Technology and the growing economic divide

Yelp Eat24 customer-support representative Talia Jane recently wrote a heart-wrenching blog about the difficulties she faced in living on her meager salary. So here I am, 25 years old, balancing all sorts of debt and trying to pave a life for myself that doesnt involve crying in the bathtub every week, she wrote. Her situation was so dire that, on one occasion, she could not even come up with the train fare to work. She lived on the junk food that they provide at work.

Her message was addressed to Yelp CEO Jeremy Stoppelman.

What did the company do? It fired her on the spot. Yes, Jane made a mistake in posting this message on Medium rather than sending an e-mail to Stoppleman. But her situation isn’t unique. Sheoutlined the contours of a life that are familiar to many of the people working on the lowermost rungs of technologys corporate ladder.

After a social-media backlash, Stoppleman acknowledged that the cost of living in San Francisco is too high and tweeted that there needs to be lower-cost housing.

But theproblem is more complex than San Franciscos housing costs. The problem is the growing inequality and unfair treatment of workers. And technology is about to make this much worse and create a cauldron of unrest.

Silicon Valley is a microcosm of the problems that lie ahead. Sadly, some of its residents would rather brush away the poverty than face up to its ugly consequences. This was exemplified ina letter that Justin Keller, founder of Commando.io, wrote to San Francisco mayor Ed Lee and police chief Greg Suhr. He complained that the homeless and riff-raff who live in the city are wrecking his ability to have a good time.

The Valleys moguls do not overtly treat as inconveniences to themselves the bitter life trajectories that lead to experiences such as Keller complained of; but they have largely been in denial about the effects of technology. Other than a recent essay by Paul Graham on income inequality, there is little discussion about its negative impacts.

The fact is that automationis already decimating the global manufacturing sector, transforming a reliable mass employer providing middle-class income into a much smaller employer of people possessing higher-level educations and skills.

The growth of the Gig Economyad hoc workis shifting businesses towards the goal of part-time, on-demand employment, with aggressive avoidance of obligations for health insurance and longer-term benefits. And the tech industry has awinner-takes-all nature, which is why only a few giant digital companies compete with each other to dominate the global economy.

A substantial part of the value they capture is concentrated at the center and mostly benefits a few shareholders, executives, and employees. With technology advances and convergence, we are in the middle of a gold rush which is widening inequality.

Already, in Silicon Valley, the Google bus has become a symbol of this inequity. These ultra-luxurious, Wi-Ficonnected buses take workers from the Mission district to the GooglePlex, in Mountain View. The Google Bus is not atypical; most major tech companies offer such transport now. But so divisive are they that in usually liberal San Francisco, activists scream angrily about the buses using city streets and bus stops, completely ignoring the fact that they also take dozens of cars off the roads.

Teslas too have become symbols of the obnoxious techno-eliterather than being celebrated for being environmentally game-changing electric vehicles. In short, theres very little logic to the emotionally charged discussionswhich is the same as what we are seeing at the national level with the presidential primaries.

Intellectuals are trying to build frameworks to understand why the divide, which first opened up in the 1990s, continues to worsen.

Thomas Piketty explained in his bookCapital in the Twenty-First Centurythat the economic inequality gap widens if the rate of return on invested capital is superior to the rate at which the whole economy grows. His proposed response is to redistribute income via progressive taxation.

A competing theory, by an MIT graduate student, holds that much of the wealth inequality can be attributed to real estate and scarcity. Silicon Valley has both: an explosion in wealth for investors and company founders, and a real-estate market constrained by limits on development.

We need to immediately address San Franciscos housing crisis and raise wages for lower-skilled workers.

Both are possible, the region has enough land and the industry has enough wealth. In the longer term we will also need to develop safety nets, retrain workers, and look into the concept of a universal basic income for everyone.

It is time to start a nationwide dialogue on how we can distribute the new prosperity that we are creating with advancing technologies.

About Author

Vivek Wadhwa is Vice President of Innovation and Research at Singularity University; Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University; Director of Research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University; and distinguished visiting scholar, Halle Institute of Global Learning, Emory University. He is author of ”The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent”–which was named by The Economist as a Book of the Year of 2012. Wadhwa oversees the academic programs at Singularity University, which educates a select group of leaders about the exponentially growing technologies that are soon going to change our world. These advances—in fields such as robotics, A.I., computing, synthetic biology, 3D printing, medicine, and nanomaterials—are making it possible for small teams to do what was once possible only for governments and large corporations to do: solve the grand challenges in education, water, food, shelter, health, and security.

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