Are technological advances causing increased poverty and inequality?

  • Didn’t progress used to mean something else?
  • Workers with less expertise and education get left behind
  • The homeless and beggars are the most visible signs of inequality in Silicon Valley
  • “Everyone could live a life of luxurious leisure”

Exponential developments in technology have driven economic growth all over the world but while the proverbial pie is getting bigger, unfortunately it’s not being shared with everyone. We tend to think that technology is the answer to poverty, but in fact, the opposite seems to be true. The disparity between the rich and the rest of the world is larger than ever before. It is not easy to explain the rise in inequality, and it is particularly complicated to determine the role of technology in this, although it is believed to be the main driver of the increasing inequality.

1. Didn’t progress used to mean something else?

In intellectual history, progress meant that advances in science, technology and social organisation improve the human condition. That, as we become more developed technologically, the people benefit from the opportunities of these developments. It used to mean prosperity, greater equality, better education, reduced infant and maternal mortality, longer and healthier lives, increases in people’s options, more freedom, a life free from fear (of disease, nature, hunger, war). Human advancement used to mean “changes that cause people to be better off, without making others worse off.”  And although technology has helped us achieve longer and healthier lives, better education and access to more options in many different ways, it hasn’t done so for everyone. Up until recently, we thought that our skills, training, talents would enable us to prosper. Human capital is what economists call it. But believing that technological advances lead to human capital triumphing over financial capital – people with skills and expertise triumphing over the rich – is an illusion.

A woman caring for plants in greenhouse
Apart from all the benefits technology has brought us, it is also one of the culprits that has lead to stagnating or decreasing incomes for most people.

2. Workers with less expertise and education get left behind

Workers have had to take on lower-paying jobs. The people who generally benefit from technology are the ones with the creativity and expertise to make use of these technological advances. There is and increasing demand and a lot of competition for high-skilled individuals, explaining the widening payment gap between the people with and without college degrees. Over their lifetimes, people with bachelor’s or higher degrees earn about $1 million more than those with only a high school diploma. The economic champions are those who come up with successful new business models and innovative new products and services. Our economy will increasingly be dominated by this small group of innovators and creators.

3. The homeless and beggars are the most visible signs of inequality in Silicon Valley

The global future we are creating is perfectly reflected in Silicon Valley. Technology booms used to uplift everybody but this does not seem to be the case anymore. The rich are getting richer while most others are struggling. The most visible signs of poverty and inequality in Silicon Valley are the homeless and the beggars that line the streets in the region. 2013 saw median income in Silicon Valley reach $95,000, which is in stark comparison to the national median, which was around $54.000. Around a third of jobs in Silicon Valley only pay an hourly rate of $15, which is not enough to support a family in the area in which housing is staggeringly expensive – prices driven by the wealthy few in the area. The heart of Silicon Valley, Santa Clara, has a poverty rate of 20 percent. It’s interesting to see that this hub of technological growth has seen no net increase in the number of jobs since 1998. Yet the 20-25 percent of the population that works in the high-tech industry is growing rich at a staggering rate. Developments in digital technology clearly mean that a low employment base can still generate billions of dollars. Silicon Valley offers a disturbing peek into the future we are creating, and many of those benefitting from the exponential developments in technology don’t seem to be bothered by the resulting inequality.p>

4. “Everyone could live a life of luxurious leisure”

Advanced robotics and the limitless potential of artificial intelligence is already leading to an increasing share of the workforce being left behind, even with digital technology increasing overall income. Robots are eliminating many routine jobs but the biggest factor is that our economy, driven by technology, significantly favours a small group of people by amplifying their talent and dramatically increasing their rewards. Although productivity and GDP continue to increase, only a small group is benefitting. In order to address this inequality and to start closing this economic gap, those gains could, for instance, be redistributed by implementing progressive tax policies such as global wealth taxes.

According to Stephen Hawking, if our technology-produced wealth would be shared, everyone could live a life of luxurious leisure. But if the owners of this machine keep lobbying against wealth distribution, most people will be left miserably poor. Robert Solow, Nobel laureate, professor of economics at the MIT and one of the most influential economists of the last half-century, says, “redistribution is a dirty word in almost any political setting. It’s not something we’re very good at and it’s not about to happen. However, any decent person should find having extreme poverty coexisting in the same society with extreme wealth immoral.”

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