Job Creation and the Emerging Home Computer Market

By Freeman, Laura | Monthly Labor Review, August 1996 | Go to article overview

Job Creation and the Emerging Home Computer Market


Freeman, Laura, Monthly Labor Review


The American family, not the American business, has become the new focus in the personal computer (PC) market. American consumers were expected to purchase 9.5 million home computers by the end of 1995, reaching 39 percent of U.S. households. This is a popularity never achieved by the electric typewriter or the video game. Forecasts have even called for 60 percent to 65 percent of U.S. homes to have a PC by the year 2000.(1) It is no wonder that computer companies are taking the home buyer seriously. More than 40 percent of all newly sold PC's have been going into U.S. homes, and industry experts say that the home market has been growing at least twice as fast as the business market.

Increased sales of PC's to the home market have stimulated employment growth in supporting industries, including wholesaling and retailing of the PC, prepackaged software, and information retrieval services (which include on-line services).(2) Employment in home PC-related industries grew by an average of 2.7 percent between 1988 and 1994 and then grew by almost 10 percent in 1995 alone.(3) (See table 1.) A total of 58,000 jobs were added in 1995, which compares favorably with many other high-profile service sector industries. (See chart 1.) The growth in the 1988 - 95 period amounted to 31 percent, compared with 11 percent for all nonfarm industries. Employment trends for the four home PC-related industries, however, differ considerably. This article explores the job growth in each of these industries and the impetus behind it.

[TABULAR DATA OMITTED]

The employment growth can be linked directly to the home PC market instead of the business market, for various reasons. Strong distinctions exist between the two markets. The first distinction is in regard to price. Due to sophisticated networking and other features required by businesses, office PC's typically cost $3,000 to $5,000, and sales are expected to grow at only 8.9 percent per year by 1998. In comparison, home PC's typically sell for under $2,000, with low-end models going for about $1,100 and high-end models costing as much as $3,000, and sales are expected to grow at a level well above that of business PC's.(4)

The other distinction between the two has to do with the use of PC's. When purchasing computers, families tend to look for user-friendly machines, whereas businesses look for computers that fit into their current office system, can easily be upgraded, and have a good warranty. This makes the business computer purchase a less frequent occurrence, whereas the home PC market has become the area more likely to improve in sales volume.

The business-use segment of the PC market is currently about 90-percent penetrated, so sales have concentrated on the home market. Once ignored by the Nation's PC makers, this market is now getting attention. More and more companies are entering into the home PC market, even though the boom in the market is now 4 years old. Still, although the market is enjoying increasing sales, its rate of growth has been slowing. (See chart 2.) The growth rate in sales of PC's to homes, which reached a peak of 30 percent from 1992 to 1993, was projected to drop to 25 percent by the end of 1995 and 16 percent by the end of 1996. Nonetheless, the home market has the greater potential for development compared with the business market, not only in terms of sales, but also as regards employment.

The computer home market

Why is the computer market expanding? Reasons for the growth in the home-based computer market can be divided into two categories: technological and social. The computer industry has undergone drastic technological advances in recent years. The most important of these is the speed at which computers process data. This change, along with reduced production costs for computer components, has lowered the prices of home PC's. Competition among manufacturers also has kept prices down and has helped to encourage purchases of computers for home use. …

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