The shape of the knowledge economy just grew a bit clearer with the release of a report that puts the overall impact of the software industry — including both direct and indirect effects — at roughly $1 trillion. At 6 percent of total U.S. gross domestic product (GDP), that’s nothing to shake a mouse at.
Software companies grew at nearly twice the rate of the U.S. economy in the last 10 years. By 2014, some 10 million worked either in software or in a job supported by the sector. “More than ever, software is an extremely influential part of our nation’s economic fabric,” Victoria Espinel, president of the Software Alliance, said in a statement.
But the data also highlight the uneven effects of the digital industry within the American economy. While the total size and scope of the software sector has expanded drastically in the past decade, creating behemoths like Facebook and Google along the way, employment gains have not been as robust.
Direct economic contributions from the software industry grew by 78 percent from 2004 to 2014. Over the same period, the number of jobs in software increased just 39 percent. That is, employment in the industry grew only half as fast as the industry itself.
The trend is manifest at the state level, too. In Washington, 6.1 percent of state GDP comes the software industry, the highest share of any state. Yet only 3.6 percent of the labor force in Microsoft’s home state works in software.
That shouldn’t come as a surprise. As the economy has shifted from manufacturing toward technology over the past several decades, robots have replaced workers, and new industries have proven substantially less labor-intensive.
IBM, for instance, employed 341,000 workers in 1980 and had a market capitalization of $115 billion, adjusted for inflation. Today, Facebook has a market capitalization of $320 billion and just 13,600 workers — a payroll 25 times smaller than IBM’s in 1980.
That’s not to say the software industry hasn’t been a boon for local economies, particularly in states like California, where the digital sector brought $90.5 billion to the economy in 2014. Even in states where the software industry didn’t put up huge total GDP figures, investment in research and development has grown. In both Nebraska and Vermont, more than 40 percent of new research funding is accruing to software.
The Software Alliance, the lobbying group behind the report, argued for renewed attention by policymakers on issues relevant to the industry, like spending on science and technology education. “Our future competitiveness will demand greater competence in software-related skills across the economy’s many sectors,” Espinel said.
But a consideration of digital technology in the economy also has to grapple with the fact that despite the industry’s rapid growth, it’s not quite the employment engine that politicians might be hoping for.