It was the best of times. It was the worst of times.
-Charles Dickens from A Tale of Two Cities
For people who spend most of their days within a few blocks of tech start-up epicenters such as South Park in San Francisco, University Avenue in Palo Alto or the Flatiron district in New York, last week’s jobs report must have created some cognitive dissonance. After all, we’re in a boom/bubble right? It’s really hard to hire good people isn’t it? But take a moment to step outside the world of high technology and a dramatically different picture emerges of what’s going on in America.
The number of unemployed now eclipses 14 million nationwide. Underemployment is scary too with U-6, the government’s official measure of under-utilization,rising to 16.2% in June from 15.8% in May. But the worst number of them all might be mean duration of employment (the length of time that the average unemployed person has been out of work) which has spiked to 40 weeks. As a Wall Street Journal article this week pointed out, if you factored in those who’ve dropped out of the labor market (and therefore aren’t counted in unemployment numbers), the situation would appear even worse.
Which bring us to an important question: Should Silicon Valley (and other tech clusters throughout the country) care? After all, as long as people in Nebraska or the Central Valley of California have enough money to buy virtual tractors to tend their crops in Farmville, should the tech community be worried about whether those same people are getting paid to do work in the real world? Is what’s best for Silicon Valley also good for America?
On one hand, a thriving tech sector is a beacon of hope for America and perhaps one of a shrinking number of things keeping the country from slipping from its perch as the world’s foremost economic superpower. Fast-growth companies like Facebook, Groupon and Twitter create jobs, attract foreign investment (see Sarah Lacy’s article “How We All Missed Web 2.0′s “Netscape Moment”) and generate tremendous amounts of wealth for employees and shareholders which circulates throughout the economy.
In addition, a host of technology companies enable people around the country to make money. Etsy empowers people anywhere to make money selling handmade goods. AirBnB allows anyone with a house or apartment to make money renting it out. And whether you’re talking about design communities like 99designs, crowdsourcing platforms like CrowdFlower, outsourcing sites like oDesk or an artisan food marketplace like Foodzie, tech-enabled marketplaces allow millions of dollars to flow from consumers to producers every year. (Check out Semil Shah’s article “The P2P Evolution” for more great examples of this in action.)
Furthermore, tech companies are helping to reshape how people train for and ultimately find employment. It’s easier than ever to pick up new skills online with the explosion in blogs, tutorials, screencasts and online video. For a self-motivated individual of at least average intelligence there is a shrinking number of excuses for not possessing in-demand skills. And jobs and recruiting platforms like Branchout, Jobvite, LinkedIn and Monster.com certainly help job seekers to smooth the path to employment.
But there’s a flip side to the argument that this technological innovation is good for the country. Books like A Whole New Mind, The Great Stagnation and The Lights in the Tunnel make arguments that automation and outsourcing are increasingly pushing jobs outside the country and in many cases, doing away with them altogether (you did see that crazy video of the Diapers.com warehouses didn’t you?). The rate of increasing technological innovation certainly produces new jobs but does it produce jobs at a rate great enough to replace those it might be eliminating?
In a similar vein, many of the companies in Silicon Valley are succeeding precisely because they’re disrupting existing players in their industries. Amazon is doing really well right now (almost $10 billion in revenue in the last quarter alone). Borders…not so much. Go iTunes and Spotify. RIP Tower Records. Creative destruction is alive and well but how many people in Silicon Valley are thinking about what happens to that displaced worker at the record store or bookstore?
Maybe something is missing in the Valley and surrounding tech communities and that’s a stronger sense of responsibility to make sure that the vast majority of the country isn’t left behind by all this cool technology that we’re building. In Paul Graham’s essay Great Hackers he points out that the more sophisticated tools become, the greater variation there is in productivity. He writes:
In a low-tech society you don’t see much variation in productivity. If you have a tribe of nomads collecting sticks for a fire, how much more productive is the best stick gatherer going to be than the worst? A factor of two? Whereas when you hand people a complex tool like a computer, the variation in what they can do with it is enormous.
If accumulation of wealth correlates with productivity then, in Graham’s view, increasing variation of wealth might actually be a sign of good things. But could this increase in variation lead to the creation of two almost completely distinct countries in America, one which continues to boom and create enormous wealth for those who reside in it and another for which long-term unemployment and underemployment and the corresponding frustration that accompanies those states becomes the norm?
Megan McArdle wrote a poignant article entitled “Why Unemployment Matters” in last week’s Atlantic where she detailed some of the crushing residual effects of being out of work. It’s worth reading and asking the questions: Can we be doing more about this? Should we even be doing anything about it? The answers to these questions matter a lot. Please share your thoughts in comments.
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