Academic journal article Federal Reserve Bank of Atlanta, Working Paper Series

The Push-Pull Effects of the Information Technology Boom and Bust: Insight from Matched Employer-Employee Data

Academic journal article Federal Reserve Bank of Atlanta, Working Paper Series

The Push-Pull Effects of the Information Technology Boom and Bust: Insight from Matched Employer-Employee Data

Article excerpt

Abstract: This paper examines the inflow and outflow of workers to different industries in Georgia during the information technology (IT) boom of the 1990s and the subsequent bust. Workers in the software and computer services industry were much more likely to have been absent from the Georgia workforce prior to the boom but were no more likely than workers from other industries to have exited the workforce during the bust. Consequently, the Georgia workforce likely experienced a net gain in worker human capital as a result of being an area of concentration of IT-producing activity during the IT boom.

JEL classification: J61, R23, R58

Key words: push-pull, migration, information technology, administrative data, profit analysis

I. Introduction

The information technology (IT) sector played a remarkable role in the growth of the U.S. economy during the late 1990s. Between 1996 and 2000 the IT-producing sector was responsible for an estimated 1.4 percentage points of the nation's average annual real GDP growth of 4.6 percent, largely driven by business investment in IT products. Since 2000, however, the IT sector has been struggling. In particular, the level of IT Manufacturing output declined rapidly as business investment spending on IT declined sharply during the 2001 recession. In 2002 it is estimated that IT-producing industries contributed only 0.1 percentage points to the economy's 2 percent annual growth (Economics and Statistics Administration 2003).

The IT boom of the 1990s led to a dramatic rise in employment in IT-producing industries, and the subsequent IT retrenchment resulted in a large decline in employment in the early 2000s. Between 1993 and 2000, the average number of workers in IT-producing industries in the U.S. grew by approximately 50 percent, which is almost two and a half times as fast as employment in private sector non-IT industries. (1) From 2000 to 2003, average employment in IT-producing industries declined by 21 percent, compared to a two percent decline in non-IT industries. Such extraordinary movement in the labor market presents unique incentives and opportunities for workers, and could serve as motivation for workers to migrate to take advantage of promising labor market opportunities and/or to escape labor market declines. The pull on workers to communities experiencing positive economic opportunities and the push of workers out during economic declines has been referred to as "push-pull" migration, and has been analyzed in a variety of different contexts. (2)

The purpose of this paper is to investigate whether workers migrated into the Georgia workforce to take advantage of the IT boom and whether IT workers (more than workers from other sectors) migrated out of the Georgia workforce after the boom, during the period of dramatic decline in employment opportunities in IT-producing industries. Because the IT-producing sector is concentrated in a few metropolitan areas such as San Francisco, Austin, Boston, Seattle, and Atlanta, the IT boom and bust had a disproportionate impact on these locations (Daly and Valetta 2004). The best chance, therefore, of identifying a migration pull effect of an IT boom would be to investigate worker behavior in these centers of concentration, one of which was Atlanta, Georgia. (3)

Using matched employer-employee data over the period 1993-2003, the analysis in this paper finds that workers in the Software and Computer Services industry in Georgia during the boom period were more likely than workers in other industries to have been absent from the Georgia workforce prior to the boom, but were not any more or less likely to be absent from the Georgia workforce during the IT bust. The implication is that the pull of employment opportunities in the IT-producing sector was much stronger than the push of declining opportunities during the bust. The asymmetry is attributed to the transferability of IT skills to non-IT producing industries during the IT industry bust. …

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