According to new research, a successful national high-speed internet plan that boosts labour productivity and allows more people to work from home may enhance the US economy by $160 billion per year.
The survey-based study aims to put specific numbers on one of President Joe Biden’s infrastructure plan’s biggest unknowns: how much is ubiquitous internet actually worth?
“Moving to high-quality, fully reliable home internet service for all Americans would raise earnings-weighted labor productivity by an estimated 1.1% in the coming years,” economists Jose Maria Barrero, Nicholas Bloom, and Steven Davis wrote in a paper released July 27. “The implied output gains are $160 billion per year,” equivalent to about 0.7% of gross domestic product. The study’s authors describe an “abrupt, enormous” shift to remote work due to the pandemic, which they expect to settle with about 20% of the U.S. labor force persistently working from home. The share could be higher for so-called knowledge workers whose jobs in computer networks anyway.
In recent years, slow productivity growth has been a key source of concern for the US economy. In the decade leading up to the pandemic, overall worker productivity expanded at a historically low rate of roughly 1%.
According to Davis, an economist at the University of Chicago’s Booth School, middle-income workers are likely to be the main winners of the broadband proposal. Low-wage workers are frequently employed in jobs requiring on-site labour, whereas high-wage workers already have access to fast and reliable internet.
The research finds “few effects at the top end and fewer effects at the bottom end,” Davis said in an interview. “Evening out the earnings distribution in the short run is not one of our arguments.”
Biden’s plan aims to bring high-speed internet to areas of the country where it is currently unavailable. As part of a larger infrastructure measure, Senate negotiators are currently contemplating a $65 billion investment in broadband, including the extension of monthly subsidies for low-income Americans.
In a poll done by Davis and his colleagues, more than 80% of respondents indicated they had reliable internet service, while roughly 16% stated they had moderate-to-poor or no connectivity. The capacity to move beyond text and messaging to video conferencing is one of the major advantages of high-speed broadband.
“Our data also suggest that better home internet access increases the propensity to work from home,” the economists wrote. “Universal access would, according to our estimate, raise the extent of WFH in the post-pandemic economy by about 0.7 of a percentage point,” they wrote, referring to work-from-home.