Information technology big boost to economy

Growth of Internet reducing inflation, creating jobs

Computers and the Internet have dramatically transformed the U.S. economy in the last five years, significantly reducing inflation and creating 7.4 million high-paying jobs, according to a Commerce Department report released yesterday.

The report marks the government's most comprehensive look to date at the growth of information technology, and puts a dollar figure on the myriad of advancements that have become a part of everyday life.

"Technology is reshaping this economy and transforming businesses and consumers," Commerce Secretary William Daley said. "This is about more than e-commerce, or e-mail, or e-trades, or e-files. It is about the `e' in in economic opportunity."

From word processing and automated inventory controls to supermarket scanners and online shopping, information technology has boosted productivity for businesses and convenience for consumers.

The high-tech industry today accounts for more than 8 percent of the national output of goods and services, with the computer and communications sectors growing twice as fast as the rest of the economy, the report notes.

But the benefit is hardly limited to high-tech companies, according to the report, titled "The Emerging Digital Economy." Among the industries investing most heavily in information technology are real estate, radio and television broadcasting, auto repair services and motion picture production.

Nationwide, investments in information technology account for more than 45 percent of all business equipment investment, compared to only 3 percent in the 1960s. In select industries such as communications, insurance and financial brokerage houses, three out of every four equipment dollars are spent on information technology, Daley said in a speech to information technology business people in Washington.

That investment is paying off in terms of lower inflation, which would have been 3.1 percent in 1997 instead of the 2 percent rise that was actually recorded, according to the report. In addition, millions of information technology-related jobs pay just under $46,000 per year, compared to an average of $28,000 for the private sector as a whole, the report said.

The trend is poised to continue as the Internet spreads to more office desktops. Businesses are using the global computer network to buy supplies more cheaply, reduce inventories, lower sales and marketing costs and improve their customer service, the report said.

Hewlett Packard, for example, has increased productivity and reduced costs by more than $200 million a year by linking more than 100,000 employees worldwide on an internal network that allows workers to share files, said spokesperson Ann McGrath. Employees also can share information on manufacturing defects and product tests on more than 100 online discussion groups, she said.

The Palo Alto, Calif.-based computer and equipment giant expects to save up to 70 percent of the costs associated with paper forms by making personnel policies and payroll forms available online, McGrath said. Money saved from administrative costs can be plowed back into research and development.

At Nike, the phone directory, employee benefits forms, cafeteria menu and conference room schedule are available on Swooshnet, as the company's internal network is known. When an Internet hoax advertised that customers could send in an old pair of smelly sneakers in exchange for a new pair of athletic shoes, Nike diffused the rumor by posting correct information on its World Wide Web site.

04-16-98