CHARTS: Tech Delivering Economic Value, Bucking Economy-Wide Trends
At Jackson Hole, economists discussed the rise of economy-wide corporate concentration and its impact on the macroeconomy, including investment, wage, and monetary policy. Tech critics have worked to connect this trend to tech, but – as we’ve noted before – tech bucks the trends seen in other sectors of the economy.
In fact, regarding investment, labor share, margins, growth, and entrepreneurship, tech is the one part of our economy consistently working. Here are six areas where tech outperforms the rest of the economy on key issues related to the concentration debate.
—Labor Share: The economy-wide share of income going to labor versus capital has dramatically fallen. But not in tech. PPI’s Michael Mandel finds that in the digital economy, labor share has actually gone up.
—Margins: Economy-wide increases in corporate concentration have been blamed for rising profit margins. While we’ve questioned the research behind this trend, PPI’s Michael Mandel finds gross margins are falling in the digital sector as well.
—Consumer Views: Critics have argued corporate concentration is responsible for bad treatment of customers, with airlines being the most prominent example. But contrary to other industries, people like and trust technology companies, in addition to their products and services.
—Entrepreneurship: Critics have argued corporate concentration has reduced entrepreneurship – a trend that predated the internet. Here, again, the tech sector stands out as a bright spot. MIT research shows entrepreneurship growth is rising and tech VC deal value accounts for about half of all VC funding in recent years.
—Business Investment: Notably, the rise in corporate concentration economy-wide has been blamed for reduced business investment. Yet again, tech is investing more in R&D than any other sector, and within tech , R&D investment is only growing.
—Stagnating Economic Growth: The decline in investment and entrepreneurship in our economy has critics blaming corporate concentration for less growth. But the Bureau of Economic Analysis found the digital economy is growing at four times the rate of the broader economy.