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Does Technology Really Create Jobs?

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David Birch, the Massachusetts Institute of Technology researcher who first measured the role of small companies in creating jobs, recently turned his computer's attention to the role of high technology in job creation. Does high tech create jobs or doesn't it, Birch asked the machine, and if it does create jobs, how does the process work?

His conclusion, in general, is that technology itself creates relatively few jobs. It is the intelligent use of technology -- which he lumps under the "innovation" rubric -- that generates employment.

High technology, you might say, is a lot like potatoes. Potato farming employs a few people in a few places, and relatively few new jobs are going to open up in potato farming in the next decade or so. On the other hand, while potato farming is not a large industry in Manhattan these days, there is a bar in the SoHo area that serves the best hot, homemade potato chips you have ever washed down with a beer. In fact, innovative entrepreneurs from Key West, Fla., to Seattle employ hundreds of thousands of people to make and sell French-fried and baked potatoes, and some really creative genius not long ago launched a whole new restaurant concept based on doing things with potato skins.

In other words, potato farming by itself will never amount to much more as an industry; it is what creative people do with the potato that makes it important. And that, Birch found, is the way it is with technology, too.

High tech accounts for only 2.8% of the jobs in the United States and, Birch projects, high tech per se will contribute only 5% of the net new jobs created in the United States during this decade. However, innovation -- the use of technology to create either new or replacement goods or processes -- can drive the U.S. economy forward and keep it competitive in world markets.

From the numbers his computer generated, Birch, director of MIT's Program on Neighborhood and Regional Change, draws several general conclusions:

* Cities and states should stop chasing high-tech businesses and concentrate instead on creating the kind of environment that fosters creative thinking in all kinds of industries. "There is no need," Birch says, "to produce technology to reap its benefits." You can buy it, like New Yorkers buy potatoes.

* Most innovation does not create new products; rather, it involves finding a better and, often, more efficient way of doing something -- making steel, for example. While innovation is absolutely essential to keep American steel companies in business, it is just as essential to find something else for laid-off steel workers to do. If we don't, organized steel workers facing unemployment won't allow innovation to go forward, and eventually the United States will be out of the steel business altogether.

* In addition to products and processes, innovation involves the replacement of old corporations with new ones. One-third of the companies on the Fortune 500 in 1970, Birch notes, were not on the list in 1981. This is not an argument against relying on big business, says Birch. Rather, as "we attempt to make it easier for our larger companies to compete in world markets, we must simultaneously create a very fertile soil in which to grow their replacements."

Last updated: Aug 1, 1984




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