|Actually, AT&T/T-Mobile Will Not Create Jobs|
|Written by Dave Burstein|
|Wednesday, 22 June 2011 13:17|
For better or worse, the merger will produce less investment and fewer jobs. AT&T's promised "synergies" of tens of billions will mean massive numbers of job cuts. Careless AT&T advocates are looking very silly spreading a claim around D.C. that the merger would create 96,000 jobs. AT&T has said they will invest $8B more over 4-7 years, about $50-75/year for each customer added from the deal. That sounds about right for maintenance capex on average bills close to $1,000/year. For each $billion invested, they claim 12,000 more jobs. However, T-Mobile's investment, now $2.8B/year, would be lost.
The net effect on investment of the merger is negative, even making an assumption that T-Mobile would be cutting investment if not merged. If you take the implication of the T+$8b and apply the same analysis they used to get the additional 96k jobs, the result is about 40,000 fewer jobs. Cutting about $11b means destroying 132,000 jobs by this logic. The calculation came to me with a caveat, "Obviously that's as dumb as the 96k, but live by the sword die by the sword." Adding to that all the other jobs at T-Mobile that AT&T tells Wall Street they will cut, and the result is far fewer jobs if the merger goes through.
Protecting jobs unneeded by the economy is not good policy in the long run. Offering equivalent services using fewer workers - automation - is often a good thing for the economy in the long run. Ultimately, productivity, not featherbedding, is better for the economy. But the pain for the people involved is brutal.
Incidentally, economist Scott Wallstein points out that most "jobs created by" arguments are based on misuse of input-output tables.
I've long agreed. I/O tables are about the current structure of the economy, but in this case we're analyzing what changes at the margin. That normally would be far fewer. In addition, nearly all these "studies" look at some general category - perhaps "broadband" - and assume that whatever they are proposing would be similar. A most egregious example came in the U.S. stimulus. Running $10M of fiber is labor intensive and creates jobs, plausible stimulus expenditures. Paying $10M to rights to fiber laid in the ground ten years ago results in no direct jobs, yet the stimulus said it would have the same effect. The "jobs created" calculations in the broadband stimulus are so inaccurate NTIA shouldn't be reporting them.
I wrote this story because reputable reporters have picked up the advocates' claims so they needed correction. As far as I know, AT&T itself has been truthful. From their press release: With the merger, AT&T has committed to more than $8 billion in incremental investment to integrate and upgrade the existing AT&T and T-Mobile wireless networks and to fund the construction of the expanded LTE build out enabled by this transaction. The majority of this incremental investment will occur within 3 years after the transaction closes. http://www.att.com/gen/press-room?pid=19899&cdvn=news&newsarticleid=31974&mapcode=corporate|mk-att-wireless-choice/op The additional $8B is on top of what AT&T alone would have invested. The mistake some made was to assume that the $8B was on top of the combined investments of AT&T & T-Mobile. http://bit.ly/nmpiR3