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Net contributing jobs, productivity to economy

New research reinforces the notion that the Internet and computer technology are fundamentally altering the way the U.S. economy operates.

New research reinforces the notion that the Internet and computer technology are fundamentally altering the way the U.S. economy operates.

The Center for Research in Electronic Commerce at the University of Texas (UT) and the federal Commerce Department both released studies this week offering further statistical evidence that the Internet has spurred an increase in U.S. worker productivity and led to millions of new jobs.

The Commerce Department study found that information technology-related ventures have turbo-charged the country's productivity, doubling from a 1.4 percent annual increase between 1973 to 1995 to 2.8 percent growth between the years 1995 to 1999.

The report also found that the country's increased reliance on IT-oriented businesses has lowered inflation and created high-wage jobs for U.S. workers. The study found that between 1994 and 1998,


Andrew Whinston
UT Austin Professor
 
Discussing the relative size of the Internet economy.
IT-related employment expanded by 30 percent, from 4 million to 5.2 million jobs.

The UT study, which specifically measures Internet-related business, was even more bullish, claiming 36 percent job growth from 1998 to 1999, or from more than 1.8 million to nearly 2.5 million jobs.

Other key findings in the UT study include a 19 percent increase in the revenue per employee for Internet-related companies. Internet-related companies contributed more than $500 billion to the U.S. economy, growing more than 60 percent year over year.

"That's 15 times larger than the growth rate of the U.S. economy," said Anitesh Barua, an associate professor of information systems at UT.

Researchers expect contributions this year to top $850 billion.

The ongoing UT research has been funded by Internet equipment maker Cisco Systems and was initially published one year ago. From the outset, it has attempted to quantify the impact the Internet has had on the U.S. economy. The study includes both Internet "pure plays" as well as the online operations of traditional brick-and-mortar firms like Wal-Mart.

The numbers fly in the face of recent developments among some Internet businesses, which seem to be falling by the wayside by the day. But researchers suggest that the current wave of dot-com consolidation and retrenchment will lead only to a greater reliance on Internet-related technology and companies in the future.

"The stock market may certainly impact these companies in the short-term," said Andrew Whinston, a professor of information systems at UT's Graduate School of Business and director at the school's Center for Research in Electronic Commerce. "Our belief is these economic forces will push this economy forward.

"The economic forces generate the wind, and it's up to the companies to set the sails," Whinston said.