IT investment may damage employment levels: Forrester

Businesses may be investing in IT at the expense of hiring employees, a Forrester Research analyst has suggested.

In a report entitled “IT Investment May Be Hurting US Job Growth”, Andrew Bartels observes that while IT investment by US businesses rose 11% in 2010, and profits grew 28%, employment was flat. “It certainly appears that businesses have been buying technology instead of hiring workers,” he wrote.

“This pattern was most pronounced in manufacturing industries like mining, forestry products, fabricated metals, motor vehicles, and machinery,” Bartels wrote in a blog post explaining the report. “In a quarter of industries, tech investment rose by 7% on average while employment was down by 2% on average.”

If it is indeed the case that businesses have invested in IT instead of recruitment, it would be a departure from prior trends. In the past, “companies have treated new hiring and new tech investment in parallel – cutting both in bad times [and] raising both in good times”, Bartels wrote.

Bartels noted that the correlation is not proof of causation. In the US public sector, he remarked, it is possible that organisations are simply maintaining technology investment while making redundancies.

“But our analysis suggests that it is certainly possible that … companies with good profits have chosen to invest in technologies that allow them to operate with fewer employees on a broad enough basis to be hurting job growth in the US,” he added.

The report raises an oft-neglected but fundamental question about the impact of technology on the economy, which applies equally in the UK, if not moreso. Technology companies may be a source of economic growth, but their products may also reduce the number of employees businesses require in order to operate, which will have its own economic effects.

Not everyone sees it this way, however. In the case of cloud computing, for example, Simon Wardley of CSC’s Leading Edge Forum argues that increased automation in fact creates demand for more employees. Wardley compares the situation to the Jevons Paradox, in which more efficient coal production techniques in the 19th century lead to increased consumption of coal.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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