January, 2001, Vol. 124, No. 1
Internet wage gap
What makes an entrepreneur?
Précis from past issues
The prospect of a new economy has been one of the great opinion generators of the times. Optimists, according to Robert E. Litan and Alice M. Rivlin’s Brookings Institution conference report The Economy and the Internet: What Lies Ahead, are of the opinion that the Internet will enhance productivity and generate more prosperity. Pessimists doubt it will have any fundamental effect on the economy.
The papers Litan and Rivlin summarize are generally of the optimistic persuasion. Patricia Danzon and Michael Furukawa, for example, see large, Internet-driven cost savings in transactions processing, particularly in the healthcare sector, and Jane Fountain notes the vast potential savings for disseminating Government information on-line. Charles Fine and Daniel Raff not only find significant potential cost savings, but suggest that cars may one day be purchased much like the "Dell model" in computers: "…customers specify exactly what features they want and buy a product that is built to suit their tastes."
Litan and Rivlin also note that "in the longer run, the increasing transparency of prices and the widening reach of markets provided by the Internet [are] likely to be a continuing global force for greater efficiency," but that such efficiencies might show up more as a larger range of choices offered consumers and greater convenience in shopping for one’s choice.
The skeptics made three points in rebuttal. First, e-commerce may total about $120 billion in transactions, but this accounts for only a small fraction of a $6 trillion total in private economic activity. Second, what baseline of productivity growth should be used to evaluate the effect of the Internet? "[E]ven if the Internet makes an identifiable contribution to productivity growth, it is quite possible that this will not produce an acceleration in the growth that is already occurring." Third, some empirical research supports the more conservative view. Indeed, Robert Gordon ranks the Internet only thirteenth among the major economic innovations of the century.
Litan and Rivlin avoid extremes when summing up the conference report: "The economic impact of the Internet will likely not be as insignificant as the pessimists claim, and not as overwhelming as many cyber-enthusiasts suggest." They do conclude, however, that the Internet will produce important cost savings, faster productivity growth, lower prices, higher living standards, saved time, added convenience, and custom products. Perhaps just not as much of these as the more optimistic project.
No matter whether the optimistic or pessimistic view of the Internet is true, Charles Babcock, writing in MSNBC.com’s Technology page, is concerned that the progress of the new economy comes at a cost: "…someone, somewhere gets crowded out." In his article, "Do you live in the Internet’s Rust Belt?" Babcock cites traditional middlemen who have relied on their understanding and control of niche-based information as being particularly vulnerable. Specific mention is made of car and software sales people, stock brokers, real estate agents, and wholesalers. Babcock quotes one California observer as saying that "sales forces could easily be done away with" because they are typically suppliers of information to customers and one of the major impacts of the Internet is to make information much more available at a much lower cost.
Internet wage gap
One old economy issue that appears to have carried over into the Internet economy has been a wage gap between men and women. Laura Carr, writing in The Industry Standard on the results of their Internet Workforce Compensation Survey 2000, reports that the median base salary for women working in the Internet economy was 24 percent lower than that of men.
Although many tangible factors such as industry, educational attainment, and, quite significantly, job level, account for some of the gap, Carr concludes that the discrepancy persists after these are considered. Carr also notes that women in the survey reported slightly shorter workdays, that they were somewhat less likely than men to work weekends, and that they were slightly more likely to be compensated for extra work. "But," she adds, "these factors are not enough to account for the gender wage gap [in the Internet workforce]."
What makes an entrepreneur?
Ever wonder whether an entrepreneurial mindset exists? And if it does, is it different for men and women who choose self-employment as a career? Yannis Georgellis and Howard Wall find that yes, different mindsets may be evident, with differences marked by such elements as gender, education, age, and region in "Who are the Self-Employed?" (Review, Federal Reserve Bank of St. Louis, November/December 2000). Using data from the CPS March 1998 supplement, the authors examine why such differences may exist and the various choices men and women make as they work on their own.
Georgellis and Wall find that gender is particularly important. While self-employed workers of both genders were concentrated in a small number of occupations, "nearly a quarter of self-employed men were in precision production," an occupation where very few women were found. In contrast, "large shares of women were in service or administrative support occupations, where self-employed men were not likely to be." Other elements, such as education (the authors find it is instructive to look at self-employment rates within a given educational group) and age (self-employment tends to rise with age) affected the analysis, as well. The authors conclude "because of these many differences questions arise whether policies designed to spur self-employment have different effects on the various categories," and the questions which emerge beget a need for increased research into the topic.
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