category: politics

Are Billion Dollar Software Apps Creating Income Inequality?

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Former Clinton Administration Secretary of Labor, Robert Reich, makes an interesting point in a post this week, entitled: “Inequality, Productivity, and WhatsApp.” By now, most have heard about – and marveled over – Facebook’s acquisition of messaging application “WhatsApp” for a cool $19 billion ($4 billion of which was straight, cold cash.)

Now that you’ve shaken your fist in the air for a few seconds in rabid disappointment about not starting your own software app, let’s move on. As Reich notes, WhatsApp is not a large company, with only 55 employees, and “Whatsapp’s value doesn’t come from making anything. It doesn’t need a large organization to distribute its services or implement its strategy.” While the now-ridiculously-wealthy WhatsApp employees, as well as the app’s everyday users, are, of course, winners, Reich argues: hang on, we are not getting more jobs out of WhatsApp or its buyout. Reich posits:

Meanwhile, the ranks of postal workers, call-center operators, telephone installers, the people who lay and service miles of cable, and the millions of other communication workers, are dwindling — just as retail workers are succumbing to Amazon, office clerks and secretaries to Microsoft, and librarians and encyclopedia editors to Google.

His point is one many of us have pondered, and his concern one many of us share. When Amazon announced future delivery-drones, who among us, while squealing over how cool this seemed, did not also squirm uncomfortably at the thought of delivery drivers’ fate? When Applebee’s announced diners will soon be able to order and pay for meals via tablets at each table, who among us doubted that it is only a matter of years before the waiter or waitress is obsolete? When we visit our local ATM, and marvel at its many functions (I can deposit cash in this thing?), we know it is only a matter of time before bank tellers are a relic of the past. Doctors are safe, you say? Watch the scene in “Prometheus” where a machine performs surgery on a patient. From video rental stores to the post office, entire job categories are evaporating due to software. And, as Reich points out, such positions are not merely replaced by the new, tech industry. The replacements are often a single software program (one design and it’s set!) or very small companies employing but a fraction of those previously carrying out similar tasks.

But whether this inevitable, massive shift in the worldwide labor economy will lead to greater income inequality is the big guess. Reich points out that, while productivity and corporate profits are growing, jobs and wages are not. ‘Tis difficult to argue with Reich’s argument. A software application or program can eliminate thousands of jobs and thousands of Americans’ salaries, even wiping out entire companies or job industries, permanently. The replacement? That wealth and those jobs, originally spread across many, is instead now concentrated in the hands of a few (e.g., the small number of What’s App employees). But what is the solution? Stifling the technology boom? Of course not. Forcing the Silicon Valley billionaires to spread their wealth or invest in new companies? Ridiculous. Heavily taxing these buy-outs? C’mon. Hoping trickle-down economics proves true and they spend their newfound fortune on starting new businesses, employing others, buying more products (sustaining small businesses and jobs with their purchasing power), and thus fueling economic growth? Our only bet.

And it’s a shaky bet.

When the Industrial Revolution pushed out agrarian labor, the world shrugged because it did not displace labor at an alarming rate or amount and the benefits (greater, easier food production, for instance) far outweighed the labor-market upheaval. Now that the software revolution is pushing out every type of labor, however, the world is not shrugging so easily. While we love the benefits these apps provide, we do not want to dwell on thinking where this leads us.

Whether liberal or conservative, this is not an easy situation in which we find ourselves. A “Mad Max” style future, of rampant unemployment once software has eliminated most jobs, is a frightening possibility.

That said, I’m off to message my friends about this and do some Amazon shopping.

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