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Notes from the Field

Access to Broadband is Essential for Positive Economic Outcomes

Though the pandemic has put the spotlight on the issue of limited broadband access in some regions, the Federal Reserve System has been studying it for years. Recent analyses explore the relationship between broadband access and labor market outcomes.

This post has been revised slightly to clarify the difference between an employment rate calculated by dividing employment by the population as it was done in this post versus one calculated by dividing employment by the labor force.

Considering that my internship has been an all-virtual experience this summer, I should not have been surprised when the topic of broadband and the digital divide was a reoccurring theme throughout the Federal Reserve Bank of Cleveland’s Policy Summit 2021. During the closing keynote, Cleveland Fed president, Loretta J. Mester, said, “[Broadband] is not only a rural issue, but an urban one, too…digitalization is happening in all parts of the economy.” Access to broadband was a theme in the Cleveland Fed’s summer 2021 Community Issues Survey report, too. Many survey respondents reported that their clients—people in low- and moderate-income communities—had difficulties accessing broadband and computer services, making it difficult to cope with the shift to digital formats resulting from the pandemic. During my time at the Bank, I was reminded time and time again—access to broadband is integral in today’s economy.

Though the pandemic has perhaps forced a spotlight on the topic of broadband, the Federal Reserve System has been studying this topic for years. At Policy Summit 2015, the closing plenary focused on broadband, with several notable speakers sharing insights and experiences from their years working to promote broadband adoption. This discussion highlighted just how important broadband is to positive economic outcomes, as well as the challenges to providing quality broadband services for all segments of the population. Another example comes from the Federal Reserve Bank of Dallas; its 2016 report Closing the Digital Divide: A Framework for Meeting CRA Obligations outlines how investments in broadband and the digital divide can count toward a bank’s Community Reinvestment Act (CRA) requirements. And recently, a Federal Reserve Bank of Philadelphia report found that, within the 25 largest metro areas, prime-age workers (people aged 25–54) who have a broadband-enabled computer participate in the labor force at a much higher rate than prime-age workers who do not.

Interested in this subject and motivated by this work, I compared employment-to-population ratios (share of the population that is employed) for those of prime age that do and do not have access to a broadband-enabled computer at home in urban and rural counties. I found that employment-to-population ratios differed markedly for those with and without broadband in both urban and rural counties. Nationally, those with access to a broadband-enabled computer are employed at a higher rate in urban and rural counties at 11.6 and 10.8 percentage points, respectively. In Ohio, Pennsylvania, and Kentucky, urban counties had larger employment-to-population ratio differences than rural counties, while in West Virginia, employment-to-population ratio differences are larger in rural counties. While not causal, this analysis and previous ones provide insights on the role that broadband access can have in labor market outcomes in both rural and urban communities.

Employment-to-Population Ratio Differences for Prime Age Individuals with and without Access to a Broadband-Enabled Computer at Home, 2019

Urban counties, percentage points Rural counties, percentage points
Nation 11.6 10.8
Ohio 14.9 12.6
Pennsylvania 14.4 10.0
Kentucky 14.0 11.7
West Virginia 10.4 13.2

Source: IPUMS American Community Survey (2019, 5 year).

The 2015 Policy Summit plenary suggested three key areas to focus on in promoting increased broadband access. First, users need to understand how these services will matter in their lives. For instance, this analysis shows that access might mean a better chance of employment. Second, for broadband to be accessible and be adopted on a large scale, it must be affordable to all users. Lastly, the plenary emphasized that a particularly effective avenue for increasing broadband adoption is partnering with established local institutions. A trusted local organization may assist with marketing, training, and implementation of public programs.

The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.