July, 2000, Vol. 123, No. 7
plants, and jobs
'Net job growth
Indexing the 'Net Economy
Précis from past issues
Firms, plants, and jobs
The bulk of employer-based studies of jobs and job flows are based on data collected for individual physical locations or "establishments" (sometimes called "plants"). Scott Schuh and Robert K. Triest, writing in New England Economic Review, add another perspective, that of the firm. A firm is an entity that may control many establishments, although roughly four out of five manufacturing firms are single-establishment firms. The other fifth, according to the tabulations the authors have constructed from the Census Bureau Longitudinal Database, account for roughly three-quarters of manufacturing employment. Thus, labor allocations made among the establishments of multiplant firms may have significant consequences and have very different causes than allocations between firms.
For example, a multiestablishment firm may transfer workers among its plant in an effort to reduce total production costs or shift the composition of output. In contrast, reallocation between firms is more likely to be due to changes in product demand. In the intra-firm case, workers may be transferred without an intervening spell of unemployment. In reallocations across firms, workers let go by firms that reduce headcounts usually undergo some period of unemployment.
Schuh and Triest examined flows of jobs for both single- and multi- establishment manufacturing firms from 1967 to 1992 and discovered the following:
Schuh and Triest conclude their paper by confirming that the labor market is in constant flux. Among smaller firms, this flux is characterized by very high rates of job creation and destruction, and is more often due to plant startups and shutdowns. Larger firms have lower rates of job creation and destruction.
'Net job growth
The Internet Economy directly supported about 2.5 million workers in 1999, according to a study by the University of Texas at Austin’s Center for Research in Electronic Commerce. This represented an increase of about 650,000 jobs compared with 1998—a hefty 36-percent growth. There are now more workers employed by Internet Economy companies than by the Federal Government (excluding postal workers).
Internet Economy companies include "bricks and mortar" firms—such as decades-old retailers—that use the Internet to increase traditional sales as well as firms for whom the Internet is their primary business—such as Internet service providers. Also, some Internet Economy jobs are newly created positions arising from the growth of the Internet itself, while others are created because firms have shifted workers to take advantage of expanded Internet-related opportunities.
Revenues also soared for Internet Economy companies in 1999. The University of Texas study found that revenue was up 62 percent in 1999, to a level of $523.9 billion. The study estimated that the 2000 level would reach $850 billion if current conditions continue.
The study of the Internet Economy appeared, of course, on the World Wide Web. It was accessed at http://www. internetindicators.com on July 5, 2000.
Indexing the 'Net Economy
Measuring the new economy on an annual basis may not be quick enough to capture all the action. To keep closer track, The Industry Standard, a San Francisco-based newsmagazine covering the Internet, tabulates a broad set of Net business momentum indicators every week. The Internet Economy Index is a composite of these Internet business health indicators. The indicators include stock prices of 20 prominent Net companies, the latest week’s tallies of Net IPOs and other deals, total traffic, network performance, online advertising spending, public relations or "buzz," and consumer e-commerce totals. Based on movement of these indicators and qualitative input from the Industry Standard’s editorial staff, each week is rated on a scale of 1 to 10 (1 is slowest and 10 is fastest) representing the momentum of the Internet Economy. For the week ended June 23, Industry Standard analyst Mark Mowery reported, "A downturn in online ad spending and Net traffic levels contributed to another mediocre week in the Internet economy," as the Internet Economy Index remained level at 5.
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