European Affairs

Some Facts and Figures About the New Economy in the United States and Europe     Print Email
Alexander Schrader

The United States is still far ahead of all other countries in introducing the internet economy, but Europe and Asia will eventually start to catch up.

Growth in the U.S. information and communications sector has been faster than anywhere else, and very brisk growth rates are forecast for the years ahead. According to the U.S. Department of Commerce, half the American workforce will be employed in information technology-intensive industries by 2006.


But so far the boom is only just beginning. From 1995 to 1998, the share of information technology industry in U.S. gross domestic product was only 8 percent, while its contribution to GDP growth was 15 percent.

This means that even in the United States, 92 percent of economic activity and 85 percent of GDP growth was still generated by traditional industries as recently as the late 1990s. Exponential growth in electronic commerce in the United States began in early 1998, according to Forrester Research.

Canada began exponential growth in e-commerce in the middle of 1999, quickly followed by Britain and then Germany, according to these estimates. Japan is expected to follow suit in 2001, with France following at the beginning of 2002 and Italy a little later.

At present, the global digital economy is heavily dominated by U.S. companies, a situation that is not likely to change much in the immediate future. The highest growth rates in the medium-term, however, are expected to be generated in Europe and Asia - admittedly starting from a relatively low level.

Hitherto, public attention has focused mainly on business-to-consumer e-commerce. The highest growth rates and revenues, however, will initially be seen in the business-to-business sector, with the realization of huge productivity gains. The business-to-consumer sector will take off later.

As the industrial countries move to a service-oriented information society, changes in the workplace have also gone farthest in the United States. Sixty-two percent of all young Americans dream of becoming their own bosses, and every tenth person between the ages of 25 and 35 has already been involved in the establishment of a new firm.

Job mobility in the United States is especially pronounced. By the age of 32, the average American employee has already had nine jobs.

In Europe, the Netherlands is playing a pioneering role in the modernization of the job market. But the transformation of the work sector has begun in Germany, too. Part-time work is continuing to make inroads (up 100 percent since 1994), and the importance of full-time work and traditional work relationships is declining.

The proportion of the workforce in traditional work relationships fell from 75 percent in 1989 to 66 percent in 1996. The number of self-employed people without staff rose by 65 percent over the same period.

An expert from the Institute for Labor Market and Vocational Research estimates that the ratio of people in permanent employment to self-employed will reach 50:50 in Germany by 2010.

Over the next several years, 1.5 million new jobs will be created in Germany in the so-called TIME industries (telecommunications, information technology, media and electronics). The figure for the whole of Europe will be 6 million. Over half of all jobs in Germany will then be in these sectors.

The service sector is becoming ever more important, with three out of four Germans expected to work in services in ten years' time. "Virtually every activity in the work society of the future will be a form of service," says the German Ministry of Research.

The number of telecommuting jobs in Germany is expected to quadruple to four million by 2010, with high growth rates also predicted for tele-learning.

The new forms of work, such as telework, desk-sharing or making offices mobile will have a fundamental influence on the market for industrial and commercial property. Workspace per employee in Germany already shrank from 30 to 24 square meters from 1993 to 1998, and in future the need for office space could contract by as much as another 40 percent.

By breaking down the division between home and workplace, businesses can also tap considerable productivity potential. At IBM Germany, for example, one of five employees can work either at home or in the office, saving the company 8 million deutsche marks a year.

Alexander Schrader, Head of Economic Research, HypoVereinsbank

 

This article was published in European Affairs: Volume number I, Issue number III in the Summer of 2000.