The information services industry, which has seen a huge spurt in information and communication technology innovation, has likely stagnated in terms of value added to overall GDP. Here’s a look at what could be driving this puzzling trend.

 

Over the last two decades, an explosion of information and communication technology (ICT) innovation has changed the way we consume goods and services, ranging from maps to entertainment. Despite this, the information services industry—under which ICT is roughly classified—is still approximately the same proportion of GDP as it was 35 years ago. This statistic is likely to sound absurd to business executives and economists in the ICT space, especially at a time when technology companies dominate the valuation of stock indices.

However, closer inspection reveals that although innovation has increased, employment in the industry has declined. This is significant since employee compensation accounts for roughly 40 percent of the industry’s value addition to GDP, and employment is key to the creation of this industry’s products.The number of employees in the information services industry reached a peak of 3.7 million in 2000–01. Between 2000 and 2011, the information industry shed more than 1 million jobs. The economic recession of 2001 played a role, but the changing nature of the industry may have been more important in the long run.

 

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