Inequality Deserves A Political Solution

Technology is not the villain. It is technology's job to enhance productivity, and it has. It is the job of politics to bring about a fairer distribution of that wealth. And it has not. Technology is neutral.

Technology and Inequality
in San Jose, the largest city in the Valley, a camp of homeless people known as the Jungle—reputed to be the largest in the country—has taken root along a creek within walking distance of Adobe’s headquarters and the gleaming, ultramodern city hall. ...... The poverty rate in Santa Clara County, the heart of Silicon Valley, is around 19 percent ..... “You have people begging in the street on University Avenue [Palo Alto’s main street],” says Vivek Wadhwa, a fellow at Stanford University’s Rock Center for Corporate Governance and at Singularity University, an education corporation in Moffett Field with ties to the elites in Silicon Valley. “It’s like what you see in India,” adds Wadhwa, who was born in Delhi. “Silicon Valley is a look at the future we’re creating, and it’s really disturbing.” Many of those made rich by the recent technology boom, he adds, don’t seem to care about “the mess they’re creating.” ....... people are stoning buses transporting Google employees to work from their homes in San Francisco. ...... inflation-adjusted wages for low- and middle-income workers have been flat or declining since the late 1970s in the United States, even as its economy has grown. ..... the richest 1 percent of the population had 34 percent of the accumulated wealth; the top 0.1 percent had some 15 percent. ..... the top 1 percent captured 95 percent of income growth from 2009 to 2012, if capital gains are included. ...... The top 10 percent now accounts for 48 percent of national income; the top 1 percent makes almost 20 percent and the top 0.1 makes nearly 9 percent. ..... Wage inequality in the United States is “probably higher than in any other society at any time in the past, anywhere in the world” ..... About 70 percent of the top 0.1 percent of earners are corporate executives ..... “Above a certain level, it is very hard to find in the data any link between pay and performance.” ...... Privately held wealth in some European countries is now about 500 to 600 percent of annual national income, a level approaching that of the early 1900s. ...... Piketty describes it as the world of Jane Austen, in which people’s lives and fates are determined by their inheritance and not their talents or professional achievements. ...... Income inequality hinders economic opportunity and innovation. ...... the belief that technological progress will lead to “the triumph of human capital over financial capital and real estate, capable managers over fat cat stockholders, and skill over nepotism” is, writes Piketty, “largely illusory.” ...... Brynjolfsson talks of advanced robots and the vast potential of artificial intelligence. While Piketty warns against a return to a world where inherited wealth determines social and political fates, Brynjolfsson worries that a growing share of the workforce could be left behind even as digital technologies increase overall income. ......... Central to Brynjolfsson’s argument is the idea that innovation is rapidly accelerating as trends in computing and networking advance at an exponential rate. Largely as a result of these advances, productivity and GDP continue to increase. But while “the pie is increasing,” he says, not everyone is benefiting. ....... the technology-driven economy greatly favors a small group of successful individuals by amplifying their talent and luck, and dramatically increasing their rewards. ......... As machines increasingly substitute for labor and building a business becomes less capital-intensive—you don’t need a printing plant to produce an online news site, or large investments to create an app—the biggest economic winners will not be those owning conventional capital but, instead, those with the ideas behind innovative new products and successful business models. .......... the small elite that “innovate and create.” ...... demand for highly skilled workers rises, while workers with less education and expertise fall behind. .......... The gap between median earnings for people with a high school diploma and those with a college degree was $17,411 for men and $12,887 for women in 1979; by 2012 it had risen to $34,969 and $23,280. ...... Automation and digital technologies have reduced the need for many production, sales, administrative, and clerical jobs, while demand has increased for low-pay jobs that can’t be automated, such as those in cleaning services and restaurants. The result has been what Autor describes as a “barbell-shaped” job market, with strong demand at the high and low ends and a “hollowing out” of the middle. And despite the increase in demand for workers in service jobs, there is an ample supply of people who need the work and can do these tasks. Hence wages for these jobs dropped throughout much of the 2000s, further worsening income inequality. ....... productivity growth is not in fact accelerating, nor is such growth concentrated in computer-intensive sectors. ..... changes wrought by digital technologies are transforming the economy, but the pace of that change is not necessarily increasing. He says that’s because progress in robotics, artificial intelligence, and such high-profile technologies as Google’s driverless car are happening more slowly than some people may think. ....... “You would be actually pretty hard pressed to find a robot in your day-to-day life” ........ many tasks that people are particularly good at, such as recognizing objects and dealing with suddenly changing environments, will remain difficult or expensive to automate for decades to come. ...... the market for middle-skill jobs may be stabilizing and the earning disparity between low- and high-skill jobs leveling off, albeit “at a very high level.” What’s more, many middle-skill workers could flourish as they increasingly learn to use digital technologies in their jobs. ...... “We have a very skill-driven economy without a very skilled workforce,” Autor says. “If you have the high skills—and that’s a big if—you can make a fortune.” ....... “We used to be a classic middle-class economy. But that’s all gone. There’s no longer a middle class. The economy is bifurcated and there’s nothing in the middle.” ..... “It didn’t happen suddenly, but in 2014 everyone has woken up to it.” ..... Though California’s economy—the world’s eighth-largest—is strong in many sectors, the state has the highest poverty rate in the country ..... there has been no net increase in jobs in Silicon Valley since 1998; digital technologies inevitably mean you can generate billions of dollars from a low employment base. ........ “Piketty says the best predictor of access to universities is parents’ income,” says Miner. “In California, it’s the zip code.” ...... the income gaps between those with different levels of education “account for a good share of the inequality ....... “we know what the solution is. It’s equalizing access to high-quality education. The problem is that we just pay lip service to it.” ..... (Local governments, using property taxes, supply an average of 44 percent of the funding for elementary and secondary schools in the United States, helping to fuel the disparity in educational investments between poor and rich communities.) ...... “If you’re born into a poor neighborhood, you don’t have access to a high-quality preschool, a high-quality primary school, and a high-quality secondary school. And then you’re simply not in position to go to college.” .......... the tax cuts made by Margaret Thatcher and Ronald Reagan in the late 1970s and early 1980s jump-started the growth of income inequality seen today in Britain and the United States. ...... increasingly progressive taxes, including a global wealth tax, could begin to close the economic gap. ........ The most obvious policy recommendations point to education, including, as social scientists are increasingly learning, pre-kindergarten and other early education programs. ....... differences in educational achievement are now associated more closely with family income than they are with factors that have been more important in the past, including race and ethnic background. And researchers have shown that those differences in achievement levels are already set by the time children enter kindergarten. ........ Inequality in education is not only hurting the chances of poor children to get ahead, says David Grusky. It is also affecting the supply of high-skill labor. By stifling opportunities for countless talented individuals, it artificially restricts the potential pool of those with technological expertise. ...... asking whether technology causes inequality is the wrong question. ...... it makes no sense to blame technology, just as it makes no sense to blame the rich. It is our institutions, including but not only our schools, that need to change. The reforms that experts recommend are numerous and varied, ranging from a higher minimum wage to stronger job protections to modifications of our tax policy. ...... we need improved corporate governance and oversight to more closely tie compensation to executive productivity...... an elite class of the super-rich can both warp our political process and erode our sense of fairness.


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