Interesting interview with economist Enrico Moretti.
A growing number of skeptics are questioning the importance of the innovation sector for the American economy, arguing that its job creation is not large enough to offset the losses in manufacturing. Intel’s former CEO Andy Grove has famously criticized America’s “misplaced faith in the power of startups to create U.S. jobs.” Tyler Cowen’s influential book The Great Stagnation argued that companies like Facebook or Twitter do not have many employees because they rely on their users for most of the content and are simply too small to replace the titans of the past, like Ford and General Motors. During the Facebook IPO, several pundits argued that there must be something wrong with an economy in which a company with such an outsized market capitalization has fewer than 3,000 employees. A series of articles in the New York Times and several others have criticized Apple’s labor practices, especially the fact that most of its products are manufactured and assembled outside the United States.
Critics raise good points, but miss two key facts. First, for all the talk about outsourcing, employment in innovation is growing, and it is growing much faster than the rest of the labor market. This growth largely benefits highly educated workers. Just to give you a sense of magnitudes, I estimate that the number of jobs in the Internet sector alone has grown by 634 percent over the past decade, or more than 200 times the growth rate of the overall number of jobs in the rest of the economy during the same period. If the rest of the labor market had grown like the Internet sector, not only would there be no unemployment, there would be two new job openings for each citizen, including babies and the elderly. The growth of total salary earned in this sector has been even more dramatic—712 percent over a ten-year period in today’s dollars.
The second point that is missing from our debate is that Apple, Facebook, and other high-tech companies support a growing number of jobs outside high tech in the communities where they are located, and many of these jobs are for workers with a high school education or less. Attracting a scientist or a software engineer to a city triggers a multiplier effect, increasing employment and salaries for those who provide local services. My research, based on data for 8 million workers in 320 metropolitan areas, shows that for each new high-tech job in a city, five additional jobs are ultimately created in local services, both in professional occupations (lawyers, architects, and nurses) and in non-professional ones (waiters, hairdressers, carpenters, and security guards).