A Comparative Study on Employment Impacts of Electronic Commerce
Mehdi Ghazanfari Amin Charooseh
Iran University of Industry and Science Ministry of Science, Research and Technology
Abstract
Electronic Commerce has different impacts on the employment in different countries, industries and sectors. This paper reviews these impacts and also develops a model to investigate its effect in Iran. Investigating several cases, we provide a robust basis to analysis the employment impacts of electronic commerce. The employment impacts of electronic commerce have broadly divided into two categories i.e. job gains and job losses. The new jobs are also studied as direct and indirect jobs.
.1 Introduction
The spread of the Internet and the growth of electronic commerce, together with the substitution of off-line activities by online activities, will affect the employment. Technical progress and innovation in products, processes, organization and markets are at the center of attention of economists and policy makers, since they are essential to keep up a growth path which allows an increase in productivity without substantial unemployment.
Information and communication technologies (ICTs), organizational change, international trade, and product market competition all have an impact on the labor market, either directly, by acting on skills, wages, and on work organization, or indirectly, through the effects of productivity and demand on employment. The impact of electronic commerce on the job market is thus the result of a complex balance and many interactions and cannot easily be quantified. However, some lessons can be learned by looking at the various channels of transmission and the literature that examines their impact on employment.
This paper reviews these impacts in several countries and also develops a model to investigate its effect in Iran.
.2 Methodology
In this research Evidenced-Base Research is used. Evidence Base Research came from Evidence-Based medicine. Evidence-Based medicine became fashionable only in the early 1990s. The formation of the Cochrane Collaboration in 1993 and, in UK, the establishment of the Center for Evidence-Based Medicine in Oxford in 1995 was important markers in its development. Evidence was used in health care and in social policy areas like education began to be made at this time.
A biennial series of conferences on 'Evidence-Based Policies and Indicator Systems' was held in Durham in 1997. For more information about application of EBR see (Davies, 1999).
The name 'Evidence-Based Research' is borrowed from Evidence-Based Medicine, defined as:
"Evidence-Based social care is the conscientious, explicit and judicious use of current best evidence in making decisions regarding the welfare of service-users and careers". (Sackett et al., 1996)
In any field, appropriate to different applications, special definitions from EBR were developed. For Example, Dr. Coe describe Evidence-Based education as:
“The support for and promotion of practices and policies that are based on good evidence about their effects.”
The logic of EBR process contains three vital elements: (Pawson, 2001)
• Causation: Systematic review seeks to differentiate influential interventions from impotent initiatives. To do so involves some understanding of the ‘causal powers’ of a program. Review methodology thus always carries a model of how programs achieve their effects.
• Ontology: This conception of how programs actually work then provides an ontology for the review process, a list of vital ‘ingredients’ that should be sought in, and extracted from, each original study.
• Generalization: Finally, review methodology will take a view on the nature of knowledge transference. How can we generalize from the evidence base? How are we to capture the lessons learned in a way that informs future policy and practice?
In ontology stage we use some different technique for data analysis, such as:
- Randomized Controlled Trial,
- Quasi-Experimental Design,
- Single Case Design,
- Multiple Case Designs.
For more information see (Dawes 1999).
In social science research usually Single Case and Multiple Case Design were used. When researchers have not access to accept or reject hypothesis they will apply Single Case Design.
In comparison, Multiple Case Design is more reliable. (Yin, 1994) Yin said, Case Study methods were used in theory building researches not in theory testing.
.3 Causation
Aaccording to the literature, it is specified that electronic commerce has different impacts on the employment in different countries, industries and sectors.
Electronic commerce induces radical innovation in transaction systems. This innovation implies significant changes in the quantity and quality of labor market in almost every industry.
To assess the impact of electronic commerce, it is essential to understand for which industries it is generating or will generate new demand and growth, which types of jobs will be destroyed and which created, and what the overall needs are in terms of skills.
.4 Ontology
There are few studies, which explicitly analyze employment effects of electronic commerce (OECD 1999, Passasmonit 1998, Margherio 1998). In this section we were applying systematic review on these researches for developing a model for investigating employment impacts of electronic commerce in Iran.
.4.1 Job gains
A number of industries are affected by electronic commerce. The distribution sector is directly affected, as electronic commerce is a way of supplying and delivering goods and services.
Other industries, indirectly affected via upstream and downstream linkages to e-commerce activities, are those related to ICTs (the infrastructure that enables electronic commerce), content-related industries (information-related goods and services, entertainment, software and digital products), transactions-related industries, i.e. those affected by the size and type of economic transactions (e.g. the financial sector, the postal sector, advertising, travel and transport).
.4.1.1 Direct effects. Some activities may increase as a direct consequence of electronic commerce (e.g. activities related to the information industries and services). Virtual firms entering the market create new jobs, and, at least initially, online and off-line activities tend to be carried out simultaneously. Electronic commerce might also create new markets or extend market reach beyond traditional borders. Enlarging the market will have a positive effect on jobs.
The firms activated in electronic commerce are divided to three groups: One group provides infrastructure for electronic commerce over the Internet, the second provides software and services for electronic commerce, and the third conducts electronic commerce (providing online services, content, selling goods and services).
Total electronic commerce employment in 1998 for U.S. is 123347 people and Share of Electronic Commerce Employment in Total Employment is 0.088 percent. Evidence of noticeable net job creation in online services is lacking or varies, depending on the sources. The extent to which electronic information services will be a source of job creation will depend on the extent to which there will be substitution between off-line and online services.
It will vary across countries on the basis of national development trends and will depend on countries’ degree of openness.
.4.1.2 Indirect effects. Another important issue relates to interlinkages among activities affected by electronic commerce. Direct and indirect effects must be distinguished and aggregated, and overall, indirect effects may be greater than direct ones. Moreover, indirect effects follow several paths.
Indirect positive effects are seen as a result of reduced costs and increased productivity which will lower prices and, thus, enhance demand for goods and services, especially in information related products that can be delivered electronically.
Expenditure for e-commerce-related intermediate goods and services will create jobs indirectly, on the basis of the volume of electronic transactions and their effect on prices, costs and productivity. Depending on price elasticity’s, electronic commerce transactions will have a net positive impact on the demand for industries such as software, online services, audio-visual, music, and publishing. Their expansion, in turn, will have a multi-pliers effect on other industries. Due to intersectoral linkages, growth opportunities in e-commerce-related industries may translate into overall employment growth. Together, these industries account for almost one-third and one-fourth of total employment in the United States and the European Union, and roughly one-third of job creation in 1993-96 (28 and 35 percent in the United States and the European Union, respectively).
Databank Consulting has attempted to estimate directly the employment impact of electronic commerce in four European countries. Overall, the employment effects, calculated on the basis of 1997 electronic revenue estimates, are very small. The four European countries (60 percent of European electronic transactions are assumed to take place) see a total gain of 173 000 jobs, of which almost 60 percent are due to indirect effects. When compared to current employment levels, this very small number is not surprising, given the current size of electronic revenues. (Passamonti, 1998)
.4.2 Job Losses
New researches refute the assumption that says think development of information and communication technologies increase unemployment rate. Although some jobs may destroyed, but created jobs is more. (Steinfield, 1999)
One report on electronic was published by European Commission, estimates than 1 million jobs will be created in electronic publishing in Europe in the next ten years. In stead of, the traditional US publishing industry, which counted 1.5 million employees in 1996, is projected to see its overall employment share drop from 1.26 percent in 1996 to 1.08 percent in 2006 (OECD, 1999). Statistics show clearly that new jobs are multifold Job Losses.
Job losses, particularly in relatively unskilled areas already quickly disappearing in the digital economy. Sales clerks, stockpersons, and other entry-level jobs offering employment options for teenagers and other unskilled workers are likely to be the hardest hit.
.4.3 Job gains and losses in some EC-related industries
This section offers some evidence on the role that electronic commerce may play in direct job creation or indirect job creation.
.4.3.1The “copyright” industry. The copyright industry broadly includes information services (mainly software services) and the content industries, such as motion picture, audio-visual and publishing industries. The software industry is the main driver of employment growth.
In New York the number of new media jobs jumped by 48 percent to 105771 in the period early 1996-mid-1997; the number of new media companies climbed by 16 percent and revenue rose by 50 percent (Scott, 1998).
.4.3.2 Travel Agencies. Internet auctions of unsold flight seats by airlines are becoming more frequent, and airlines are effectively eliminating travel agents. In 1996, for example, independent travel agents handled 80 percent of US airline reservations; in 1998, the share is down to 52 percent, with airlines dealing directly with customers via the Web or telephone (Kehoe, 1998).
.4.3.3 Post Offices. The development of electronic transactions is also threatening revenues and thus employment, and new companies that take advantage of the Internet are emerging. E-Stamp Corp., for example, is a start-up firm that plans to sell postage over the Internet. As mentioned above, e-mail messaging is growing fast and replacing traditional mailing activities. Productivity gains achieved in postal delivery activities appear to have yielded labor savings.
On the other hand, electronic commerce will have positive spin-offs for transport activities when it entails a physical delivery. The use of the Internet is resulting in increased competition between the Post Office and actors such as DHL, Federal Express and United Parcel Service (OECD, 1999).
.4.3.4 Retail. While electronic commerce may lead to expand employment in the near term, as retailers maintain a presence in both physical and cyber channels, it is expected that have a negative impact on employment in this sector (OECD, 1999).
At 21.6 million and almost 18 percent of the total work force in 1996, the US retail sector is fairly big in terms of employment and has been increasing over time, it is forecasted by the US Bureau of Labor Statistics to follow a downward trend. Under those optimistic assumptions, US retail activities may decline by 25 percent.
.4.3.5 Finance and banking. Finance is also likely to be significantly affected by eCommerce. Preliminary results from the Canadian Survey of Innovation in 1996 reveal that 82 percent (representing 99 percent of the total sample revenues) of the banks are using the Internet, and that 19 percent (representing 86 percent of the total sample revenues) use it to sell goods and services.
For example, US data show that employment and its share in total employment have been declining since the beginning of the 1990s. Finland, a leader in the use of electronic payments, has seen a 3.5 percent annual decline in employment, resulting in a cut of more than a third of the jobs between 1984 and 1996.
A turnaround was achieved at CIBC in 1996. It was primarily attributable to the creation of nearly 1000 jobs because of the opening of two new telephone banking centers. The shift to the new delivery channel has meant, however, that occupations such as bank teller are in decline, while customer service representatives are increasing in number and importance (OECD, 1999).
.5 Generalization
Thereby our systematic review of evidence, we concluded below points:
- At this time, the impact of electronic commerce on employment are very small, but in the longer term, its effect may be felt more strongly.
- The overall effect of electronic commerce on employment will be the balance of direct new jobs, indirect jobs created by increased demand and productivity, and job losses.
- Jobs gains and losses may differ by industry, by geographic area and by skill group.
- Statistics show clearly that new jobs are multifold Job Losses.
- Indirect effects may be greater than direct ones.
We formulate our findings about impact of electronic commerce on different industries in table 1. Two main attributes that select for this classification are innovation and information. Innovation deputes parameters such as: new products or services, new markets, … and information deputes parameters such as:
effective relationship with consumers, provide useful information,.
According to the table 1 industries that described in previous section sit in cells of table 2.
Table 1. Employment Impacts of Electronic Commerce
InnovationHigh / Low
Information / High / Increase / No impact
Low / Substitution / Decrease
Table 2. Employment Change in Selective Industries
Increase / Substitution / DecreaseCopyright / Retail
Finance & Banking / Travel agencies
Post offices
.6 View of Electronic Commerce in Iran
Referring to the tables presented at pervious section, in this section we review these impacts investigates in Iran, applying Evidence-Based Research as below: