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The employment and wage impact of broadband deployment in Canada

/ September 29, 2016

The employment and wage impact of broadband deployment in Canada

A recent article published in the Canadian Journal of Economics “provides the first empirical assessment of the impact of broadband on employment and wage growth in Canada”.

And the findings are good news for rural Canada. (Canada was the first country to deploy broadband.)

Olena Ivus and Matthew Boland of Queen’s School of Business, Queen’s University, assessed the impact, on employment and wage growth, of broadband from its first deployment in 1997 through to 2011. Canada invested millions of dollars to expand broadband into rural and remotes areas which were left unserved or underserved by commercial interests due to lack of profitability. Commercial broadband investment is affected by factors such as population density, existing economic activity, and income levels.

Looking for causation, not “mere correlation”, Ivus and Boland needed to identify “exogenous variation in broadband deployment” because economic activity itself can affect deployment rates. Interestingly, for this reason, they used landscape elevation variation as the limiting factor “for the rate of broadband deployment”. Both wireless (e.g., microwave) and wired (e.g., fibre cable) deployment costs and effectiveness, as well as economic activity itself, are affected by topography. Microwave systems can range over “100 kilometres over flat terrain” but are less effective in mountainous areas.

What they found was that broadband deployment “decreases regional disparities” in employment and increases viability for rural Canada.

Their findings indicate that, although rural areas lag behind urban areas in aggregate employment growth, broadband does limit the gap, with rural areas benefiting more that urban.

Employment growth, rural and urban, in the goods industries was not affected by broadband deployment. Specifically in the service industries, rural employment grew by 1.17 percentage points per year while they fell by 1.21 in urban area. In other words, rural service industries grew at the expense of urban. The impact was “most pronounced in industries with high IT intensity”.  Further, they found that growth declined in IT-intensive industries with limited broadband and increased as “broadband became more available”.

Average wage growth in service industries was about the same for rural and urban (1.01 and 0.99 percentage points per year, respectively).

This study suggests that continuing to develop broadband in rural areas is a sound economic development strategy. Service industries, including IT, are no longer limited to urban areas, because the costs of doing business outside of urban centres are reduced. Goods production is more dependent on availability of raw materials, which services are not, and their findings show no impart of broadband on employment and wages.

For access to the full article, link here: Canadian Economics Association

Ivus, O and M. Boland. (2015). The employment and wage impact of broadband deployment in Canada. Canadian Journal of Economics, 1803-1830.

David Clark

MA, BES, BA(H), Mad(Diploma)

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