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Better Internet Access Could Boost US Output by $160 Billion a Year
- August 25, 2021
- CBR - Economics
About one-fifth of paid workdays will take place at home in the postpandemic economy, according to research by Mexico Autonomous Institute of Technology’s Jose Maria Barrero, Stanford’s Nicholas Bloom, and Chicago Booth’s Steven J. Davis.
In this new landscape, securing reliable high-speed internet service for all US homes would yield sizable productivity gains, the researchers argue. Moreover, better internet service would also increase economic resilience in future pandemic-like episodes.
Tapping their Survey of Working Arrangements and Attitudes, Barrero, Bloom, and Davis examined the role of at-home internet quality in remote-worker productivity. In a previous study, they calculate that remote work could boost employee productivity by almost 5 percent relative to prepandemic times, largely due to reduced commuting time. Using forward-looking data from their monthly survey, they conclude that providing reliable, high-quality home internet to all US homes could further boost earnings-weighted labor productivity by about 1 percent.
Since they began collecting the survey data in May 2020, the researchers have generated more than 40,000 responses from working-age US residents. The survey tracks working arrangements, attitudes, productivity, and well-being in relation to remote work. It also asks employees about their employers’ plans for remote work after the pandemic.
The researchers combined survey data on employers’ plans with responses to the question “How much would your efficiency working from home increase if you had perfect high-speed internet?” Some 75 percent of respondents said they already had high-quality internet service. Among the rest, 33 percent predicted that moving toward that would lead their productivity to rise at least 5 percent, while 28 percent said they expected a 10 percent gain, and 17 percent projected a 20 percent jump.
Although only a quarter of the population reported having subpar internet, universal access to high-quality internet service would boost labor productivity by more than 1 percent, generating a GDP gain of $160 billion per year, the researchers estimate. Universal access would also raise the incidence of remote work by around seven-tenths of a percentage point, they find.
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And universal access would raise earnings—by 1 percent for people who earn $20,000–$50,000 a year, 1.2 percent for people earning $50,000–$100,000, 1.3 percent for those earning $100,000–$200,000, and 1.1 percent for those earning over $200,000 per year, according to calculations made on the basis of 2019 earnings. The gains would be highest for those in the middle of the earnings distribution because many low-wage workers hold jobs that can’t be done remotely, while most high earners already have high-quality internet service.
The researchers note that they do not quantify how much it would cost to achieve universal, high-quality service, an important factor in deciding whether moving toward it would be worthwhile.
But in this cost-benefit analysis, widespread access could temper the negative effects of future pandemics, biological attacks, and other disasters that disrupt travel and in-person interactions, the researchers write. Indeed, they estimate that subpar internet access lowered GDP by about 3 percent during the height of the COVID-19 pandemic because such a large share of labor services were supplied from home.
Lastly, outside the workplace, strong internet access improves the ability of households to manage shopping, remote schooling, and even socializing when in-person activities are too risky or infeasible. All these factors, the researchers argue, support the idea that universal internet access would help bolster US economic resilience during future pandemic-like disasters.
- Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis, “Internet Access and Its Implications for Productivity, Inequality, and Resilience,” Working paper, July 2021.
- ———, “Why Working from Home Will Stick,” Working paper, April 2021.
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