Digital Divide déjà vu

The Digital Divide is back! While the divide never really went away, the coronavirus pandemic has refocused attention on the gap between the digitally connected haves and have-nots. As a report from the Government Accountability Office notes:

The recent outbreak of the Coronavirus Disease 2019 (COVID-19), a fatal and highly communicable disease caused by the coronavirus, across the United States and the resulting limitation of large gatherings have reinforced the importance of access to broadband. Many health care systems, government entities, businesses, educational institutions, restaurants, and other merchants have transitioned some or all operations online to minimize interpersonal contact and help slow the spread of the disease. Lack of access to broadband poses challenges to accessing telemedicine, telework, remote instruction, and resources for home schooling, as well as e-commerce. Because broadband has become increasingly critical to economic opportunity, jobs, education, and civic engagement, those without access are unable to enjoy the social and economic benefits of broadband.

The concern is especially high now that schools are attempting to re-open on-line. As Brookings’ Nicol Turner Lee puts it:

Many school districts have announced plans to either go completely virtual or implement a hybrid model of both in-person and distance learning. But if the last few months are any indication of most schools’ effectiveness in deploying remote learning, minority and rural students, especially those from impoverished public schools, will lose the race to educational and social mobility outcomes. 

If all of this seems familiar, it is. Twenty years ago, I hosted a conference on “New IT – New Equity – New Economy.” The purpose of the conference was to broaden the conversation beyond the narrow digital divide focus on access to the Internet. I believe the insights from that conference, published as a report Inclusion in the Information Age are still relevant today.

Given the richness of the discussions, it was not appropriate to draw any final conclusions. Rather, the conference summary offered “points to consider.” The following are those points as published in the report:

Point one: Focus on the transformation, not the technology.  

 At its heart, the issue of the “digital divide” is not simply a question of technological deployment. The broader issue concerns the transformation to what, for lack of a better term, we call the Information Age. The end purpose is not to narrow some gap, but to ensure that everyone has access to the expanded opportunities. Our framework should be one of inclusion for all in the broader activities that make up society and the economy. Our goal should be to facilitate the transformation to help everyone participate in civic and economic activities, however those activities are carried out in this new information age.  

 Point two: Review and coordinate efforts.

The problem has aspects of telecommunications policy, such as infrastructure and standards, and elements of technology policy, such as research and development and technology deployment. It also draws from information policy in the areas of content. But it also has aspects of policies on training and workforce development, education, economic development, housing and community development, human services and trade.  

 Reaching our goal requires a coordinated approach – in the private, public and non-governmental sectors – that combines the various elements of providing opportunity and inclusion in the information age.  

 In terms of governmental policy, this means that the focus of digital opportunity efforts should be the White House, not any one department or agency. Since the issue spans agency boundaries, the point for coordination of efforts must be the National Economic Council (or whatever structure the President chooses to coordinate policy at the White House). The bully pulpit of the Presidency should be used to highlight local community initiatives and promote government and private sector programs.  

 It is also time to take a new look at some policy areas. For example, a comprehensive approach is needed toward all parts of managing the information commons: privacy, intellectual property rights, “right-to-know” policies and other related areas.  

 Point three: Work to ensure that everyone has access to the technological infrastructure.  

 As discussed throughout this report, barriers to access to the infrastructure are many. Ways of overcoming those barriers are also varied, including public access facilities that can combine access with training and other activities, as well as home access.  

 With respect to access in the home, we must return to the question of universal access. The concept of universal access is built on the notion of a necessary public utility that requires government action to ensure that it is available to all. As the convergence of telecommunications and media takes place, is IT and the Internet more or less a public utility? And if so, what is the role for the government in guaranteeing universal access? We need to re-look at the concept of universal access in light of the coming convergence.  

 The development of broadband capabilities around the country is rapidly becoming a predicate for access – both at home and at work. Some worry about an over-built broadband system.57 Tell that to the millions of people in rural America and the inner cities who don’t have access to broadband – and to those who struggle to get POTS (plain old telephone service).  

 Since the conference, a number of competing proposals have come forward to facilitate the development of broadband. It is beyond the scope of this report to examine those proposals. However, as part of our discussion of universal service, we should examine our goals for broadband deployment. For example, Canada has committed to having broadband reach every community by 2004. The goal is to utilize the technology for on-line education and health care, especially in rural areas – and to help Canadian small- and medium-size businesses compete.58 Whether or not the Canadian model is applicable here is an open question. It is, however, a question that should be discussed.  

 It is important to recognize that there is no single model for the places where the public may gain access to the new IT infrastructure. Both home use and public access points are important. Multiple access public points are needed, such as existing public facilities, training centers, libraries, and after-school centers. For such public access sites, maintenance and on-going operational support is a must. This includes mundane issues, such as security, janitorial support, utilities as well as the more IT specific, such as network administrators and other technical support personnel. We need to bolster and expand programs, such as those at the Commerce and Education Departments, which support these activities.  

 Beyond support for on-going operations, there is the issue of funding for organizational development. There are many community efforts throughout the country to promote access, all of which struggle with organizational problems. Sustainability is the key. A grant here and there from the government and foundations is not enough.  

 The bottom line is not just access to information technology, but the utilization of that technology by organizations and individuals to better peoples’ lives. We must work to weave information technology into the operations of community groups in a way that will both help individuals use the technology and will make those groups more efficient and effective in their core mission.  

 Some of the barriers to digital inclusion are physical: the usability of the technology. This is not, as commonly thought of, an issue only for those with disabilities. The problems of usability and human-machine interfaces affect all of us. Surveys show that one major reason people do not use computers and the Internet is that it is too difficult. Research on ways to increase access for those with disabilities will pay off in increased usability for all. Recent Federal rules require that government web sites be accessible to the disabled. We need to build upon these efforts to make usability and accessibility part of all web sites, and a regular part of a good web design training program.  

 Point four: Encourage and facilitate participation and involvement by all in the digital economy and information society.  

 Participation and involvement begins with the usability of the technology. Technology must meet people’s needs – not define those needs. Information technology can help people in their day-to-day lives if it is designed and structured in such a way that it helps answer their questions and solve their problems. Otherwise it becomes a barrier and a source of frustration. This is the danger of what some refer to as the “over-wired” world.  

 It is important to understand that individuals have different needs. A one size- fits-all may help some – and increase their participation and involvement – but will block others. By focusing on “demand-pull,” rather than “technology-push,” we can better tailor the technology to meet individual needs.  

 Development of meaningful content is one of the ways to increase the level of participation. Involvement will increase as compelling content is available. For example, information on health care is a major draw for many. Increased educational content and help for parents and teachers in using that content is another way of promoting utilization. The other way to increase participation is through support for the development of locally-based content. Not only does locally-based content give individuals a reason to participate, the process of creating community-relevant content itself stimulates involvement. Some foundations have stepped up to this task. But more can and should be done by both the public and the private sectors.  

 In the area of e-government and political participation, the question of involvement and access takes on a special significance. We need to make sure that egovernment is available to all. If a government (Federal, state or local) is going to deliver services or make information available through electronic means, then it is incumbent that the government promote access for the purpose of allowing these services to be widely delivered to everybody in the community. No services or information should be removed or dramatically cut back from traditional means of dissemination in favor of electronic dissemination until and unless all members of the community have access to that electronic means as easily as they have to the traditional means.  

 Point five: Focus economic development on the Information Economy, not the Internet Economy.  

 The information age will require a new approach to economic development. It is not about replicating Silicon Valley. It is about helping existing businesses and existing (and potential) entrepreneurs become more competitive by using technology. Key to the process is using and developing assets: financial, social, skill-based, and information assets. We must focus on building the local economy’s vitality and ability to compete in the age of globalization and help people make the switch to the new economy. One of our first tasks should be the development of processes for identifying and assessing local assets.  

 Revitalized programs for training the existing workforce should also be a top priority. Training programs should not be only for those who are laid off or are looking for a job. The new information age requires constant updating of skills. On-the-job training and incumbent worker training must be a large part of our workforce development activities. We must also expand our focus on all the various levels and forms of literacy and basic skills, including critical thinking skills.  

 We need special emphasis on how SMEs are making use of information technologies. It’s relatively easier for large firms, compared to small businesses, to incorporate new technologies into their operations. One idea that surfaced at the conference was to support mechanisms for collaborative learning amongst companies looking at the comprehensive use of information technology in small business.  

 We also need to foster entrepreneurship at all levels. New technology-creating (“high-tech”) businesses are important – but so are new businesses that use the technology. New entrepreneurial opportunities arise from the economic assets and the market demands of an area. Those may be high-tech based or not. The important point is not to replicate someone else’s strategy, but to grow the economy from the local assets, whatever they may be.  

 New innovative financial mechanisms are needed, both for dealing with “intangible” assets and to reach out to those communities left behind. Individual Development Accounts, micro-loans, and the New Markets Initiative in the FY2001 budget deal are cases in point. The New Markets Initiative is an example of a true bipartisan effort, which the Bush Administration and Congress would do well to emulate and build upon.  

 Collaborative learning and sharing of information is also important in the larger process of economic development. There are a number of examples of information assets being applied within businesses and local economies: the example given at the conference of ACEnet is a case in point. Economic development is an information intensive activity. We need to utilize new knowledge management techniques and old-fashioned communications techniques to collect, disseminate and better utilize that information.  

 Point six: We need a better understanding of what is going on.  

 One of the frustrations many people felt during the conference was based on their inability to describe what was happening in the economy. Since the date of the conference, the debate about the “old” and “new” economy has only sharpened. The concern is especially heightened in local economies. As one conference participant put it, “we’ve been gathering the same old data about the state of local economies in the same old way for 30 to 40 years and we haven’t caught up with the real trends and the underlying issues in local economies.” We need to re-look at the data needed for economic development in the information economy.  

 The problem of data extends beyond the scope of local economic data. We need both better data and expanded analysis of the socioeconomic aspects of the information technology. To quote the National Academy of Sciences:

Despite the significance of these impacts [of information technologies] for society, there has been relatively little investment in research to help understand, predict and shape them.60 We need to make those investments.  

 Expanding social science research is not enough. That research must be translated into policy relevant terms. In a cost-cutting effort in the 1990s, Congress eliminated the Office of Technology Assessment (OTA). This may turn out to be an example of false economy. OTA was widely praised as an authoritative and nonpartisan source of information on a variety of technology related issues. Congress should seriously consider re-establishing this agency.  

 Point seven: The decision-making process must be open.  

 True inclusion and opportunity can only occur in if the process of decision making is open and transparent. Information technology has a tremendous potential for opening and maintaining channels for general input and advocacy. However, decisions made about the technology can have the effect of closing off the process rather than opening it up. We must insure that all parties are at the table when decisions, including issues such as standard setting, are made. As noted earlier, having people with grass roots experience in on the discussions would greatly enrich the process. Everyone – the innovators and social entrepreneurs as well as “everyday people” – should be included.  

 The decision-making process will also affect the future development and utilization of information technology. Issues of trust, such as privacy and security, are key factors in that development. An open and transparent decision-making process will help foster trust and thereby foster technology utilization. A closed process will retard future development.  

 The need for an open process extends beyond the actions of the government. In America, we value and respect the rights of private citizens (individual and corporate) to conduct their business in private. However, the freedoms which are associated with the marketplace also need to be accompanied by responsibility. Issues of corporate responsibility are moving higher up on the agenda in connection with the issue of globalization. Some conference participants suggested that we need to start a national dialogue about corporate responsibility in the information age.  

 Point eight: Innovate and experiment.  

 We are in a time of transformation and change. The speed of that change and the pace of economic activity will vary. Yet the change is real and will continue.  

 In such a time, we must often invent new ways of coping with our problems and new policies for guiding our economy and society. This does not mean that we should throw out the old models and values. On the contrary, we should build upon what we cherish and what has worked in the past. But we cannot be bound by the constraints of “that is the way we always did it.”  

 In the area of public policy, we need to view our activities and programs as a series of experiments. As June Holley noted:  

Policy needs to be much more rapid – prototyping, we call it. So you get some innovations happening out there, and then you set up an environment when you can learn from those innovations…and begin to build sort of this moving wave of policy in that fashion.

 Such experimentation will require great policy discipline, however. It will require the ability to drop a policy or program when it is not working – regardless of how hard we fought for it in the first place. It also requires accepting and expanding a policy or program that work – no matter how much we opposed it originally. It also requires a strong, unbiased means of evaluating programs and policies. We must support and strengthen those organizations and institutions that undertake such evaluation.  

 We must also find means to ensure that the evaluations are timely for the fast-moving policy arena. The goal in evaluation is not simply proving the effectiveness of an action – it is to facilitate learning. Learning is the hallmark of the Information Age. Our public policy process must embrace that concept as tightly as the rest of our economy and society already have.

July employment data

This morning’s employment data shows both strengths and vulnerabilities.

BLS reported that employment in July rose by 1.8 million, in line with expectations of an increase of 1.7 million jobs. [Reminder that these are not all “new” jobs but workers being called back to work.]. Employment in both tangible and intangible producing industries rose. Similar to June (but at a smaller scale), the biggest increases were in industries where there is physical presence with customers. Increases occurred tangible services of personal services and, to a lesser degree in accommodation & food services, and in the one intangible service that requires physical presence: arts and entertainment. As I noted last month, these industries are also the ones most vulnerable to a re-closure of the economy.

Almost all other industries saw more modest gains. However, information services and telecommunications employment declined. Employment in nursing and residential care facilities continued to drop dramatically.

Bottom line: under normal circumstances, this would be a stellar increase. However, in the age of COVID-19, this is only a modest rebound in employment. Much more needs to be done.

Don’t be fooled by today’s employment numbers for June: a look at tangible and intangible jobs

While the employment numbers for June from BLS may look good on the surface, a closer look reveals a dangerous trend. A large part of the employment rebound in June was in jobs where there is physical presence with customers. Increases occurred tangible services of accommodation & food services and personal services, and in the one intangible service that requires physical presence arts and entertainment. These three sectors accounted for almost half of the jobs gained in June, benefiting no doubt from a loosening of lockdown restriction. However, the June numbers reflect the situation in the middle of June. Since then coronavirus cases have skyrocketed. These industries may face a rapid decline in employment as new restrictions are imposed.

Overall, as well as the case with the May rebound (see my earlier analysis), tangible jobs fared better than intangible jobs in June, accounting for three-quarters of the employment gains. Trade, transportation & utilities jobs saw a big gain and manufacturing jobs continued to increase.

One encouraging sign is that intangible services jobs in professional & business services and in educational & health services increased at a healthy level. These are nowhere near their February levels but the trend is on the right direction. As I noted before, we will have to wait an see whether the experience of the crash will alter the supply relationship with companies and consumers finding they can get by with a lesser degree of intangible services.

 

June 2020 parts

Which jobs got hit in the COVID crash: tangible versus intangible

The Great Recession fundamentally changed the labor market mix between tangible and intangible-producing jobs. The COVID crash may shift that realignment again as tangible and intangible-producing jobs react differently to the downturn. Both declined significantly but only tangible-producing employment rebounded in May.

First, a little background. Intangibles are increasingly important as both inputs and outputs of economic activities. Intangibles are both major inputs to the production process of most other industries (such as research and development) and an important part of direct personal consumption (for example, of financial services). To understand the importance of intangibles in the U.S. labor market we need to go beyond the traditional (and outmoded) division between goods and services.

Matrix 2020To better capture the structure of the labor market, I have divided it into tangible and intangible as well as goods and services, as described in my earlier analysis. Tangible activities are primarily physical activities (involving atoms); intangibles are primarily information/analytical activities (involving bits). Production of goods is almost exclusively a tangible activity. Services can be divided into tangible and intangible activities. Tangible services involve physical activities such as cutting hair, ringing up a sale at a cash register, cooking and serving a meal, and transporting someone or something. Designing a poster, negotiating a deal, writing an article, and approving a loan are examples of intangible services. (See below for more on the methodology.)

Continue reading “Which jobs got hit in the COVID crash: tangible versus intangible”

COVID-19 hits IP trade hard – other intangibles, not so much

Yesterday, the BEA released data on the March trade deficit showing the effect of the COVID-19 pandemic on US trade. Like overall trade, trade in pure intangibles took a hit in March, with the intangibles surplus down 2.9% as exports dropped faster than imports. The surplus had also declined in February after rising the previous 4 months.

A more detailed look shows that some categories of intangibles did better, and worse, than others.

The two areas contributed the most to the decline: financial services and net revenues from the use of intellectual property dropped. Both these are showing very worrisome trends. Net revenues from the use of intellectual property decline by over 7.1%. Import (royalties paid out) grew somewhat while exports (revenues received) dropped. As the chart below shows, this is a continuation of a worrisome trend that started back in 2014 of steady to declining revenues and steadily increasing payments.

Note that the balance in financial services also started flatting back in 2014. The March surplus in financial services dropped by 2.3% as both exports and imports went down.

As for the other types of intangibles, the story is rather blasé. The surplus in business services actually grew with total trade increasing– exports rising slightly higher than. The maintenance & repair services surplus was essentially flat as both exports and imports fell. The surplus in telecommunications services was also flat; but in this case both exports and imports grew. The one area where we have a trade deficit, insurance services, improved ever so slightly as both exports and imports rose.

 

Declining IP trade balance

The Wall Street Journal has a story about the declining trade balance in services over the past 9 months as exports have stagnated and imports grown.  However, the most striking feature of the services trade balance decline has been in intellectual property (a pure intangible).  And the problem is not a recent one.  Foreign revenues from intellectual property (exports) have been flat for almost a decade while foreign payments (imports) have continued to increase. IP-Sept 19

Archive of Athena Alliance papers and presentations

Athena Alliance papers and presentations, events and policy forums are now archived and available as part of this blog. The are posted by date below interspersed with the blog postings. To see just the papers and presentations, click here. To see just the postings on the Policy Forum on the Intangible Economy, click here. To see just the materials on past events, click here.

For Athena Alliance annual reports, see the following:

Annual report 2001
Annual report 2002
Annual report 2003
Annual report 2004
Annual report 2005
Annual report 2006
Annual report 2007
Annual report 2008
Annual report 2009
Annual report 2010
Annual report 2011
Annual report 2012
Annual report 2013
Annual report 2014
Annual report 2015

Thank you and goodbye

It is time to say goodbye.

 

I have taken a new position as Senior Program Officer at the National Academy of Engineering for their Manufacturing, Design and Innovation (MDI) program (see program website). As a result, we have now shut down Athena Alliance and the Intangible Economy blog and are archiving our reports.
Thank you for your interest in The Intangible Economy over the past 10 years.

Ken Jarboe

August employment in tangible and intangible industries

Today’s employment numbers from BLS is somewhat mixed news. The unemployment rate dropped slightly to 5.1% in August but payrolls increased by only 173,000. Economists had expected an increase of 217,000 jobs.
Employment in intangible producing industries grew faster than in tangible producing industries. Employment in tangible producing industries was up by only 34,100 in August. Manufacturing and Construction & Mining employment dropped. Trade, Transportation & Utilities and Accommodation & Food Service were once again the biggest gainers. Intangible producing industries added 139,100 jobs. Educational & Health Services had the overall largest gain. Professional & Business Services and Government also grew. Arts, Entertainment & Recreation employment increased, reversing a two month decline.

Aug 2015 employment

Aug 2015 percent

Aug 2015 pie

For background on the methodology, see our working paper Employment in tangible-producing and intangible producing
industries
.

July trade in intangibles

The U.S. trade deficit declined by $3.3 billion in July, according to data released this morning from BEA. Exports were up by $0.8 billion and imports were down by $2.5 billion. Economists had expected a deficit of $42.4 billion. One worrisome note is that petroleum goods deficit grew for the second month in a row, in contrast to the downward trend for most of this year. The non-petroleum goods deficit improved slightly in July.
Once again exports of pure intangibles continued to grow. While imports rose slightly, the intangibles surplus increased to $15.8 billion in June. The surplus in business services continued to grow. But, once again and continuing a worrisome trend, net revenues from the use of intellectual property dropped. The surpluse in maintenance & repair services was steady and grew in financial services. The deficit in insurance services improved slightly, while the very small surplus in telecommunications services declined. (See detailed charts below.)
Our Advanced Technology deficit dropped from $8.8 billion in June to $7.4 billion in July. The biggest change in the deficit came from a decrease in Information and Communications Technology (ICT) imports, which offset a smaller surplus in aerospace.
Advanced Technology goods also represent trade in intangibles. These goods are competitive because their value is based on knowledge and other intangibles. While not a perfect measure, Advanced Technology goods serve as an approximation of our trade in embedded intangibles. Adding the pure and embedded intangibles shows an overall surplus of $8.4 billion in compared with $8.9 billion in June.
Intangibles trade-July15.png
Intangibles and goods-July15.png
Oil goods intangibles-July15.png
Intangibles trade parts-July15.png
Maintenance and repair services-July15.png
IP-July15.png
Insurance services-July15.png
Financial services-July15.png
Business services-July15.png
ICT-July15.png

Note: I am now reporting the trade data using the new BEA classifications for services trade, which breaks services into more categories. In the past, the intangible trade data was the sum of Royalties and License Fees and Other Private Services. Under the new classification system, intangibles trade data is the sum of the following items: maintenance and repair services n.i.e. (not included elsewhere); insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services.


Charges for the use of intellectual property n.i.e. is simply a renaming of Royalties and License Fees. This includes transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights.


Maintenance and repair services n.i.e., financial services, and insurance services, were previously included in Other Private Services. Telecommunications, computer, and information services is a combination of those two items (telecommunications and computer & information services) that were also previously included in Other Private Services. Three categories previously in Other Private Services — education-related and health-related travel and the expenditures on goods and services by border, seasonal, and other short-term workers — were removed and reclassified to travel. The new category of other business services is a continuation of the older category Other Private Services with those components removed.


Thus, other business services includes categories such as advertising services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; and industrial engineering services. It also includes personal, cultural, and recreational services which includes fees related to the production of motion pictures, radio and television programs, and musical recordings; payments or receipts for renting audiovisual and related products, downloaded recordings and manuscripts; telemedicine; online education; and receipts or payments for cultural, sporting, and performing arts activities.


For more information on the changes, see the March 2014 Survey of Current Business article, “The Comprehensive Restructuring of the International Economic Accounts: Changes in Definitions, Classifications, and Presentations.”