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THE ECONOMIST: Going Digital

🕐 2 min read

Going Digital

Over the past two decades, we’ve gone digital. The development of the internet and related technologies and advances in communications have changed the way we live and work, affecting virtually every aspect of our daily routines. The digital segment of the economy has been growing much faster than the overall pace, but up until recently, there wasn’t a good way to measure it.

Even if we can agree on a definition of the “digital economy,” the rapid rate of change means that products important for a while become obsolete and new inventions come on the scene regularly. Even so, the US Bureau of Economic Analysis (BEA) recently tackled the challenge, seeking input from researchers, analysts, and experts to develop a measure of the digital segment of the economy.

The three major components of the BEA’s definition are the digital-enabling infrastructure needed for a computer network to exist and operate (such as the internet, needed telecom equipment, and computer hardware and software); the digital transactions that take place using that system (“e-commerce”); and the content that digital economy users create and access (“digital media”).

Between 2006 and 2016, the BEA estimates that the digital economy’s real value added grew at an average annual rate of 5.6%, far faster than the overall economy’s average pace of 1.5%. In 2016, the digital economy accounted for 6.5% of gross domestic product ($1.2 trillion) and 3.9% of employment (5.9 million jobs). This gap attests to the exceptional productivity found in this sector. Notably, the digital segment accounted for 6.7% of employee compensation. Employees working in the digital economy earned $114,275 in average annual compensation, substantially more than the overall average of $66,498 per worker.

This activity is scattered across a number of industries. For example, while we have long been able to track the numbers of certain occupations which are clearly digital (such as computer systems design and related services), now we can also look at those in retail who focus on e-commerce or individuals in broadcasting who are digitally focused.

Not only do jobs in the digital economy pay well, they are also becoming more numerous, with employment growth rates well above the national average. However, prices for digital economy goods and services have been falling thanks to technological advances and competition, which is contrary to the pattern of rising prices observed in most of the economy.

Understanding the digital economy is important to businesses, policymakers, consumers, job seekers, analysts, and others. Moreover, the competitiveness of the US economy is integrally linked to this large and growing segment of the business complex. The definition will morph over time, but the dynamism will remain and no doubt guide much of our economic destiny.


Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group ( He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

Ray Perryman
Dr. Ray Perryman is President and CEO of The Perryman Group, an economic research and analysis firm based in Waco, Texas. His firm has served the needs of more than 2,500 clients, including two-thirds of the Global 25, over half of the Fortune 100, the 12 largest technology firms in the world, 10 US Cabinet Departments, the 9 largest firms in the US, the 6 largest energy companies operating in the US, and the 5 largest US banking institutions.

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