Saturday, July 02, 2005

The so-called "jobless recovery" even in Silicon Valley

Today an article in the NYT entitled Profit, Not Jobs in Silicon Valley points to the frustrating phenomenon for information professionals at all levels of status and wages in Silicon Valley (and perhaps, to a lesser degree, around the US): "demand, sales and profits are rising quickly while job growth continues to stagnate"

In the last three years, profits at the seven largest companies in Silicon Valley by market value have increased by an average of more than 500 percent while Santa Clara County employment has declined to 767,600, from 787,200. During the previous economic recovery, between 1995 and 1997, the county, which is the heart of Silicon Valley, added more than 82,800 jobs.

Changes in technology and business strategy are raising fundamental questions about the future of the valley, the nation's high technology heartland. In part, the change is driven by the very automation that Silicon Valley has largely made possible, allowing companies to create more value with fewer workers.

This question of labor productivity in the high-tech industry complicates the typical narrative for "old economy" industry, where the usual suspects of outsourcing and offshoring are assumed whenever employment stagnation (or wage stagnation) in a local economy is seen along with stable or rising revenues and profits. The article points out that

One key measure, known as value added per employee, rose 3.7 percent in 2004, to $222,000 in economic value per worker. That compares with $85,000 per worker in the rest of the country, according to data reported by Joint Venture Silicon Valley, a regional economic research group.

By a number of other measures, companies are watching profits and sales rise. An analysis published in April by The San Jose Mercury News found that the top 100 public companies in the region had revenues of $336 billion in 2004, an increase of 14 percent from the previous year.

Of course, this is what information technology in the hands of educated labor is supposed to do, right? Raise productivity and profits for those who invest in it, and raise the wages and working conditions of those who use it. But it's interesting to imagine that something like the "deindustrialization" of, say, Detroit -- due simultaneously to such things as increased US worker costs and productivity, foreign firm competition, shifting consumer demand, and reluctance of US employers to invest in places where they've historically supported whole communities when presented with opportunities to instead divest of assets and take higher profits elsewhere -- might be happening to some degree now in Silicon Valley. Post-deindustrialization, anyone?

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