Technology sector’s impact on the US economy
The technology sector in the US is one of the top-five economic contributors in 22 states and in the top ten of 42 states. In the US, the tech sector’s share of real economic growth risen steadily since 2007. The industry consists of three major sub-segments such as (i)Software and services, (ii) Technological hardware and equipment (iii) Semi-conductors.
Rapid development and adoption of technologies such as robotic automation, cloud computing, the internet of things (IoT), artificial intelligence (AI), machine learning, and 5G technologies are promoting the ongoing growth of the IT industry. The IT sector in the US dominates the global IT market with the largest market share of more than 40%. According to CompTIA, there are over 557,000 software and IT service companies in the US. The economic impact of the tech industry is around $1,879 billion, nearly 10% .
Technology and Labour force
The tech sector has changed the way work is conducted by increasing or replacing specific tasks. Some jobs are being eliminated and some new jobs are being created due to technological innovations. The demand for IT workers grew steadily from 1990s. According to a report by CompTIA, there are over 12.1 million tech workers in the US in 2019, an 23% increase over the decade.
For instance, the internet sector is creating jobs in every sector of the economy. Companies are increasing their IT spending to boost their revenue growth. It is also important to note that the companies strategically spending on software technologies perform better than companies that are not. The revenues of the companies investing in technology have doubled according to a report by Accenture.
The technological advancements have created remote working possible in the country. The growth of remote working websites such as Upwork for high skilled workers is an indicator that tech sector has revolutionized the way the work is done. Moreover, software tools like Google suite, Slack, Zoom are making it easier for companies to make remote working possible. According to a report by FlexJobs, over 3.4% of the population in the US is working remotely. There is an increase of 44% in the number of people working remotely in the last five years.
Improvement in Labor productivity
The workflows are being simplified with the introduction of automation. For instance, the first power looms produced 2.5 times as much cloth per hour and now the productivity has increased to 80 fold in output per hour in the last 80 years. Labor productivity is also improved in other sectors after the introduction of technology. For instance, Customer service operations are now being handled with the support of technology. Chatbots are deployed in answering FAQs and providing tech support in ordering products, reservations, etc.
Rise of Fintech firms
Technology is also being utilized in the finance industry to perform efficiently and improve customer experience. Various innovations in mobile payments, blockchain, digital currencies are made possible with the advancement in technology. These fintech innovations are changing the landscape of traditional financial and banking systems. Fintech’s are increasingly inclined to provide products that are personalized and client-centric. With, increasing mobile and internet users, fintech firms are leveraging the technology and expanding access to liquidity and banking to reach a wider population. Earlier, fintech firms were primarily from non-bank entities but now banks are re-thinking the way they see fintech firms. More collaborations and partnerships are growing in this industry. Fintechs are positively impacting the growth of the US economy by creating jobs and other opportunities. Fintech startups are attracting a continuous amount of investments. According to CBInsights, US Fintechs raised around $12.4 billion in 2018, and this leads to a 30% increase in venture investments in the entire US market. It is also important to note that the US remains the top market for fintech investments.
The emergence of new industries and services
Apart from fintech firms, technology has significantly impacted various sectors. The technology is both considered boon and bane because it has created new industries and disrupted certain industries. Increasing mobile and internet users have led to the rise of smartphone app industries. Various business firms are developing their own mobile applications to serve better. The app industry in the US is one of the lucrative markets due to the early adoption of technology. The industry has created a job market for software developers and coders. There are more than 38,245 American app publishers in Google play.
Similarly, technology is changing healthcare services too. In 2009, only 16% of the health care institutions were using an electronic health record. Now, over 80% of hospitals use electronic health records.
The Tech sector has greatly contributed to the growth of US economic growth by directly and indirectly providing millions of jobs and thereby improving the living standards of the country. It has not only shaped the economy but also the society. People cannot imagine a life without technological wonders such as computers and the internet in the modern world. The early adoption of technology was made possible due to the country’s high-quality research & development and educational institutes, being funded for basic research that later laid the foundation for commercial applications.
Disclaimer: The author of this text, Robin Trehan, has an undergraduate degree in Economics, Masters in international business and finance, and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries, and/or employees.
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