Tuesday, November 27, 2007

Service Jobs - Information Services

Information Services

The NAICS definition of Information Services attempts to include all the establishments that produce, distribute or transmit information or cultural products. Establishments publishing books, magazines, newspapers, films, sound recordings or producing television and radio programming are included here.

Establishments that distribute and transmit information include a variety of telecommunications: phone service, cellular, paging, cable, satellite, Internet Service, web search firms, and libraries. These establishments tend to own, operate, and maintain facilities.

The companies cannot be neatly divided between production and the distribution-transmission segments. NBC produces programming and then distributes or transmits their product over broadcast airwaves, the Internet, cable, DVD’s. Newspapers still print newspapers but most also publish over the Internet. Software companies repackage other people’s published products into digital materials for libraries. Libraries look like computer labs.

In the process of devising the new NAICS industry classification system, the committee decided to split off computer and Internet services into their own categories. Publishing is publishing except the Internet and broadcasting is broadcasting except the Internet. Data processing and hosting and related services have a separate sub-sector as do Internet publishers and broadcasters and web search portals. Google is not just a search engine, although its employment goes into the web search portals sector.

Information service jobs trended upward in the 1990’s and peaked in 2000 with 3.6 million jobs. Jobs in the digital technology services are no longer increasing fast enough to offset the losses in print publishing, broadcasting and wireline phone services. Employment totals started dropping after 2000 with jobs in 2012 down to 2.68 million.

Employment in publishing, except Internet, dropped 297.3 thousand since 2000. Include newspapers, books, magazines, directories, greeting cards and everything printed in sub-sectors that lost jobs. Jobs in software publishing jumped from 98 to 260 thousand from 1990 to 2000, although jobs are only 286 thousand in 2012. Telecommunications employment reached a peak of 1.44 million in March 2001, but 858.1 thousand by 2012.

Technological change affects all information services where cost cutting with the new technologies and competitive expansion of entertainment opportunities has the potential to create many new products at much lower costs and prices. For a company to compete they have to have access to customers. In information services that means access to phone lines, cable, the airwaves and so on. If the older established companies that own or control the networks could prevent access to networks then competition stops. Limited access assures a few comfortable firms that charge high prices and take their sweet time adopting new technologies. So far technology companies, the Congress and the Federal Communications Commission keep steady negotiations to find a satisfactory regulatory framework to allow just the right amount of competition, whatever that might be. If the system they work out drives prices down to cost in good competitive fashion, there will be many jobs in jeopardy, not just profits.

Many are familiar with the website called Craigslist.com. Materials on the website defines their mission rather than what they do. What they do is up to the user to decide and I would say it is self serve classified advertising, available free to all users, except three metropolitan areas that pay a token fee. There are message boards and chat rooms and some other appealing services, all free, but roughly speaking it is classified advertising by geographic area and no charge. It serves the entire world.

Metropolitan Washington, DC has its own link and scrolling through the ads it is definitely getting heavy use. However, the Washington Post continues with its printed classified ads that have variable but significant charges, especially compared to free. A few lines of job ad placed only for the weekend can easily run $200.00. Having the Washington Post and Craigslist selling classified advertising at dramatically different prices in the same market defies everything economists predict about markets. In economic theory this does not happen. The low cost and low price seller will take business away from the high priced seller. High priced sellers will have to lower their price or go bankrupt. Prices will equalize among competitive sellers.

This is very good theory and it should happen just that way; so far it has not. We might speculate why. The people that read classified advertising are many, and perhaps they seldom place a classified ad in either newspapers or Craigslist. For them they may not care what the ad costs but they are in the habit of looking at newspapers rather than the Internet so they have no reason to follow Craigslist even though it is cheaper.

If people do adopt the low priced seller as economic theory predicts we have to worry about jobs. When I first heard about Craigslist a few years back, they had an “about us” link where I learned they had 18 employees. Last time I looked they are up to 26, a 44 percent increase in employment. Think about that. In the new digital world, we can have all the classified advertising anybody needs or wants anywhere in the world with just 26 jobs.

Newspapers have begun to eliminate stock prices from their daily business news. They cannot compete with the graphs, charts and continuously updating stock quotations available on the Internet. Some Americans, especially older Americans, want to maintain long held habits and prefer their stock quotes and their classifieds from newspapers, just as some even keep a Yellow Pages around the house, but the future of information will be electronic and the job trends will be down.

These relatively new services require access to a network like phone lines, a cable network, or wireless transmitters. If access to networks could be blocked by network owning companies then independent Internet Services like Craigslist would not exist.

Old timers will remember the phone monopoly where AT&T did its own research at Bell Labs, produced its own equipment at Western Electric and installed and owned the phone lines, switching equipment and all the business and household phones. Under regulations approved by the Federal Communications Commission phone users were renting their telephones from the AT&T and they were strictly prohibited from altering or changing their rental equipment. Anything but Phone Company phones were prohibited and referred to as foreign attachments.

With the principle that ownership should bring control, the Federal Communications Commission agreed to a policy of no foreign attachments. The policy changed in 1968 when an independent company developed a device that could be connected to the telephone and allowed two way wireless radio connection. It was called the Carterphone.

If the Federal Communications Commission continued its old policy and prevented users from connecting anything to the phone lines, then a new technology would be abandoned and a new industry with jobs in manufacturing would be lost. Incentives for innovation and research for the future would be brought to a halt.

The Federal Communications Commission wrote a new policy to allow foreign attachments in effect opting to encourage innovation and new technologies. In doing so it created a new industry and paved the way for fax machines, answering machines, the computer modem, Internet Service providers and the vast new digital age of today and tomorrow.

In 1968, a telephone company sold telephone service and charged regulated monopoly rates based on minutes and distance. Even after 1968 and the Carterphone rules, the use of analog technology kept communication companies in separate markets with separate services. Before the arrival of digital communications, the phone company was close to the same thing as telecommunications and separate from other businesses.

With today’s digital technology the walls of separation are falling down. The FCC continues to have jurisdiction over telecommunications services but foreign attachment rules covering equipment proved inadequate to allow for the expansion of computer and Internet services. Foreign attachment implies a physical device that end users buy for themselves but Internet Service providers need access to phone lines. New rules permit independent Internet Service providers, data processing services and others to have equal access to phone lines. Phone companies can offer their own services but they have to allow others to compete on an equal basis. Now that everybody can get into everybody else’s business, the chances for competition increase and there is room for lower prices as part of cost cutting and competition.

Wireline, wireless and cable companies can offer Internet services in addition to phone and cable services with minimal new investment in proprietary equipment. More of the telecommunications industry uses the computer hardware and software that can be used with all information services including music and television. Costs are falling and the incremental cost of new subscribers for one or more services keeps dropping. With many companies able to offer cable, Internet and phone services and with creative new services like Voice Over Internet Protocol and satellite services the chances for competition go up day by day. Competition among a growing number of companies to sell lower cost services should lead to lower prices to consumers and with more service options to choose different combinations of services.

So far there has not been much price cutting. Companies get away with selling a block or bucket of services at quite high prices. If Competition among these many companies with their overlapping services ever really breaks out, prices could fall to very low levels. It might happen and it might not. If prices remain high then profits and dividends to stockholders will be good. If prices fall, then profits and dividends will fall and consumers will get a break. Either way the prognosis for jobs is not good.

During the period from 1990 to 2012 wireline telecommunications employment dropped by 178.9 thousand jobs leaving 580.5 thousand jobs. During the same period wireless employment increased from 36 thousand jobs to a high of 203 thousand jobs in 2007, but dropped to a monthly average of 159.3 thousand by 2012. Despite the massive change over to wireless service there are many more jobs to lose in wireline than there are jobs to gain in wireless.

Job growth in all parts of information services depends on people’s use of digital technology. Publishing generally, and newspaper circulation especially are down and employment with it. The potential continues for further decline if people get into different habits and read their news and classifieds over the Internet.

Broadcasting jobs in television and radio reached a high of 252.8 thousand jobs in 2000, but dropped afterward to 211.4 thousand by 2012. Jobs in Internet publishing and broadcasting and Web Search portals continue to grow rapidly reaching a high of 110.8 thousand jobs in also in 2000. After dropping to 91.4 thousand jobs in 2010, they have recovered to 121.4 thousand by 2012. If consumers switch from broadcast television to Internet broadcasting there are many more jobs to lose than jobs to gain in Internet broadcasting.

Data processing and web hosting services are down to 250.4 thousand jobs in 2012 from a high of 316.8 thousand jobs in 2001. The motion picture and sound recording industries are holding steady with 372.3 thousand jobs about the same as 1998 and 1999.

Information occupations needing college degree skills come to 930 thousand jobs, or about 34.6 percent of the total. Career jobs that use college degree skills in publishing include 130.5 thousand jobs as reporters and correspondents, news analysts, public relations, writers and editors and another 65 thousand jobs in art and design graphic design; college degree skills in film and sound recording establishments include 62.1 thousand jobs as producers and directors. Many actors, composers and musicians have college degrees, but demonstrated skills are the main criteria for these jobs.

With only 2.68 million jobs information Services has only a small share of non-farm establishment jobs. Information services had a rising share of non-farm jobs until 2000, which turned out to be the start of a downward trend. The 2012 job share equals 2.0 percent non-farm employment. With just 2.68 million jobs we cannot expect much help from Information Services to fill the new jobs of the future.

Wider use of information technology permits companies to increase their services and decrease employment. Up to 2012 the companies have avoided competition so that high prices restrict the use of services over what they would be if prices more closely reflected incremental costs. Increasing the sales of information services would help support jobs and moderate the decrease in employment caused by higher productivity and technology, but the small base of employment and the risks of further job losses does not permit forecasting many more jobs from information services. We have 61.1 million jobs left to fill we have to have more service.

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