Thinking About The Gap: Technology and Inequality

San Jose California, where Silicon Valley is located
San Jose California, where Silicon Valley is located

Article written by Paula Newton and Maria Fonseca

It is hard to exist in the world today without seeing the signs of inequality everywhere. Inequality has been growing so much that all governments and the civil society speak about it with increasing worry, trying to understand its causes, but unable to find solutions. This is an unhappy state of affairs, and the MIT Technology Review argues that the situation is particularly pronounced, a “chasm” even between rich and poor in Silicon Valley in the USA. While salaries in the technology industry for some have risen tremendously – up to $94,000 in 2013 as a median wage (compared with the US average of $53,000), a very large number of jobs in this booming area pay less than a living wage for inhabitants of this area. Rising house prices combined with low wages for many make this a very hard place to live for some.

This has led many to anger, argues the MIT Technology Review. After all, technological advancement is only serving to make the rich richer still, rather than improving lives for all – which they argue is closer to the way things used to work. In some cases, the MIT Technology Review explains,  this has even led to people throwing stones at buses that ship people from San Francisco to the Google offices, their rage is that intense. The problem as many see it is that technology is leading to the destruction of middle class jobs, leaving the gap between rich and poor to rise.  As Russell Hancock says, the president of Joint Venture Silicon Valley, a nonprofit group that promotes regional development, the current situation is puzzling, because in the past, technological improvements would be beneficial to all:

“But when we used to have booms in the tech sector, it would lift all boats. That’s not how it works anymore. And suddenly you’re seeing a backlash and people are upset.”

Actually, as the MIT Technology Review clearly points out that “Economists have long warned that inflation-adjusted wages for low and middle-income workers have been flat or declining since the late 1970s.”

Cover of MIT Review edition of November 2014
Cover of MIT Review edition of November 2014

While the MIT Technology Review discusses the USA specifically, in fact this can also be seen in the UK. This has led to a situation in the United States where the upper 10% now owns 48% of all national income, and the top 1% has 20%. It is argued by MIT Technology Review that this is due to a problem of “supermanagers” where people get extremely high wages in some cases, with the implication being that there is less to go around for everyone else. This issue is particularly pronounced in the IT industry where people become “go to” experts who are critical to holding it all together, and the wages for these people inflates out of control compared to some that get pay rises that do not even cover the increased cost of living.

The challenge of this is not so different if you look back in history to pre-revolution France. At that time most of the wealth was hoarded by just a few people – an elite that also dominated in the political and social arena – while everyone else had very little. When you think about it, the comparison sticks. And this is uncomfortable for many since this is not how we like to perceive the idea of progress. Indeed, a shared view upon the paradigm of progress is that technological progress works to make everything better and a bit easier for everyone. In reality that is not necessarily happening, and instead it appears to be serving just a few very wealthy people.

Is technology provoking inequality ?

The main argument put forward by the MIT Technology Review article is that there is evidence that technology is the single biggest driver of the inequality that we now see around us. As explained in the MIT Technology Review it is argued that this happens because:

“The biggest factor is that the technology-driven economy greatly favours a small group of successful individuals by amplifying their talent and luck.”

Thus, while development is occurring and the “pie is increasing” not everyone gets something from this and in fact in many cases only a few people do. According to academic Erik Brynjolfsson this is akin to a “winner take all” effect that can be seen in society. High tech entrepreneurs such as those that founded the greats like Google, Facebook and Twitter can certainly be seen to be benefitting tremendously while others remain on the streets. Overall, it is a fact experienced by all that this situation has led to the obliteration of the middle class. Development economists would argue that this is a major challenge as the building up of a middle class is seen to be the building block of a more stable economic situation in most developing countries.
The article also mentions Piketty´s recent book Capital in the XXIst century, that resulted from the analysis of an immense quantity of data coming from 250 years, as a way to trace the evolution of inequality since the Industrial revolution. Piketty´s conclusions resulted from a decade of research done collaboratively, and were drawn thorough statistical and historical analysis. But if Piketty atributes the reasons of inequality to inherited wealth, the scholar and economist Erik Brynjolfsson thinks that what is producing inequality is actually innovation and technology.

No one seems to have the complete set of answers, but one thing is certain: it is unsustainable.

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