What Is the Impact of the Digital Divide?

Imagine if you didn’t have reliable access to the internet to read this blog post. Or access to a computer to apply for a new job.

For a lot of Americans, this still a reality—and not having access to broadband internet services impacts their ability to find jobs, develop new skills and gain upward economic mobility. A recently released chapter of a new book, Investing in America’s Workforce: Improving Outcomes for Workers and Employers, highlights the lingering digital divide: the gap between people who have access to broadband services and know how to use the Internet and those who do not have such access or knowledge.

“On the Wrong Side” of the Divide

“Despite incredible advancements in broadband technology, these innovations are not available to all Americans,” writes Jordana Barton of the Federal Reserve Bank of Dallas in the chapter, titled “Preparing Workers for the Expanding Digital Economy” (PDF).

Broadband is commonly used interchangeably with “high-speed internet.” Consumers’ ability to receive—or upload—data over broadband is measured in megabits per second (Mbps). For context, here’s an example of the speed you’d need for some common activities.

The Speed You Need

SOURCE: FCC Broadband Speed Guide.

The Federal Communications Commission’s benchmark for “advanced telecommunications capability” for broadband is 25 Mbps for downloads and 3 Mbps for uploads. As of year-end 2016, 92.3 percent of all Americans had access to fixed terrestrial broadband at speeds of 25 Mbps/3 Mbps, up from 89.4 percent in 2014, according to the FCC’s 2018 Broadband Deployment Report. Nonetheless, over 24 million Americans still lacked broadband at those speeds.

“Those who find themselves on the wrong side of the digital divide—including low-income people, those with less formal education, rural populations, the elderly and older workers, and minorities—suffer further economic, social, health, and political disparities resulting from disconnection,” Barton writes.

This divide limits workforce development and advancement potential in rural areas and in low-income areas of cities.

“It's a real problem for people within our District,” said Samantha Evans, a community development advisor at the St. Louis Fed who specializes in workforce development. “Closing the digital divide is so important to the workforce and overall to our communities in the Eighth District.”

Finding Work in a Digital World

Just finding a job without online access is hard. Almost 80 percent of Americans used the Internet in their most recent job search, a Pew Center report showed.

Access to the internet and having digital skills is critical when looking for jobs in a 21^st century global economy, Evans said. Word processing and spreadsheet proficiencies have become a basic requirement for most jobs, even positions that require less education.

“Closing the digital divide is an essential step toward capturing the economic benefits of a skilled workforce,” Barton writes. “Workforce opportunities are hindered when low- and moderate-income (LMI) communities lack broadband access.”

Developing New Skills in a New Economy

This is particularly true in areas where a large number of new jobs are middle skilled jobs—those that require more training than a high school degree, but not necessarily a four-year degree.

“The majority of the jobs in the South are within that middle-skills area, and a high percentage of those jobs have a digital component,” Evans said. “These jobs are going to outgrow other types of employment, particularly in the Southern part of our district. If people don't have access to the necessary training, or even a way to apply for these jobs, they’re at a disadvantage.”

A recent study (PDF) by the St. Louis Fed, the Atlanta Fed and the National Skills Coalition found that more than half of jobs in the South were middle-skills jobs, and there are not enough workers trained to fill these positions.

“These jobs do require some sort of digital knowledge, so it’s imperative for areas to be able to have access to that in order to close this skills gap,” Evans said.

In fact, 82 percent of middle-skill jobs require digital skills, according to a Burning Glass Technologies report. That same report finds that digitally intensive middle-skill jobs pay more than non-digital middle-skill jobs: Baseline digital skills alone pay a 17 percent premium over non-digital roles.

Broadband Drives Business Development

Access to broadband is also necessary to attract business and industry (i.e., jobs) to underserved communities. The digital divide limits business development in low-income areas of cities and in rural areas.

“Broadband infrastructure is a critical component of creating an ecosystem that supports entrepreneurship, enabling businesses to expand market reach and customer bases,” Barton writes in the recently released chapter.

The implication for rural communities is significant because access to high-speed broadband can help businesses thrive and no longer be dependent on physical proximity to a broad customer base, she writes. Having broadband infrastructure has the potential to make geography irrelevant for some types of businesses.

About the initiative: Investing in America’s Workforce is a Federal Reserve System initiative in collaboration with the John J. Heldrich Center for Workforce Development at Rutgers University, the Ray Marshall Center of the Lyndon B. Johnson School at the University of Texas, and the W.E. Upjohn Institute for Employment Research. “Preparing Workers for the Expanding Digital Economy” is a chapter in a new book called Investing in America’s Workforce: Improving Outcomes for Workers and Employers. It officially publishes Nov. 9, 2018.

Additional Resources

• About Community Development at the St. Louis Fed
• On the Economy: Southern States Lacking Middle-Skilled Workers Risk Falling Behind
• On the Economy: Middle-Skill Workers Are in Demand