It’s often amusing that we need a study to tell us something that seems painfully obvious, but indeed, sometimes that’s just what we need.
As you may have heard, Sprint today announced a study that debunks AT&T’s claims about jobs in a post-merger environment. The study, commissioned by Sprint, was done by David Neumark, professor of Economics and director of the Center for Economics and Public Policy at the University of California at Irvine. The study looks closely at one done by the Economic Policy Institute (EPI) back in May that was, according to AT&T, commissioned by the Communications Workers of America (CWA). It’s been frequently cited by CWA and AT&T, which says a merger with T-Mobile USA would result in “tens of thousands” of new jobs.
AT&T says Neumark’s study is “woefully flawed” with no factual underpinnings. I don’t buy a lot of the Department of Justice’s arguments about why the merger should be denied, but I do have a quibble with the purported job numbers that AT&T and CWA are tossing out there. Neumark’s study sounds a lot more plausible, although I am not an economist and certainly no math wiz. (But really, why is this so hard to figure out?)
A few weeks ago, I asked an AT&T spokeswoman about the post-merger job estimates, and she referred to some of AT&T’s prior statements, such as: Where some jobs serving duplicative functions are eliminated, AT&T will rely mostly on natural attrition. She also referred me to EPI about its study, so I talked with someone over there as well. They did an admirable job of explaining things, but I came away with no clear understanding of how you really get to 55,000 to 96,000 “job-years” based on AT&T’s planned investment of $8 billion over seven years.
I understand the estimate includes both direct jobs within the primary industries, supplier jobs and induced jobs created as incomes earned by newly hired workers are spent back into the economy. But I still can’t make the leap and conclude that after several or seven years, the combined entity would employ more people than the two separate companies employ today, or would employ in the future if they were left to go it on their own. That just doesn’t ring true, even if you figure that more people are cutting the cord and more aggressively expanding LTE would generate more work. Maybe you assume T-Mobile is going down the tubes without the merger, but that’s hardly a sure thing.
At the same time, companies are increasing automation, implementing more self-care for customer service and doing other things that generally fall into the category of trying to operate more efficiently.
Neumark points out that while data implies the most likely result is fewer jobs after an AT&T/T-Mobile merger, “the future need not be the same as the past.” Events transpire and just because most mergers result in job reductions doesn’t mean you should automatically assume the next one will as well. But Neumark refers to some of those “synergies” that typically result with mergers and that AT&T has mentioned in terms of cost savings from network efficiencies, and the potential gains, once again, sound like the types that come through reduced employment.
Prior to the DOJ’s decision yesterday, AT&T said if the merger goes through, it would bring back 5,000 wireless call center jobs to the United States that were outsourced to other countries, and it deserves props for that. AT&T also committed that the merger would not result in any job losses for U.S.-based wireless call center employees of T-Mobile USA or AT&T who are on the payroll when the merger is due to close.
Whereas a week ago, I would have said the odds are the merger would be approved, the DOJ’s announcement turns that completely around. Jobs are only one part of the deal, but jobs are what people care about (that’s what I believe, but I didn’t do a study on that.) If AT&T can show the merger will result in many more jobs – and present some real, understandable evidence aside from the EPI study – that would be a huge coup. I just don’t know how you keep two sets of finance departments, marketing teams, retail establishments, et cetera, post-merger and still call it “synergistic” to Wall Street. But hey, when pigs fly.
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