Wealth Creation, Not Job Creation is Impact of Tech Industries

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Just as the world welcomes the good news that Mark Zuckerberg is joining many tech giants in promising to give away the bulk of his billions, a study from the Oxford Martin School reveals the downside to Silicon Valley wealth.

The burgeoning tech industry that has generated famous successes of companies like Uber, AirBnB and Facebook, is responsible for just 0.5% of US jobs, ushering in an era of wealth rather than job creation.

Industrial Renewal in the 21st century: evidence from US cities, published in Regional Studies, was written by Dr Carl Benedikt Frey and Thor Berger as part of the Oxford Martin Programme for Technology and Employment. The study examined jobs that did not exist in official classifications in the 20th century, using data on 1.2 million workers in the US and updates of official industry classifications to identify new technology industries.

The study found that:

• Only 0.5% of the US labour force is employed in industries that did not exist in 2000
• Even in Silicon Valley, only 1.8% of workers are employed in new industries
• The majority of the 71 new ‘tech’ jobs relate to the emergence of digital technologies, (such as online auctions, video and audio streaming and web design) but also include renewable energy and biotech
• New jobs cluster in skilled cities, making economic activity increasingly concentrated and contributing to growing regional inequalities

Dr Frey says that the report should herald a warning for policy-makers: “Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as economies become increasingly digitized. Major economies like the US need to think about the implications for lower-skilled workers, to ensure that vast swathes of people don’t get left behind.”

Mr Berger adds: “Our findings show that recent technological progress has favoured skilled workers. People working in new industries are vastly better educated than the average population, often with a STEM degree, and earn almost twice the US median wage” says Mr. Berger.

The United Kingdom is expected to face a similar challenge, says Dr Frey: “While our analysis was based on detailed datasets relating to US industries, the implications are likely to extend to employment in the UK, where new jobs have overwhelmingly clustered in Central London”