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Tech Is Splitting the U.S. Work Force in Two

(Nytimes.com)

It’s been pointed out that at its 1988 peak Kodak employed 145,000 people and had a market cap of $30B, while WhatsApp employed only 55 people when it sold to Facebook for $19B. That’s an extreme example of the disproportionate shift in wealth within tech, but it’s symbolic of a much larger problem. Homelessness is a crisis in tech hotbeds like the Bay Area, Phoenix and Austin, where senior software engineers easily command salaries of $300,000 – $400,000. A talented friend of mine who recently spent a year at Yelp in SF expressed shock to a colleague at the scale of the problem and was advised that “it takes about 1-2 months to no longer really see the homeless”.

Of course this is not just happening in the software hotbeds of North America. Vast swaths of the manufacturing industry that effectively created a middle class in the post-war period are now being gutted by a number of factors – globalization and automation being the primary causes. And it’s not for a lack of jobs – employment is actually at record highs – it’s the low pay, tenuous employment and exorbitant cost of housing.

The forecast of an America where robots do all the work while humans live off some yet-to-be-invented welfare program may be a Silicon Valley pipe dream. But automation is changing the nature of work, flushing workers without a college degree out of productive industries, like manufacturing and high-tech services, and into tasks with meager wages and no prospect for advancement.

Automation is splitting the American labor force into two worlds. There is a small island of highly educated professionals making good wages at corporations like Intel or Boeing, which reap hundreds of thousands of dollars in profit per employee. That island sits in the middle of a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low.

Chart: The New York Times | Sources: Bureau of Labor Statistics; Brookings (productivity)

The next decade will be a defining moment in our history. AI, automation and technology in general are rapidly bifurcating society into haves and have-nots. The industrial revolution of the late 1700’s sparked a societal move from a mostly self-sustaining agrarian society to a mostly capitalist urban one, creating the original titans of industry and a lot of severe poverty along the way. It took about a hundred years to implement the mechanisms to create a more equitable society (specifically post-war social welfare and housing and labour reforms). The current shift, observed through increasing wealth inequality, is arguable deeper, and unquestionably much more rapid.

History has shown these patterns do have a breaking point, and while ours might look a lot more like Elysium than Les Misérables, let’s hope we can restore some balance before we get there.

February 8, 2019 — TWG