Why Big Data Looks Like a Jobs Winner

When small and medium-sized businesses deploy analytics, the economy gets a shot in the arm
By: 
Alan Morantz
Why big data looks like a jobs winner

At this point, any organization without a full-blown strategy for Big Data and analytics is probably too embarrassed to come clean.

After all, no one doubts the promise of data analytics to unlock insights that would otherwise remain hidden. Nor is there much doubt that, in the years ahead, data scientists and their professional kin will be happy as clams as they entertain offers for their skills.

But just how much of a halo effect can we expect from Big Data? Beyond benefiting certain industries or types of tech jobs, will it have any impact—good or bad—on the labour market? Normally that would be a hard question to answer. But a study called “Big Data Adoption and Employment in Small and Medium Enterprises” exploited an information-sharing program at a major Spanish bank to solve the puzzle.

Over four years, the bank offered its small and medium-sized business clients free access to insight-rich market research. The study used data on the diffusion of the program at the city level to estimate the link between the use of Big Data by retailers and job creation and unemployment. The study also dug deep to see whether Big Data improved or hurt job prospects for women, youth and the elderly. 

How was the study designed?

The study is based on the adoption of an analytics sharing program run by a Spanish bank from 2014 to 2018. Under the program, small and medium-sized enterprises (SMEs) using the bank’s point-of-sale credit card platform received a market research report on their own sales profiles relative to competitors in the same sector and zip code. (The report included credit card transactions, client demographics and new versus returning customers.) The researchers matched participating SMEs with their location and then incorporated changes in job creation and unemployment at the city level into their calculations. 

What did the study find?

  • Adoption of the Big Data analytics reports boosted job creation at the city level by 1.4 per cent and lowered unemployment for men under 25 and over 45 and for women under 45.
  • Adoption of analytics led to more indefinite jobs and fewer short-term engagements, and increased employment for women, youth and older workers. The biggest increases came from fixed-term contracts that were converted into indefinite contracts for both men (plus 14 per cent) and women (plus 16 per cent). 

What do I need to know?

Up to now, the narrative around Big Data, and analytics generally, has largely centred on adoption by big companies. It’s time for that to change. The most promising gains for the larger economy will be realized when Big Data is in the hands of SMEs, which typically account for more than 50 per cent of employment in OECD countries.

As this study shows, adoption of Big Data-based analytics drives up employment and job creation, particularly for younger and older groups as well as for women—the same demographic groups most sensitive to unemployment. It also leads to more temporary job contracts being converted to indefinite contracts, which most people would welcome.

SMEs that use Big Data benefit themselves. A companion study of the same analytics-sharing program in Spain found that the firms using the analytics-based reports saw their revenue jump by nine per cent and their unique customers and transactions increase by 12 per cent.

If government policy-makers could figure out a way to encourage greater adoption of Big Data by SMEs, it would be a win all around. 

Study Title: Big Data Adoption and Employment in Small and Medium Enterprises

Authors: Jose E. Galdon-Sanchez (Universidad Pública de Navarra) and Ricard Gil (Smith School of Business)

Published: Economics of Digital Services, University of Pennsylvania, 2021

Smith School of Business

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