You probably have not seen many people walking around the Stanford campus lately wearing t-shirts labeled “Goldman Sachs,” “Barclays” or “Bank of America.” Indeed, this paper has reported on the stigma associated with careers in finance that has sunk into undergraduate culture since the financial crisis and the ensuing recession.
In the national discourse, the term “Wall Street” itself has become a catchall for elite, wealthy Americans capitalists uninterested and out of touch with the experience of the majority. Numerous students – at Stanford and at other elite schools – have sought to persuade their fellow students to steer clear of Wall Street and argue that there are stable and well-paying careers to be found or created as entrepreneurs and public servants that can be far more socially useful than producing and trading complicated financial products on Wall Street.
Stanford students seem to have voted with their feet as well, if the shrinking number of economics majors in the last several years can serve as a rough guide (to those public and development economics specialists, my apologies). As Professor of Law and Business Robert M. Daines has said, “Fewer students right now are pursing [jobs in the financial sector], but I think that is because jobs are scarce and students are sensibly considering other options. As a general rule, it’s probably good to have more people working in the ‘real economy’ – making and selling stuff – than we’ve had in the past decade.”
If the exploding number of computer science majors can serve as another rough guide, Stanford students have, more and more often, found jobs in the lucrative and bustling technology sector. Stanford and Silicon Valley have always been very much intertwined, and never more so than today, considering the number of Stanford students entering the Valley and the number of Stanford-affiliated technology start-ups.
In a sense, we have been choosing Silicon Valley over Wall Street to help produce technologies and services with companies that have revolutionized our day-to-day lives (Google Search, for example) as well as, to a debatable degree, aided actual revolutions (just google “Twitter and the Arab Spring”).
Because of smart phones and search engines that were dreamed up and developed in the Valley, for instance, information is more readily accessible to more people than ever. While the roots of the recent economic crisis, which put millions of Americans out of work, have their origins in our financial system, technology firms have made all our lives better in both visible and tangible ways.
It is heartening that Google – perhaps the most dynamic force in Silicon Valley – subscribes to the corporate slogan of “Don’t be evil.” And it is therefore not surprising that we happily wear our career-fair pickings and employer hand-outs – emblazoned with loud logos and slogans from Google, Facebook, Palantir, Dropbox and the like – without a second thought.
Yet underneath the innovation, the entrepreneurship, and the democratization of information, as well as the hoodies, t-shirts and friendly corporate headquarters, are worrying trends. The nature of technological innovation in recent decades – namely, that which has come out of the Valley – appears to have been a major contributor to the growth of economic inequality in the U.S.
According to an influential study by economists David Autor, Lawrence Katz and Melissa Kearney, the adoption of computer technology has driven the “‘polarization’ of the U.S. labor market, with employment increasingly polarizing into high wage and low-wage jobs at the expense of traditional middle-skill jobs.”
Computers merely complement the work of a researcher at Stanford and can’t yet displace the waiter serving you your food. But they have made a significant dent in employment opportunities in industries such as car manufacturing or accounting. Google needs software engineers as well as janitors, but for the near future, they will not domestically employ individuals in the traditional manufacturing industry.
This is a hugely significant development for many reasons. One is that income inequality can damage equality of opportunity, and, therefore, the potential for social mobility. Hard work in secondary school may not be enough to get into the best universities and graduate programs when, for instance, richer peers have access to outside tutoring or prep classes.
“Economic power tends to beget political power,” writes the economist Daren Acemoglu, and that political power can further distort opportunities and codify wealth divisions. Rampant inequality can often bring about backlash and instability on account of those who feel marginalized by the status quo. As inequality has surged and potential for mobility has stagnated in recent decades, it has taken center stage in political discourse and in President Obama’s agenda.
The premium on education and skills, like software engineering, has continued to grow in recent decades, but the number of people with the relevant education and skills has not grown in proportion – a trend which Katz and the economist Claudia Goldin argue — in their important book, “The Race Between Education and Technology,” — explains the growth in inequality, the shrinking of America’s middle class and the consequent decline in social mobility.
Improving our education system and boosting the number of well-educated and skilled workers, they argue, should help to resolve inequality and allow everyone to reap the benefits of computer innovations.
Nationwide STEM initiatives, as well as smaller but growing projects like CodeHS – started by Stanford students – provide hope that we can achieve this vision. Yet uncertainty remains – it is unclear whether jobs will truly return in large numbers and at such levels of pay. Though Silicon Valley-types often claim that there is a shortage of engineering talent, it is as difficult to imagine firms that need mostly software engineers (Google employs 44,777, Facebook 4,900) employing people on the scale of an industrial firm like General Electric (305,000) as it is to imagine the majority of Americans graduating from college with software engineering skills in the next several years.
It is difficult to argue that Silicon Valley has actively caused inequality. It has not actively taken money from other parts of society with malicious intent. Yet its growth has marked the divergent fates of Americans perhaps better than any other trend.
So, why hasn’t there been an Occupy Google or an Occupy Oracle? Why are we so comfortable wearing Dropbox and Palantir t-shirts when their success, in a sense, symbolizes the growth of inequality?
For one, many of these companies provide services, many of which are free, to ordinary Americans that make their lives better, and given this, most would not begrudge these companies the fruits of their labors. Yet the actual value of these fruits has been notoriously hard to quantify, if not outright questionable, and is still a matter of debate.