Cybercrimes aren't just costing U.S. businesses billions of dollars each year, they're also potentially costing hundreds of thousands of employees their jobs, a new study finds.
Research from security solutions provider McAfee estimates between $100 billion and $500 billion in annual loss to the U.S. economy and more than half a million U.S. jobs lost as a result of malicious cyberactivity.
The study attributes the lost jobs to a number of factors, including the fact that cybercrimes and cyberespionage reduces the comparative advantage of research, education and know-how, making it harder for victim nations to produce goods and services.
Analysis by the Commerce Department’s International Trade Administration found that in 2011, $1 billion in exports equaled 5,080 jobs. Based on those numbers, the study's conservative estimate of $100 billion in losses would translate into 508,000 lost jobs.
James Lewis, director and senior fellow of the Technology and Public Policy Program at the Center for Strategic and International Studies (CSIS) and one of the study's co-authors, said as with other estimates in the research, the raw numbers might tell only part of the story.
"The effect of the net loss of jobs could be small, but if a good portion of these jobs were high-end manufacturing jobs that moved overseas because of intellectual property losses, the effect could be wide- ranging," Lewis said.
The purpose of the study was to put a more accurate number on cyberactivity's effect on the economy. To help measure the real loss from cyberattacks, economists, intellectual property experts and security researchers examined several different factors, including the loss of intellectual property and the direct financial losses that are a result of cybercrimes.
That, however, is just a portion of where the total losses are coming from. Opportunity costs, damage to brand and reputation, consumer losses from fraud, the opportunity costs of service disruptions, "cleaning up" after cyberincidents and the cost of increased spending on cybersecurity are all taking their toll on the economy, researchers say.
Mike Fey, executive vice president and chief technology officer at McAfee, believes the study is the first to use actual economic modeling to build out the figures for the losses attributable to malicious cyberactivity.
"Other estimates have been bandied about for years, but no one has put any rigor behind the effort," Fey said. "As policymakers, business leaders and others struggle to get their arms around why cybersecurity matters, they need solid information on which to base their actions."
Based on their study, researchers said they now plan to further examine the impact cybercrime has the economy by looking at the ramifications of cybersecurity losses on the pace of innovation, the flow of trade and the social costs associated with crime and job loss.
The study, “Estimating the Cost of Cybercrime and Cyber Espionage," was co-authored by Stewart Baker of Steptoe & Johnson LLP.