Home Computer Market

steady downward trend between its peak in 1991 and the end
of 1993. This trend reflected recessionary cutbacks during
the beginning of the period and loss of employment due to
advances in technology (including technology to monitor in-
ventories) throughout the period. The industry lost a total of
38,000 jobs over that time span and then began to experience
a bounce back: since January 1995, computers, peripherals,
and software distribution has regained 32 percent of the jobs
lost, representing a growth rate of 4 percent. (See chart 4.)
Possible reasons for this include the improved home Pc sales
and the introduction of Windows®95.

Another home Pc-related industry falls within the retail trade
sector. The retailing of home Pc’s is categorized within com-
puter and software stores. This industry has had continuous em-
ployment growth, but the rate of growth has gone through dra-
matic changes. The rate fell from 9 percent in 1989 to almost no
growth in 1992, but has gained strength rapidly since then, reach-
ing a high of 11 percent in 1994, (See chart 5.) Because the
business PC market is at a 90-percent saturation rate, this new
employment growth likely reflects not only the strength of the
economy during the current economic expansion, but also in-
creased business due to the use of the home PC and the corre-
sponding surge in retail sales.

urchases of home PC’s, classified as either new sales or
replacement sales, meet special needs of the user that the
computer industry has recognized and acted upon in order to
boost penetration into the market. Most computers purchased
as new sales for home use are multipurpose computers that work
easily and effortlessly, as tools for work at home or for children’s
use. New home computer buyers are investing in PC products
that will give them maximum productivity as they work and
peak enjoyment as they learn and play. As a result, analysts and
computer manufacturers believe that consumers are now “call-
ing the shots” when it comes to new computers designed for the
family room, home office, or study.'> Formerly accustomed to
catering to businesses, these manufacturers, as well as retailers
and others in related industries, are listening carefully, and the
capabilities of the newer home pc’s have extended far beyond
word processing and spreadsheet analysis. Whether the con-
sumer needs the PC to pay bills, run a business from the home,
answer the phone, or all three, the key, according to manufac-
turers, is making the machine simple to use and with multipur-
pose applications. The newest systems come complete with a
new multimedia theme and include oversized computer moni-
tors with super VGA color, sound cards, modems, fax capabili-
ties, printers, single or even dual CD-ROM drives, answering ma-
chines, stereo speakers, and preloaded software. The purpose is
to give users a complete multimedia system that is ready to go
in one-stop shopping.
“Computer makers are also counting on replacement sales
to home-Pc owners looking for the latest technology, but this

50 Monthly Labor Review August 1996

part of the market could easily slow. For some consumers,
who are currently purchasing high-end Pentium models that
can easily be upgraded with the latest chip, that may be
enough to let them forgo buying a new rc for some time.”"*
Although the marketing method of tailoring products to
consumers’ needs may eventually hurt replacement sales, it
has worked to the extent that 25 percent more consumers in
the United States purchased computers for their homes in
1995 than in 1994. Not only have the wholesale and retail PC
industries registered employment growth, but also, the
software industry is expanding within the home Pc market.

Jobs in the software industry

The software industry has good opportunities for increased
sales worldwide. The United States is extremely competitive
in computer software. U.S. firms have been the unquestioned
Jeader in the industry since its inception in the 1970s, and the
growth in the number of firms has been exponential. Vast
fortunes have been created along with thousands of jobs—
changing society forever by an industry that did not exist 20
years ago.”

Employment trends. Although the overall computer services
industry has shown serious deceleration in the midst of con-
tinued growth,” it has recently displayed renewed strength
in two areas: information retrieval services (discussed in the
next section) and the software industry. The prepackaged soft-
ware industry employs slightly less than 200,000 individuals.
Although a small industry with only 17 percent of the em-
ployment of the entire computer and data processing services
industry (sic 737), prepackaged software added 71,000 jobs
between 1988 and 1994, plus an additional 25,000 jobs dur-
ing 1995 alone. The result is more than a doubling of em-
ployment since 1988. It is important to note that the prepack-
aged software industry averaged an annual growth rate of 9
percent from 1990 to 1994, but grew more than 15 percent
during 1995. (See chart 6.) This accelerated growth is most
likely due to increased sales from home PC users.

PC applications software. The higher employment growth
in the software industry in 1995 can be credited to the home
PC, because of the saturated business market and the trends in
software sales, which have recently changed in composition.
North American software sales, tracked by the Software Pub-
lishers Association, point toward a market dominated by
home Pc's.'? The association tracks quarterly data on soft-
ware sales according to the type of application. (See table 2.)
In 1994, sales of personal computer application software
reached $7.38 billion.” Word processor and spreadsheet soft-
ware remained the largest application categories with solid unit
sales growth. Price declines, however, limited revenue growth.



Sources of U.S. Intemet and on-line
usage, 1995 and estimated for 2000

Home

university
Work
1995

2000

Millions of people

SOURCE: Forrester Research, Inc.

through on-line services such as America On-line, Prodigy,
CompuServe, and Microsoft Network were estimated to be
several hundred million dollars that year alone.”

Although on-line services receive a great deal of atten-
tion from the media, they are still in the early develop-
ment phase, with only one-third of all PC users logging
on, according to recent research from Computer Intelli-
gence InfoCorp. (cit).”” This leaves tremendous room for
growth, and on-line services will only be as popular as is
their content. According the Cl study, home and work-
place PC users have similar on-line access, but the types of
communications performed by the two groups are quite dif-
ferent. Workplace pc users are twice as likely (65 percent to
32 percent) to communicate with a larger computer or a local
area network, while home PC users are more likely to go on-
line or communicate using the Internet. The CII study also
found that sending and receiving electronic mail and down-
loading software or files are the major on-line activities of
both the home and the workplace users. From there, how-
ever, the usage patterns diverge: interactive chat activities

Footnotes

are used by more than 1 in 3 home on-line subscribers, but
less than 1 in 10 workplace subscribers, and home users are
nearly twice as likely to use on-line services as a gateway to
the Internet as are workplace users.

According to Forrester Research, the home-use segment
of the Internet and on-line services will grow by 283 percent
by the year 2000, compare with a growth rate of 108 percent
for the work-use segment.* (See chart 8.) From 1995 to
2000, the Internet will expand, driven by the spread of home
PC’s and consumers’ desires to connect with one another. As
this happens, the demographics, infrastructure, government,
and monetary systems of the Internet will evolve to support
alevel of business activity theretofore not possible. Accord-
ing to Forrester, anywhere companies now have an employee
taking information or payments, they will soon have a
customer’s computer on-line. Anywhere these firms distrib-
ute information—through catalogs, advertisements, or cus-
tomer service lines—they will have a live connection as well.
Forrester expects that new technologies will facilitate the
delivery of information services to new users. First, high-
speed wireless networks will attract the mobile customer by
offering hassle-free access to data. Then, multimedia will
make shopping at home attractive and painless, so people
can see what they are purchasing and place an order without
filling out a form or talking to a person. Finally, diverse plat-
forms will ensure that not just PC users, but users of intelli-
gent phones,” personal digital assistants,” or interactive tv’s
also can be on-line.

More THAN 150,000 sos were created in various home Pc-
related industries (wholesale trade, retail trade, software, and
information retrieval services) between 1988 and 1995, with
58,000, or 39 percent, coming in 1995 alone. Technological
advances and price declines spurred sales of both home pc’s
and the software they use. This trend caused employment to
increase in related industries; but the rise in employment can
be expected to continue only as long as computer manufac-
turers pursue the advances of technology and pass them on to
the consumer, helping the computer attain mass market ap-
peal. Most important, for jobs to be created in the home Pc-
related industries, computer manufacturers must overcome
the obstacle of a saturated business market and seek out new
opportunities in the home market. Further, software program-
mers and on-line service providers must target their products
and services toward home users with the newest technology.
Finally, businesses must expand efforts to reach their cus-
tomers through the latter’s home PC's. QO

' Karen Freifeld, “Computers/Surging Sales; Computer Companies Gear
Up for a Competitive Holiday Season as More and More Consumers Look
to Buy a Home Pc,” Newsday, Oct. 8, 1995, p. 1.

2 Employment data are from the Current Employment Statistics survey
and appear in Employment, Hours, and Earnings, United States, 1909-94,
Bulletin 2445 (Bureau of Labor Statistics, 1994), and the supplement en

Monthly Labor Review August 1996 55



Home Computer Market

Employment in prepackaged software, 1988-95

Thowands (Seasonally adjusted) Trouser
200 | ~| 200
180 + + 180
160 |- + 160
140 F 4 140
120 + 4 120
too + + 100
so L 4 80

1 1 1 i L Jd 0
1988 1989 1990 1991 1992 1993 1994 1995

With sales of $522 million (up 88 percent), home education had
the largest percent increase during 1994, accounting for 23.5
percent of the total change in software sales. Entertainment was
the second fastest growing category, with sales of $716 million,
an increase of 56 percent over 1993. Together, these imply more
purchases from the home PC user.

Through the third quarter of 1995, the rate of growth of
sales for consumer software products was still strong, but was
slowing from the feverish pace of late 1994. Entertainment
products showed the highest consumer growth over the first
three quarters, up 73 percent, while home education software

Aclel-wa Selected software sates, 1993 and 1994
(Numbers in millions)
Tocuct or 1993 1994 chnoe
1,030.5 0.30
830.1 1.74
716.2 55.93
522.2 88.18
410.7 15.76
351.2 9.65
342.4 45.58
346.2 93.36

NOTE: Excludes sales of operating systems and video-game cartridges.
Figures are annual averages of quarterly data.
SOURCE: Software Publishers Association.

52 Monthly Labor Review August 1996

grew the fastest in the third quarter of 1995, rising 30 percent
over its rate a year earlier.” Of particular note is that applica-
tion segments which traditionally have led the industry (word
processor and spreadsheet applications) had little or no rev-
enue growth, while other segments (entertainment and home
education) emerged as growth leaders due to new users and
technologies. Once mainly business oriented, the software
industry has now begun to focus on the booming market in
the home PC arena.

CD-ROM. PC application software used to be the only gauge of
growth in the software market, until the CD-ROM (compact disc
read-only memory) became popular. A CD-ROM is similar in
appearance to a music CD and is used mainly in the home mar-
ket. The circular discs store vast amounts of data and are ca-
pable of multimedia uses that combine numerous elements such
as text, still photographs, audio, and video. cp-rom’s established
themselves several years ago in the business and school mar-
kets, but the devices were slow to catch on in the potentially
larger consumer market until late 1994.

Along with software sales, sales of CD-ROM's are surging
among home PC consumers due to the decreasing prices of com-
puters with CD-ROM capability and a widening array of uses for
the discs. The following tabulation, based on data from the Soft-
ware Publishers Association, lists the fourth-quarter 1994 sales,
in thousands of units, of CD-ROM's, by category of use:



FSRELEN Employment in computers, peripherals, and software distribution, 1988-95

Thousands Thousands
320 (Seasonally adjusted) 320
310 | ~] 310
300 F ~] 300
290 |- > 290
280 + 280
270 + + 270

— —
L L Ll 1 \ 1 i °
1988 1989 1990 1991 1992 1993 1994 1995
Soe Annual rate of employment growth In computer and software stores, 1989-95
Thousands (Seasonally adjusted) Thousands

15 15

10 F + 10
5h 45

1989 1990 1991 1992 1993 1994 1995

Monthly Labor Review August 1996 5)



Home Computer Market

(disks or tapes), or in paper form. A rapidly emerging method
is to use CD-ROM's to distribute large volumes of information.
The type of information varies from abstracts of technical
articles to monthly sales data for consumers on business prod-
ucts. The industry has a bright future, because competition
requires accurate and timely information and because tech-
nological changes lead to new and better products and meth-
ods of distributing them. Included in the industry are popular
on-line service companies such as Prodigy and CompuServe.

As more businesses and, more importantly, more home PC
users become aware of the advantages the Internet offers, on-
line services will become a larger proportion of the information
retrieval services industry. Although the Internet has become
the fastest growing medium of communication, the information
retrieval industry itself has yet to keep up. A small industry, it
employs about 60,000 individuals, but it has grown more than
16 percent since 1994. This growth rate is markedly different
from that of previous years: industry growth had remained
basically flat from mid-1989 until 1994. (See chart 7.) Con-
sidering the development of the product offered, the growth
trend can be expected to continue, fueled not only by home
PC users entering into the on-line services market, but also
by broad participation from businesses aiming to profit from
the home Pc user. These businesses range from those adver-
tising and selling a product to those simply keeping up with
the fast pace of high technology and advancing their capa-

bilities in the information transaction arena.

Most on-line information services provide users with, among
other things, a link to the hundreds of schools, businesses, and
other institutions that have rushed to set up home pages on the
Internet, with graphics and hypertext. (Home pages are a table
of contents that lets users point and click with a computer’s
mouse in order to retrieve information; hypertext is the format
in which the information is written.) Home pages can be cre-
ated by anyone and placed on the Intemet, allowing users to
obtain information on a variety of topics, meet others with simi-
lar interests, or even place electronic orders for goods ranging
from pepperoni pizza to airline tickets.

The enhanced computer capabilities, the lower prices of
PC's, and the energetic expansion of the Internet are attracting
the attention of a large mix of retailers. Selling through the
Internet can result in personal relationships with customers
and create a competitive advantage over other retailers. It of-
fers small companies a level playing field against larger, na-
tional retailers and can act as an important expansion vehicle
for tapping into new markets in the United States and over-
seas, Many companies are afraid that if they do not get on-
line, they will be left in the dust. In response, retailers are
taking the initiative to reach the home pc user through the
Internet by creating interesting home pages and updating them
regularly with exciting new information. More than 100 shop-
ping “malls” dotted the Internet in 1995, and retail sales

[EXEIEA Employment in intormation rehieval services, 1988-95

Thousands (Seasonally adjusted) Thousands
60 F + 60
55 + 4 55
50 | 4 50
45 45
aot 4 40
35 + 4 35

af 1 1 L 1 L | 0

1988 1989 1990 1991 1992 1993 1994 1995

54 Monthly Labor Review August 1996



Home Computer Market

Laura Freeman

Laura Freeman is an
economist In the

Division of Monthly
Ipustry Empioyment
Statistics, Bureau of

Labor Statistics.

Job creation and the emerging
home computer market

The rapid spread of personal computers for use

at home has generated more than 150,000 jobs

in sales and software since 1988—58,000

in 1995 alone; the pc software industry

and the information retrieval services industry,

in particular, have benefited from rising employment

he American family, not the American

[ business, has become the new focus in the
personal computer (PC) market. American
consumers were expected to purchase 9.5 mil-
lion home computers by the end of 1995, reach-
ing 39 percent of U.S. households. This is a popu-
larity never achieved by the electric typewriter
or the video game. Forecasts have even called
for 60 percent to 65 percent of U.S. homes to have
apc by the year 2000.! It is no wonder that com-
puter companies are taking the home buyer seri-
ously. More than 40 percent of all newly sold PC’s
have been going into U.S. homes, and industry
experts say that the home market has been grow-
ing at least twice as fast as the business market.
Increased sales of PC’s to the home market have
stimulated employment growth in supporting in-
dustries, including wholesaling and retailing of
the Pc, prepackaged software, and information
retrieval services (which include on-line serv-
ices).? Employment in home Pc-related industries
grew by an average of 2.7 percent between 1988
and 1994 and then grew by almost 10 percent in
1995 alone.? (See table 1.) A total of 58,000 jobs
were added in 1995, which compares favorably
with many other high-profile service sector in-
dustries. (See chart 1.) The growth in the 1988—
95 period amounted to 31 percent, compared with
11 percent for all nonfarm industries. Employ-
ment trends for the four home pc-related indus-
tries, however, differ considerably. This article
explores the job growth in each of these indus-

46 Monthly Labor Review August 1996

tries and the impetus behind it.

The employment growth can be linked directly
to the home PC market instead of the business mar-
ket, for various reasons. Strong distinctions exist
between the two markets. The first distinction is in
regard to price. Due to sophisticated networking
and other features required by businesses, office
PC’s typically cost $3,000 to $5,000, and sales are
expected to grow at only 8.9 percent per year by
1998, In comparison, home PC's typically sell for
under $2,000, with low-end models going for about
$1,100 and high-end models costing as much as
$3,000, and sales are expected to grow at a level
well above that of business PC’s.*

The other distinction between the two markets
has to do with the use of Pc’s. When purchasing
computers, families tend to look for user-friendly
machines, whereas businesses look for computers
that fit into their current office system, can easily
be upgraded, and have a good warranty. This makes
the business computer purchase a less frequent oc-
currence, whereas the home PC market has become
the area more likely to improve in sales volume.

The business-use segment of the PC market is
currently about 90-percent penetrated, so sales
have concentrated on the home market. Once ig-
nored by the Nation’s PC makers, this market is
now getting attention. More and more companies
are entering into the home Pc market, even
though the boom in the market is now 4 years
old. Still, although the market is enjoying increas-
ing sales, its rate of growth has been slowing.



Home Computer Market

titled Employment, Hours, and Earnings, United States, 1990-1995, Bulle-
tin 2465 (Bureau of Labor Statistics, September 1995). Unless otherwise
stated, employment data are annual averages.

> The specific industries covered by the “home Pc-related” category are
computers, peripherals, and software (sic 5045), computer and software
stores (Sic 5734), prepackaged software (sic 7372), and information re-
trieval services (sic 7375).

‘Della de Lafuente, “Home Computing; Family Purchases of New PCs
Fueling the Market,” Chicago Sun-Times, Nov. 6, 1994, p. 1.

+ For a detailed analysis, see Jacqueline Wamke, “Computer manu-
facturing: change and competition,” this issue, pp. 18-29.

The Department of Commerce's price deflator for domestic PC's, cal-
culated with technology as a constant.

7 De Lafuente, “Home Computing.”

* Ibid.

° Use of Computers at Home, School, and Work by Persons 18 years and

October 1993 (U.S. Department of Commerce, Bureau of the Cen-
sus, 1993).

"© Odyssey Ventures, Inc. is an independent market research firm dedi-
cated exclusively to studying the complex and changing relationship among
consumers, technology, and at-home information and entertainment.

" Odyssey Ventures, Inc., “Homefront” study, July 1995.

"2 Bart Ziegler, “Hard Drive—PC Makers’ Big Push into the Home Mar-
ket Comes at a Risky Time,” The Wall Street Journal, Nov. 1, 1995, p.Al.

» Ibid. “There’s never been a mass-market product produced at over
$1,000,” says Howard Blias, a vice president in Digital Electronic
Corporation's rc division, who insists that “The rc is an anomaly.”

“* Odyssey Ventures, Inc., “Homefront” study.

De Lafuente, “Home Computing.”

6 Ziegler, “Hard Drive,” p. Al.

“Implications of ‘Lotus v. Borland’ Decision,” Massachusetts Lawyers
Weekly, May 1, 1995, p. B4.

For a detailed analysis, see William C. Goodman, “The software and
cnginerng industries: threatened by technological change?" this issue, pp.
37-45.

The Software Publishers Association is the principal trade associa-
tion of the rc software industry. ‘The association bases its figures on a

56 Monthly Labor Review August 1996

survey of members that excludes sales of operating systems for pc's
and networks, as well as sales of video-game cartridges.

® Software Publishers Association, “Personal Computer Application Soft-
ware Sales Reach $7.38 Billion in North America in 1994; Record Fourth
Quarter Closes a Record Sales Year,” news release.

2 Software Publishers Association, “Third Quarter North American
Software Sales Hit $2.2 Billion,” news release; the introduction of the new
operating system, Windows®95, in late August caused a brief spur in sales of
business application software, including word processor and spreadsheet
software. After little change in the second quarter of 1995, sales of the major
business application categories rebounded to levels nearly 40 percent higher
than in the third quarter of 1994, led by sales of the new operating system.
‘This growth in business applications, however, is probably a temporary spurt,
and home re-related software will likely resume the lead in sales.

® See “co-nom Sales Surging among Consumers; Lower Computer Prices,
More Uses Cited” (Plain Dealer Publishing Co., Sept. 20, 1994), p. 2C.

? Ibid.

* The Internet—the Accidental Superhighway.” The Economist, July
1, 1995, pp. 3-18.

> For a detailed analysis of the banking industry, see Teresa L. Morisi,
“Commercial banking transformed by computer technology,” this issue, pp.
30-36.

* Neil Buckley, “The Revolution Continues—Large Retailers Now see
the Re-creation of Personal Relationships with Customers as a Source of Com-
petitive Advantage,” Financial Times Limited, Oct. 4, 1995, p. I].

* Computer Intelligence InfoCorp., “Consumer Technology Index,” 1995,
cu, a Ziff-Davis Publishing Company, is a leading source of fact-based infor-
mation on and for the computer and communications industries.

TM Forrester Research, “People and Technology—Analyzing the Impact
of Technology on Consumers,” The Forrester Report, September 1995, Forr-
ester Research is a technology market research firm that studies the Internet
and its commercial potential.

® Intelligent phone networks include calling services, such as automatic
call forwarding, and message services.

> Personal digital assistants are portable, handheld computers that have
telephone, fax, e-mail, and paging capabilities.

* See Egil Juliussen and Karen Petska-luliussen, The 7th Annual Com-
puter Industry Almanac, 1994-1995—the Complete Guide to People, Sala-

ries, Companies, Technologies, and Forecasts in the Fascinating Ever-Chang-
ing Computer Industry, p. 350.



Quantity sold

10,229
3,474
3,181
2,248
1,154

173

Category

' For example, encyclopedias, guidebooks, and reference
works,

In dollar terms, according to the Software Publishers As-
sociation, the largest selling category in the fourth quarter of
1994 was games and other home products, with sales of $88.3
million, followed by home education, with sales of $58.1
million. The growth in the CD software industry, according to
the same source, is well above the growth recorded for the
software industry overall (although such a growth rate was
easier to achieve than that of the overall industry due to the
small base involved). The CD segment of the software indus-
try is dynamic and fast growing, and the appeal of distribut-
ing and buying CD software is broadening. This is another
indicator of the software industry’s switching focus to the
home market instead of the business-use segment.

The consumer CD-ROM market was slow to develop in past
years, in part because software companies were hesitant to
design products when so few computer owners had CD-ROM
drives. But prices for upgrade kits, which allow owners to fit
CD-ROM drives onto existing machines, have fallen to about
$400 from more than $1,000 a few years ago. With the con-
sumers buying the necessary hardware, companies such as
Microsoft are joining smaller players in designing CD-ROM
software products. There are now more than 8,000 CD-ROM
titles, up from fewer than 100 in 1986, according to InfoTech,
Inc.” And, as with the hardware, the prices of cp’s also are
dropping. The result is that computer manufacturers increas-
ingly are including CD-ROM drives as standard equipment on
personal computers, and software designers are churning out
a new generation of games and other titles to maintain con-
sumer interest.

Jobs providing on-line services

The information retrieval services industry is experiencing
changes similar to those experienced by the software industry,
also reflecting the increasing use of home PC's. More demand
for home Pc-related information retrieval services has translated
into more jobs providing those services. The industry grew by
more than 15 percent in 1995 alone. Demand stems not only
from the growth in the home PC market, but also from advancing
technology and an expanding new medium.

What began as an experimental network of three comput-
ers linking the Department of Defense, military research con-
tractors, and universities involved in military-funded research,

called the ARPAnet (Advanced Research Projects Adminis-
tration network), has now grown into what is widely known
as the Internet. Since 1993, the Internet has become a new
public forum, through the multimedia side of the net, called
the World Wide Web. This combination of special software
and a unique way of connecting documents has allowed us-
ers to “travel” the Internet with pictures, sound, and video
simply by pointing and clicking a mouse. The World Wide
Web has broadened the Internet so that it is more than just a
way to send e-mail and download an occasional file. Through
the Web, the Internet has become a place to visit: cyberspace.
This new medium is not just based on broadcasting and pub-
lishing, but has an interactive dimension as well. The World
Wide Web has allowed a broader audience to make use of the
advantages of the “information superhighway.”

The Internet as a whole doubled in size in 1995, as it has
done every year since 1988. It now reaches nearly 5 million
“host” computers, each of which may connect to several
individual users. During the same period, the Web grew almost
twenty-fold; in just 18 months, users created more than 3 million
multimedia pages of information, entertainment, and adver-
tising. There has never been a communications medium or
consumer electronics technology that has grown as quickly—
not the fax machine, nor even the personal computer.

The range of customers who use the Internet is vast and
includes U.S. grade-school students who exchange letters and
stories with children in other countries; college students re-
searching term papers; homemakers exchanging recipes, paying
bills, doing their banking,”> and using home shopping networks;
office workers transmitting data across States or oceans; and
Corporate marketing departments promoting their products.
Internet users encompass all types of individuals with access to
computers, whether for home PC use, telecommuting, or other
work-related purposes. Most of these persons access the Internet
through on-line information services.

Tracking the growth of the Internet in terms of employment
is a difficult task. There is no “Internet, Inc.” that collects
fees from all Internet networks or users. Moreover, because
the Internet is not owned by one or more specific companies
(and does not have a standard industrial classification), an
analysis of changes in employment related to it is not possible.
To track its influence upon employment, one is limited to
analyzing the information retrieval services industry, which
provides individuals with access to the Internet.

Employment in information retrieval services. The informa-
tion retrieval services industry consists of establishments en-
gaged in providing on-line information retrieval services on a
contract or fee basis. Information service providers collect,
manipulate, and disseminate information about specific top-
ics. The information is stored in large data bases and is dis-
tributed through communications links, by magnetic media

Monthly Labor Review August 1996 53



Use of computers at home: percent by age
and educational attainment, 1993

Age (years)

18-21

22-24

25-34

35-44

45-54

55~64

65 and older

Education

Less than 9th grade

9th to 11th grade

—_—__——________
High school graduate
Some college
Bachelor's or higher
degree

0 10 20 30 40 50 60

SOURCE: U.S. Bureau of the Census.

come families to purchase a computer,
an enormous expectation for a product
that is the most expensive consumer
purchase after a home and a car.

Increased sales of home computers
is important to computer manufac-
turers because high technology and a
competitive market have diminished
their profit margins significantly.
Indeed, net profit margins have been
reduced to as low as 1 percent.'? Yet it
is unclear whether manufacturers can
reduce prices of PC’s enough to entice
low- and moderate-income families
into the market, Some manufacturers
are betting that they can ignore the
price problem, while others have
branched out into other businesses to
help subsidize their Pc business.'>

Considering that the home pc
“boom” is now in its fourth year, fore-
casters predict that it cannot last much
longer. A recent survey disclosed that
only 5 percent of households lacking
a PC were “extremely likely” to buy
one in the next 6 months; some 78
percent said that they had no plans to
purchase a computer this year." Still,
firms that sell Pc’s and complemen-
tary products have changed their mar-
keting techniques to specialize in
what the home-use purchaser needs.
They have also been expanding their
businesses—for example, by adding
employment—in order to take advan-
tage of the current demand for home
Pc’s and other pc products.

Jobs selling computers

The wholesale and retail Pc in-
dustries. The wholesaling of PC's is
classified as a category within the
overall distribution of computers,
peripherals, and software. Although
specific employment data for home PC
wholesaling are unavailable, trends.can
be inferred from the larger wholesale
Pc distribution industry.

Employment in computers, periph-
erals, and software distribution within
the wholesale trade sector followed a

Monthly Labor Review August 1996 49



Home Computer Market

Employment growth in home PG-related industries, compared with selected other
high-profile service sector industries, 1995

(Ovar-the-year changes, seasonally adjusted)

Home pC-related*

Personnel supply

Social services

Auto dealers

Hospitals

L 1 L L L n
C) 20 40 60 80 100 120 140
Thousands of jobs

7 Home PC-relatad industries include SiC’s 8045, §734, 7372, and 7375.

JEREIE Personal computers sold fo US. homes, 1991-96

Millions Millions
14 14
12+ 12

10

°

1991 1992 1993

1 Data for 1995 and 1996 are projected.
SOURCE: *Computers/Surging Sales," Newsday, Oct. 8, 1995.

48 Monthly Labor Review August 1996



USI Employment in home pc-related industries, 1988, 1994, and 1995
[Numbers in thousands}
trom Change from Change from
Employment 1988 fo 1994 1994 to 1995 1988 to 1995
ac Indust
ustry ‘Average Average
108 | 1994 1998 | Number | annuat | Number | Percent | Number | annual
percent percent
Total home PC-related (487.4 579.6 637.5 92.2 270 57.9 9.99 150.1 3.80
F 300.7 285.5 302.1 15.2 -72 16.6 5.81 14 AT
61.0 88.7 97.7 277 6.49 9.0 10.15, 7 60.16
86.4 157.4 181.9 71 11.74 245 15.57 96.5 110.53
99.3 480 558 a7 316 78 | 1625 16.5 41.98

(See chart 2.) The growth rate in sales of pc’s to homes, which
reached a peak of 30 percent from 1992 to 1993, was projected
to drop to 25 percent by the end of 1995 and 16 percent by the
end of 1996. Nonetheless, the home market has the greater po-
tential for development, compared with the business market,
not only in terms of sales, but also as regards employment.

The computer home market

Why is the computer market expanding? Reasons for the
growth in the home-based computer market can be divided into
two categories: technological and social. The computer indus-
try has undergone drastic technological advances in recent years.
The most important of these is the speed at which computers
Process data. This change, along with reduced production costs
for computer components, has lowered the prices of home PC's.
Competition among manufacturers also has kept prices down
and has helped to encourage purchases of computers for home
use.’ Computer prices have dropped by 65 percent from 1988
to 1994, subject to the application of a price deflator.$ In other
words, a computer bought in 1994 would cost only 35 percent
of what it cost in 1988. Considering the changes in both quality
and prices of the most recent home PC models, technology has
brought this industry into a different era.

Among the social reasons for the market change in
home-based computer systems is the desire of parents to
expose children to computers at younger ages. Also, par-
ents are buying computers for their college-bound stu-
dents, who, in turn, are teaching the parents about home
computing. In addition, parents who are either self-em-
ployed or working for someone else at home after hours
or as telecommuters are shopping for home systems.’ Al-
though 44 percent of first-time Pc buyers cite doing job-
related work at home as the major reason for buying their
new machine, 38.3 percent of first-time buyers want a
computer at home for their children’s schoolwork, accord-

ing to Link Resources, a leading high-technology market
research company.®

Who are the people in this new market? The individuals driv-
ing growth in the home computer market come from a variety
of educational backgrounds, employment and occupational cat-
egories, income levels, age groups, and family size and compo-
sition. Home use of PC’s is growing across all demographic
groups, but there does seem to be a specific type of individual
that is more likely than others to make this purchase.

The Bureau of the Census has reported on the use of com-
puters at home, school, and work by persons 18 years and
older. Its 1993 study indicates that individuals with at least a
bachelor’s degree are the most likely to use a pc in the home
environment.’ (See chart 3.) The age range of most home Pc
users is 35 to 54 years. Add to this information the fact that
44 percent of individuals purchase Pc’s for home use in order
to perform job-related work, and a picture emerges of the
person most likely to purchase a home Pc.

In addition to reporting individual profiles, the Census Bu-
Teau study suggests that the typical family that owns a home PC
is a married couple, with full-time employment among family
members, that leans towards the higher end of the family in-
come bracket, from $35,000 and up. The employed family mem-
bers are classified mostly within occupations in management
and professional areas and technical, sales, and administrative
support areas.

Persons fitting the foregoing profiles are key to the new
market in home Pc’s and have become the target of a variety
of industries, from retailers of PC's and software to computer
services. But, according to the research firm of Odyssey Ven-
tures, Inc.,"° “the easiest piece of the home market, affluent
families with children, is getting saturated. Two-thirds of the
10 million homes with children and incomes above $50,000
already have a Pc.”!! This means that computer manufactur-
ers will increasingly have to entice moderate- and low-in-

Monthly Labor Review August 1996 47