Author Touts Cell Phones as Vital Economic Resource for the Poor

Citing strong evidence that cell phones play a critical role in the economic prospects of low-income Americans, a visiting scholar at the Massachusetts Institute of Technology, in association with a Washington think tank, reports that wider cell phone use could lead to income gains for the poor from $2.9 billion to $11 billion annually by simply allowing the poorest American households to be in touch with potential employers and other job resources.

In “Cell Phones Provide Significant Economic Gains for Low-Income American Households,” Nicholas P. Sullivan, a visiting scholar at the MIT Legatum Center for Development and Entrepreneurship, contends that providing cell phones to the 38 percent, or roughly 17 million families, of the poorest American households now without them could lead to a significant income increase for those families, which include millions of African-Americans, Hispanics and seniors.

“Americans, and particularly those in lower-income groups, are deriving clear economic benefits — even though low-income groups are far less likely to own a cell phone,” according to the report, which was released Wednesday by the New Millennium Research Council, a Washington organization specializing in telecommunications and technology policy.

“This report is the first in the United States to zero in on the potential economic and public safety benefits in the bottom two quintiles of household incomes, those making less than $35,000 a year,” Sullivan says.

Sullivan is the author of You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy, a book published in 2007 that led to the study of cell phone use among the U.S. poor. He says the U.S. cell phone study idea arose after he received numerous questions on whether cell phone ownership helps create opportunities for poor Americans in the way it has done so for the poor in developing nations.

“Millions of Americans who are most in need are missing out today on the economic gains that other Americans attribute to their cell phones. The overall conclusion in this study is that the cell phone is extremely important to Americans for personal safety, and a huge boon to an individual’s potential economic productivity and earning power,” Sullivan notes.

Sullivan says that to “explore the potential of cell phones as an income tool in the U.S. and also look at the extent to which cell phones function as security blankets in emergency and crime situations” he relied upon two major surveys: a statistically large online sampling of 110,000 prepaid TracFone users and a scientific survey by the Opinion Research Corporation of 1,005 Americans. The report revealed that among those who do not own a cell phone, 37 percent are retired, 29 percent have a high school education or less, 38 percent make less than $35,000 annually, and 30 percent are unemployed.

Citing the online survey of 110,000 prepaid cell phone customers, the Sullivan report pointed out that among the 30 percent identified as belonging to a working household they attributed an annual income gain of $2,361 to their cell phone. Based on the TracFone data, if non-cell phone households in the lowest income brackets could obtain phones and earn additional income, the total gain would result in $11.1 billion additional revenue, according to the report.

John Breyault, the director of the New Millennium Research Council, says the Sullivan report has “major implications for federal and state Lifeline and Link-up programs providing subsidized phone service to eligible consumers.”

“These programs reach very few of those that they are intended to help and have a strong ‘last-century’ bias in favor of landline phone service,” Breyault observes.

Though the NMRC is promoting the Sullivan study, neither the organization nor MIT sponsored the study, officials say. 

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