A conference proceedings paper published in 2000 (P. Conceicao and J. K. Galbraith, 2000), takes a closer look on empirical evidence from OECD Countries in regards to this topic. It is suggested that by looking at traditional economic progress, industrialisation will go hand-in-hand with rising inequality but that they will level out as the developments are normalised. However, they had a different theory – that the data they had gathered did not support this.
The most common assumption is that IT created jobs that were skill-biased, that is it demands people with high skills. Therefore, also higher pay went to the people who had the IT-skills, and this created a social gap. However, plausible at it might seem, it didn’t match with the empirical data on the start of social inequality in, for example, the US. In addition, the productivity, which is also often said to increase with IT, had not in fact grown much at all since the World War 2. What the researchers found was that using a modified Kuznets curve, knowledge-intensive countries that are at the forefront of development, cannot increase their growth by importing more or better equipment, as they are already in the lead. Other countries can “learn” from these countries and create their own markets based on this instead of innovation in every aspect. Diffusion fuels growth. Introducing new technology is less “demanding” socially than inventing brand new technology and hence the growth in these other countries is compatible with decreasing or stagnant inequality. (P. Conceicao and J. K. Galbraith, 2000)
Of course, this data was gathered and analysed in 2000. What has happened in the 16 years since? Were they right?
In America’s technology-centred cities such as Palo Alto, San Francisco and San Jose it might seem like the gap has increased, not stabilized or decreased. This created social disturbances too, for example the fact that buses with commuting Google employees are stoned by the homeless in Silicon Valley. (Rotman, 2014) Vivek Wadhwa, working at Stanford University, says that it’s similar to what he has seen in India, his native country. “Silicon Valley is a look at the future we’re creating and it’s really disturbing.” He mentions that those made rich by the technology boom doesn’t seem to care about the “mess they’re creating”. (Rotman, 2014) The high salaries of tech workers are driving up the housing costs and costs of everything around them, making lower-income families struggling to get by. Not only that, but the tech people are often so isolated from the poor areas that they don’t see the problems they are creating. (McKenzie, 2013)
It’s easy to ask oneself – is the IT world creating technology that eliminate the need for many middle-class jobs? Is the man in the middle not needed anymore? While there are plenty of middle-class jobs available, there is a constantly larger base of unemployed people who are able to do this work and is fighting for it. Therefore, the pay decreases and this further worsens the gap. (Rotman, 2014) In fact, there has been no net increase in jobs in Silicon Valley since 1998 – a smaller workforce is able to generate billions of dollars on its own. (Rotman, 2014, McKenzie, 2013)
Source of image: (Rotman, 2014)
From Thomas Piketty’s book “Capital in the Twenty-First century” (Piketty, 2014), data has been analysed from countries where such historical data could be gathered. This led to the findings that “wage inequality in the US is probably higher than in any other society at any time in the past, anywhere in the world”. (Rotman, 2014, Piketty, 2014) Still, Piketty says, it’s not just the skill-based pay that’s the issue. There’s a lot of corporate governance and above a certain level, there is a problem finding a link between pay and performance.
Erik Brynjolfsson, professor at MIT within management, believes that technology is the main driver in inequality. One aspect is the robots and automation, which eliminates some jobs, creating others behind the scene – but not in a 1:1 measure. However, the biggest factor is that the technology-driven economy favours a small group of successful individuals, amplifying their talent, luck and pay. It has a winner takes it all scenario – in competition, there will always be one clear winner and this will be favoured by the most customers. As he mentions; “why would you use a search engine that is almost as good as Google”? This logic now rules a great deal of the marketplace and benefits the inventors of a new successful product, but not the copies.
Why is this such a significant problem?
Piketty is concerned that our society will once more become like it was in many countries centuries ago – defined by inherited wealth and managed by old-money and wealthy families. Have our democracy come so far only to take a step back?
Not only that, but unequal societies have a bad reputation of social problems. Increased violence, lower school attendance and crime is often a result of societies where it feels “hopeless” or “impossible” to even out the equality. Richard Wilkinson, co-author of “The Spirit Level: Why More Equal Societies Almost Always Do Better” (Wilkinson, Pickett and Cato, 2009), says that while it is easy to think poverty is the culprit of these problems, it is actually the gap between the rich and the poor that is to blame.
What could be the solution?
There is a hope that maybe various companies have realised this trend, and that it is still not too late to reverse the damage. An example: when New United Motor Manufacturing closed down their factory in 2010, thousands of jobs were lost. Now Tesla Motors moved in there and has created, if not thousands, at least 1 thousand new jobs. Moreover, with this, service-jobs will be created to cater for the employed.
I hope that this multiplier effect can be a good factor in the task of evening out the differences. A community called “The Tipping Point” was established in 2005 to help the Bay Area people in need, from the tech community leaders. This community is trying to level out the “frightening” disparity between the rich and the poor in the area. 11 years later, it has done much good, but as we have read in the articles from 2014 – not enough. It’s still a huge problem. (McKenzie, 2013)
These articles were mostly focused on America, but it is also linked to the UK, India and Scandinavia for example; either where the problems are the same (if unequal) or not so much of a problem (if the society is more equal). (Wilkinson, Pickett and Cato, 2009)
My theory is involving the people who are unwittingly part of this new gap. An example is when the Obama campaign for re-election were taking place in 2012. They asked San Francisco computer engineers to donate some free time to help with their tech office and software. The tech leader was afraid the busy geeks would not sign up for charitable work. She was wrong. Hundreds of people signed up, giving up their free time to contribute. She was very confused about this, and asked them why. The answer was mostly the same all across the board: “I always wanted to participate but no one ever gave me anything to do with my skills that mattered”. (McKenzie, 2013)
I think that volunteering classes in computing, coding, supporting for reading for IT exams and certifications, could help. Not necessarily just utilizing the IT-skills of the “rich”, but also making it easier to get involved. Less pressure on signing up for something weekly, more drop-in-support would increase people’s willingness to help, I believe. You have to believe that people would want to help, if they could.
McKenzie, H. (2013) Silicon Valley’s ugly rich-poor gap: What’s the tech world gonna do about it?[Online] Available from: https://pando.com/2013/07/08/silicon-valleys-ugly-rich-poor-gap-whats-the-tech-world-gonna-do-about-it/ (Accessed: 25.09.2016).
- Conceicao and J. K. Galbraith. (2000) ‘Technology and inequality: empirical evidence from a selection of OECD countries’, Anonymous System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on, System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on, (Accessed: 25.09.2016). pp.7 pp. vol.2.
Piketty, T. (2014) Capital in the twenty-first century. Harvard University Press. [google].
Rotman, D. (2014) Technology and Inequality [Online] Available from: https://www.technologyreview.com/s/531726/technology-and-inequality/ (Accessed: 25.09.2016).
Wilkinson, R., Pickett, K. and Cato, M. S. (2009) ‘The spirit level. Why more equal societies almost always do better’,
Illustration top image source: Geralt, Pixabay, CC public domain licence. https://pixabay.com/en/books-bookshelf-computer-science-942485/