AT&T, T-Mobile job creation claims debunked, to Sprint's delight

Sprint is pointing to new data, debunking AT&T's claim that its T-Mobile acquisition will create tens of thousands of new jobs for Americans.

While AT&T has recited Economic Policy Institute (EPI) claims of job creation likely to follow from the merger, David Neumark, a professor of Economics and director of the Center for Economics and Public Policy at the University of California at Irvine, took a closer look at the EPI data — at Sprint's request — and found it to be the opposite of what will more likely happen.

The EPI analysis claims, wrote Neumark in his report, that:

... the AT&T/T-Mobile merger will create jobs because of increased capital investment is completely unfounded. It is based solely on a claim by AT&T that it will increase its capital expenditures. But it appears to ignore reductions in capital expenditures that T-Mobile would have undertaken, and the strong likelihood that net capital expenditures would decline as a result of the merger. Indeed, AT&T has told the federal government and its investors that the merger would lead to reduced capital expenditures. By EPI’s own logic, the net reduction in capital expenditures would lead to fewer jobs.

Noting the tenuousness of any exercise looking into the future, Neumark noted that AT&T's past track record in such matters is the "most important evidence" pointing toward what's likely to happen, and its previous acquisitions have indeed led to job reductions. And, as in many acquisitions where redundancies are created, AT&T has acknowledged that the merger will "force reductions."

The Communications Workers of America (CWA) has come out in favor of the deal, which Neumark also found good reason for. The CWA, through increased membership, states the report, will likely "benefit current unionized AT&T employees — as long as they do not lose their jobs as part of the merger — because the increase in the percent of the workforce that is organized would likely let them earn a higher union wage premium."

During a call with the media this morning Neumark reiterated that the merger is "good for the CWA a but, in the aggregate, not good for Americans."

The survey follows a day after AT&T promised to bring back 5,000 outsourced call center jobs to the United States, should the deal be approved (CP: AT&T will bring back 5,000 jobs if T-Mobile deal is approved) and U.S. Department of Justice surprised by filing a complaint to block the deal on grounds that it would lessen competition in the market (CP: DOJ lawsuit dashes AT&T's hopes of an easy merger review).

AT&T, in a statement yesterday, expressed surprise (and hurt) regarding the DOJ's move. It has yet to respond publically to the dispute of the EPI claims that, as Neumark wrote, it has been happily parroting.