Embracing the Self-Service Economy

April 14, 2010
| Reports

The past decade has witnessed a rapid growth in self service that allows consumers to take on the traditional role of a service worker in the provision of a service. Self service has long existed—think of placing a call by dialing a telephone instead of using a telephone operator or pressing a button in an elevator instead of using an elevator operator—but its importance has grown as advances in information technology (IT) have created many opportunities to leverage self-service technology for large gains in efficiency and convenience. Using computer kiosks, airline travelers check in to their flights; on the Internet, consumers purchase products without ever speaking to a sales agent; and, using a mobile phone, customers check their bank balances and transfer funds. Self-service technology continues to become more efficient and more convenient, and, as a result, increasingly organizations, including businesses, non-profits and governments, are using self-service technology to operate more productively and to better serve their customers.

Self-service technology has already transformed entire industries, from ATMs in banking to e-commerce in the travel industry, resulting in significant savings for businesses which are passed on to consumers in the form of lower prices and better service. However, even though self-service technology has generated a wide range of benefits and savings for consumers, businesses, and government, it is only the beginning. Over at least the next decade, self-service technology has the potential to be a major force for growth in productivity and improvements in quality of life. We estimate that if self-service technology were more widely deployed, the U.S. economy would be approximately $130 billion larger annually, the equivalent of an additional $1,100 in annual income for every household.

These savings could not be coming at a more crucial time. Most national economies will need the power of self-service technologies if they are to avoid serious economic problems stemming from significant growth in the number of retirees, a situation that will be particularly acute in Europe, Japan, and the United States. In the United States, for example, the number of retirees for every 1,000 working age adults is projected to grow from 213 today to 346 by 2030. For Social Security recipients in 2030 to not see a decline in their inflation-adjusted payments without workers seeing a decline in their after-tax incomes, economic productivity will have to increase by 62 percent. Unfortunately, the Social Security Administration estimates productivity will grow just 40 percent. As a result, in 2030, either worker incomes after Social Security taxes are deducted will be significantly lower, or Social Security benefits will be lower, or both. Self-service technologies promise to be a major source of needed productivity growth, enabling the United States, Japan, Europe, and other nations facing demographic challenges to realize such growth without reductions in wages or benefits.

But these benefits will not automatically occur unless the right policies are in place and the wrong ones are avoided. First, governments should avoid putting in place restrictions on self-service business models and processes. This means that policymakers must resist the efforts of special interest groups that press for restrictions in technology to protect their economic or social interests at the expense of the average citizen. Second, where appropriate, governments should proactively promote self-service delivery of government services. For example, governments should pass along to citizens the savings from using lower-cost self-service options. Governments should also help create a climate conducive to expansion of self-service technologies. This means that government should support the development and deployment of technologies that enable self-service, like broadband, electronic IDs, and mobile payment systems. In the United States in particular, Congress should increase the minimum wage thereby providing firms with more incentive to invest in self-service technology, while at the same time helping to boost the incomes of low income Americans. In addition, Congress should establish an academic Center of Excellence to develop best practices for accessible design for self-service technology. Finally, we recommend that policymakers establish stronger safety nets for workers adversely affected by technological change so that the workforce can more easily adapt to a rapidly changing economy.

Self-service technology offers a broad set of benefits to consumers and businesses and has the potential to contribute even more to our national prosperity and quality of life. While self-service technology is widespread, it is still relatively new and will only continue to improve in quality over time. However, policymakers must avoid enacting policies to restrict self-service while at the same time putting in place appropriate policies to stimulate the self-service economy to realize these benefits.

The Internet Economy 25 Years After .com

March 15, 2010
| Reports

ITIF is marking the 25th anniversary of the very first .com with a comprehensive report, "The Internet Economy 25 Years After .Com: Transforming Life and Commerce." The Internet revolution has just begun.

The report is being issued 25 years to the day in 1985 when was registered as the first .com in the world. The report quantifies the dazzling growth and economic benefits of e-commerce, especially in the last decade since bubble collapse, and recommends ways to ensure a growing and vibrant Internet in the years to come.

From its quiet beginning in 1985, the Internet has grown to 80 million .coms and well over 200 million websites. E-commerce is the driving force behind rapid innovations, new products, services and business models and redefining our roles as consumers and citizens. The 25th anniversary of the .com will be the subject of a policy forum headlined by former President Bill Clinton on Tuesday at Reagan Building in which ITIF President Robert D. Atkinson will participate,

ITIF’s new report arrives in an important week in the development of the Internet’s infrastructure, with the FCC announcing its long-awaited recommendations on the national broadband plan.

Among the findings in the report are the following:

  • Of the roughly 250 million websites about 80 million are .coms. Even after the collapse of the .dom bubble, the number of domain names grows by an average of 668,000 a month.
  • The .coms alone account for some $400 million in economic benefits to businesses and consumers and that figure will likely double in the next ten years.
  • Despite high-profile failures in the dot-com bubble burst, typical survival rates for these new businesses were actually higher than normal and spectacular success stories have followed.
  • Only about 25 percent of the world's 6.7 billion participate in the dot-com economy but is changing – 73 million Chinese became Internet users in 2007 alone.

In order to sustain the progress that has been made in empowering consumers, spurring innovations and boosting productivity, the report urges:

  • Adoption of policies that allow for the deployment of technologies, like wired and wireless broadband, mobile payments platforms, health IT, and other Internet platforms.
  • Removal of regulatory and legal barriers to the emergence of new e-business models.
  • Creation of incentives for companies to invest in Internet-enabled business practices.
  • Advancing digital literacy.
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