate, but also closing the door to future industries and revenues they would generate,” Mandel concludes.

“Upstate New York should complement its universities, workforce, transportation and affordable land advantages by encouraging the essential high-speed, high-capacity broadband network to power future industries and create jobs.”

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The Internet of Goods and a Revitalized Economy: Upstate New York as a Template

Posted on by The Progressive Policy Institute

A revival in local manufacturing could provide a new source of jobs for areas of the country that have suffered disproportionate job losses in recent years. The key to this revitalization is integrating digital technology into every stage of the research, development, distribution and delivery of the goods produced. We call this integration the Internet of Goods and believe it is poised to revitalize physical industries such as manufacturing, agriculture and transportation.

Based on new business models, as well as new technology, digitally-driven manufacturing can provide an essential jumping-off point for growth. As we recently wrote in a policy report:

We believe that, through additive manufacturing and other new technologies, combined with the new faster local distribution networks, there is the possibility of creating new business models for manufacturing. In particular, there is the potential for the revival of small-scale manufacturing operations, relatively close to customers, making small-batch and custom goods.

Digitally-driven manufacturers won’t locate in dense urban areas where land prices are high and logistics for transporting the manufactured goods are complex, time consuming and expensive. Instead, they will gravitate to areas of the country that have sufficient, available land; have a strong base of workers comfortable with technology; and have access to a high-capacity broadband network infrastructure.