If Politicians Pushing SOPA/PIPA Want To Create Jobs, They Should Support The Internet -- And Stop Treating Copyright Companies As Special

from the evidence-based-policy-making dept

A key element of the political rhetoric around SOPA/PIPA was the idea that it was about jobs, and that jobs are so critical in the current economic climate that safeguarding them overrides any other concern the Net world might have about the means being proposed to do that. But then the key question becomes: who are really more important in terms of those jobs - the copyright industries, or companies exploiting the potential of the Internet that would be harmed if the Net were hobbled by new legislation?

A timely new McKinsey report entitled "Internet matters: The Net's sweeping impact on growth, jobs, and prosperity" provides us with some independent evidence on the topic. Here are the relevant findings:

The Internet is a critical element of growth. Both our macroeconomic approach and our statistical approach show that, in the mature countries we studied, the Internet accounted for 10 percent of GDP growth over the past 15 years. And its influence is expanding. Over the past five years, the Internet’s contribution to GDP growth in these countries doubled to 21 percent.

The latest information (pdf) from the International Intellectual Property Alliance (IIPA) claims the GDP contribution from the "core copyright industries" in the US in the years 2007-2010 went from 6.43% to 6.36% - that is, its contribution to the overall GDP was largely unchanged over this period. So the contribution of the "core copyright industries" to GDP growth over this period was also around 6%. The "core copyright industries" are defined as follows:

The core industries are those industries whose primary purpose is to create, produce, distribute or exhibit copyright materials. These industries include newspapers and periodicals, motion pictures, recorded music, radio and television broadcasting, and computer software.

That is, they include software companies, some of which are doubtless active on the Internet. So the contribution of the non-Internet core copyright industries to the GDP growth from 2007-2010 was less than the 6% figure above. That compares with an overall contribution of the Internet to GDP growth in the mature countries as a whole of 21% (but over five years, not four).

So what about the jobs? Here's McKinsey again:

The Internet is a powerful catalyst for job creation. Some jobs have been destroyed by the emergence of the Internet. However, a detailed analysis of the French economy showed that while the Internet has destroyed 500,000 jobs over the past 15 years, it has created 1.2 million others, a net addition of 700,000 jobs or 2.4 jobs created for every job destroyed. This conclusion is supported by McKinsey’s global SME survey, which found 2.6 jobs were created for every one destroyed.

Again, the IIPA report offers some figures:

the core copyright industries employed 5,496,100 workers in 2007. These workers represented 3.99% of the total U.S. workforce in 2007. By 2010, the number of core copyright employees in the United States had declined by 398,500 workers to 5,097,600.

In an earlier report (pdf), the number of people employed by the core copyright industries in 2002 is given as 5.48 million – roughly the same as in 2007. That is, whether or not the numbers are really representative, there was a net decline in the workforce of the "core copyright industries", which include software and probably some Internet companies, from 2002 to 2010.

By contrast, in France, whose population is roughly a fifth of that of the US, the Internet created some 700,000 jobs net. That was from 1995, but in the early years it is likely that relatively few jobs were created by the then-new Internet, so most of those 700,000 would have been created later on - say 400,000 for the last eight years. In the US, we might expect at least a pro rata number – 2.4 million jobs. That's probably an underestimate, since the US is in the Net vanguard, but even if it's an overestimate, the figure is likely to be much better than the net loss of the core copyright industries.

If the backers of SOPA and PIPA were really as concerned about jobs as they profess to be, they would be doing everything in their power to defend the Internet so as to preserve this incredible engine of growth, not attack it. And they would be pushing the copyright industries to embrace the Internet as rapidly and completely as possible, since the McKinsey report also points out:

Although the Internet has resulted in significant value shifts between sectors in the global economy, our research demonstrates that all industries have benefited from the Web. Indeed, in McKinsey’s global SME survey, we found that 75 percent of the economic impact of the Internet arises from traditional companies that don’t define themselves as pure Internet players. The businesses that have seen the greatest value creation have benefits from innovation leading to higher productivity triggered by the Internet.

Sounds like a perfect solution: instead of fighting the digital revolution tooth and nail, the copyright industries could embrace it like everyone else, stop demanding to be treated like a special case, and start innovating.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Filed Under: economics, enterpreneurs, jobs, pipa, sopa, startups, studies

How Can The Startup Visa Be Improved Upon?

from the fixing-it-bit-by-bit dept

When the startup visa was first put forth by Paul Graham, I was a big supporter. When Brad Feld took the idea and got political support for it, I was still a big supporter. But when the bill was actually introduced, I expressed some serious worries about it -- specifically over the fact that it was entirely focused on enterpreneurs who could raise a certain amount of money. As I noted, there were some potentially serious unintended consequences of requiring enterpreneurs to raise a specific amount of money just to stay in the country. The leverage between enterpreneurs and VCs can be a delicate enough balance without adding in the fact that you might get deported if you don't take the deal being handed to you.

While many of the people I know and respect in the industry have been vocal champions of the current bill, it was good to see at least someone make a big deal of these serious deficiencies in the bill. Pascal-Emmanuel Gobry wrote up a post for Business Insider that basically reflects this same viewpoint. We both think that a startup/entrepreneur visa makes a ton of sense, and it's something the country needs, but we're a bit worried by the current bill, which seems entirely focused on venture capital, rather than actual entrepreneurship.

Some have responded and suggested that this is better than nothing, but I'm not entirely convinced of that. A bad bill with unintended consequences could create more harm than good and could derail future attempts to put forth more serious (and needed) reform.

In the end, I think (former VC) Jeff Nolan put it best: this is a "well-intentioned bad idea that shouldn't be stopped." The real thing is that it should be fixed. Now, some of the bill's supporters have suggested that the problems with this bill are necessary, in that it's the only way they'll get passed, but that seems like a defeatist attitude. We have an opportunity to actually get this right and to bring smart entrepreneurs who can create a lot of jobs and tremendous value to the US. We shouldn't rush it through in the easiest manner possible: we should focus on getting it right, even if it takes more effort.

Update: It looks like the folks at the Kaufman Foundation have had similar concerns as well, supporting the concept, but worried about tying it to funding. They suggest an alternative, focused on job creation:

Here's a way to improve on the Kerry-Lugar plan. Create a true "job creator's visa," one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.

There are plenty of immigrants who might qualify: the one million skilled foreign workers now here on H1-B visas who otherwise must go home after six years, as well as the roughly 60,000 foreign students who earn degrees at American universities each year. These are far larger numbers than those who could qualify under the Kerry-Lugar proposal.

Filed Under: enterpreneurs, entrepreneur visa, immigration, startup visa, startups, venture capitalists, visas