Winners and Losers


Writing for the Weekly Standard, Charlotte Allen goes to Silicon…Chasm.  First she visits the enclaves of the super-rich,  and then the “middle”:

Berkey himself doesn’t live in Atherton. He can’t afford to. He’s a research fellow at Stanford’s Hoover Institution, and his wife, Eleanor Lacey, is general counsel at SurveyMonkey, which occupies Facebook’s old startup quarters in downtown Palo Alto. That makes them part of what is known as the “middle class” of Silicon Valley: two-career couples with family incomes in the low-to-mid six-figure-range. They and their two daughters live in neighboring Menlo Park, in what is essentially a modest 1950s tract house, the kind of flat-roofed, three-bedroom, two-bath, sliding-glass-patio-door, under-2,000-square-foot residences, pleasant but not pretentious, that were built en masse well into the 1970s as cheap starter homes, because back then it was conceivable that there could be such a thing as a cheap starter home in the valley. Berkey says his own house is currently valued at $1.2 million.

Relative economic displacement is thus beginning, however gently,  to bite people who never imagined that this was what their futures would hold.

We then go on a little further:

You can laud this underbelly barrio as vibrant immigrant culture or you can decry it as an instant-slum product of untrammeled illegal border-crossing, but it represents an important fact on the ground: These are the people who earn their livings tending to the needs of the high-tech “creative class” that has made Silicon Valley famous. I could see them on Atherton Avenue, the amanuensis class heading up from Menlo Park in their wee panel trucks and Dodge minivans and their Ford flatbeds fitted out with racks for garden tools among the Bentleys, BMWs, Audis, and Lexuses that are the standard Atherton vehicles. They tend the meticulously clipped lawns, flower beds, hedges, and trees of Atherton (Berkey said that it’s not uncommon for an Atherton sentence to begin, “My arborist .  .  . ”). They clean the houses and the swimming pools, they deliver the catering, they watch the children, and they repair the roofs, the plumbing, the balconies, and the wine cellars of the very affluent and the very busy. You might say that across-the-tracks Menlo Park, along with down-market Latino neighborhoods just like it up and down the peninsula—East Palo Alto, parts of Redwood City, the southern end of San Jose—functions as a kind of oversize servants’ wing.

 And, as night follows day, we get to Tyler Cowen and Average is Over. Keep that terrifying book in mind as you read this:

The big names in tech might be awash in capital and might have made their founders billionaires (New Economy founders typically retain large blocks of their own stock), but they employ surprisingly small numbers of U.S. workers. Google, the valley’s largest employer, has 46,000 people on its payroll. Facebook employs only 4,600, and Twitter, in San Francisco, fewer than 2,000. Apple claims 400,000 people putting together components and creating apps and other extras for its iPhones, iPads, iPods, MacBooks, and desktop computers. Yet only 16,000 of those are on the payroll in Cupertino. Another 31,000 work at Apple operations in Texas and other states, but the vast bulk of manufacturing is outsourced abroad via contractors to China and other cheap-labor purgatories. Yet those 16,000 in Cupertino make Apple the second-largest employer in the valley…

 Furthermore, the oligarchs of Silicon Valley seem intent on keeping the social pyramid stacked in exactly the same layers in which it’s stacked right now. After decades of political quietism during which Silicon Valley entrepreneurs expressed libertarian sentiments but mostly voted Democratic and funded Democratic candidates who shared their elite-class social and political views, Silicon Valley has finally mobilized—for immigration expansion. In April Mark Zuckerberg, with help from Yahoo CEO Marissa Mayer, LinkedIn cofounder Reid Hoffman, and venture capitalist John Doerr, launched, a $25 million-and-counting lobbying group aimed at lawmakers in both political parties., unlike other pro-immigration groups, isn’t much interested in amnesty for illegal immigrants or easier border-crossing for lettuce-pickers. Its chief interest is in expanding the H-1B work visa program for “highly skilled” workers that’s mostly used by tech employers to hire temporary guest-workers from foreign countries, usually from East and South Asia….

 …The anti-H-1B faction has a response to that: statistics. One of them, from an April 24 briefing paper produced by the liberal Economic Policy Institute, is that only one out of every two U.S. college graduates with a degree in engineering or computer and information science is hired into those fields, despite a doubling of the number of homegrown computer-science graduates between 1998 and 2004. Others argue that employers mostly don’t use H-1B workers to fill “best and brightest” jobs, but, rather, relatively low-paying routine programming positions, and that the most avid users of the visas are India-based outsourcing companies that use the visas to provide a few months of U.S. training for their employees, who then return to India.

 Most damning of all is that, despite persistent claims of tech-worker shortages, programmer salaries overall have inched only slightly higher from what they were 20 years ago: from $60,000 a year to about $75,000 a year in 2012 dollars, according to the Economic Policy Institute. Engineers fare somewhat better: The average annual starting salary at top valley employers such as Google is about $100,000, with the median for experienced engineers at about $150,000….

 …Tyler Cowen in Average Is Over … advises the construction of Rio de Janeiro-style shantytowns for the 85 percent of Americans whose livelihoods will be swept away by the New Knowledge Economy he touts—although no shantytowns, please, in Cowen’s own neighborhood in upscale Fairfax County, Virginia! And also, says Cowen:

 “There is one final way in which we will adjust to uneven wage patterns and that is with our tastes. Many of society’s lower earners will reshape their tastes—will have to reshape their tastes—toward cheaper desires. Caviar is an expensive desire and Goya canned beans is a relatively cheap desire. Don’t scoff at the beans: With an income above the national average, I receive more pleasure from the beans, which I cook with freshly ground cumin and rehydrated pureed chilies.”

 Yes! Let them eat beans! Master and servant. Oligarchs and serfs. Two years ago the Occupy movement of progressives raised a battle cry against the “1 percent,” who were supposed to be striped-pants, Republican-voting tycoons lifted from the Monopoly board. What they didn’t know was that the 1 percent actually wear rubber shower sandals, ride bicycles—$20,000 bicycles—and vote Democratic and green, green, green. It was them. It was the future, and it has already arrived in the Silicon Valley.

 And anyone who thinks that the articulate and intelligent people who do not make the cut (and there will be plenty of them) will accept that fate quietly is badly mistaken.

There is a clear strain of social unease, and with it, discontent, that runs through this brilliant piece (written, remember, for a conservative magazine)  by a (conservative)  writer  and that there is is a harbinger of much greater trouble to come.

Quite what to do about all this is, I do not know (a harshly redistributionist tax policy is certainly not the answer), but if the state could stop pursuing policies (such as facilitating mass immigration, unskilled or skilled) that actively make things worse, it would be a start.

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  1. Profile Photo Member

    Fun fact: David Berkey is Victor Davis Hanson’s research assistant. 

    • #1
  2. Profile Photo Inactive

    This article presupposes that our economy will keep on chugging along – which is quite a gamble given the structural problems brought on by proliferate government spending.

    We’ll see…

    • #2
  3. Profile Photo Inactive

    I doubt this sort of bifurcation persists for very long.

    First because I expect explosive political reactions to continue until the elites provide a tolerable modus vivendi for the rest.

    Secondly because I expect the more ambitious of the non-elites to go around the elites and undermine their staid neo-Victorian values.

    Fracking is an example of the small wildcatters going around the environmentalists, big business and big government to do something new and unexpected. In a world of stagnation and economic oligarchy the man on the make will have more incentive to go around the system than to blow it up or join it.

    • #3
  4. Profile Photo Inactive

    I was an engineer in southern California in 1959. Every engineer I knew was planning to get out, either to medical school (as I did), to get an MBA or to law school. Engineers were driving taxis. Nothing has changed.

    • #4
  5. Profile Photo Inactive

    Those who breathe rarified air have much more to lose when the air goes suddenly sour.  One of the advantages of holding a $950/mo. mortgage is that nearly any gainful employment will support it.  I’ve driven a cab to support my mortgage in lean times.  I don’t imagine the same applies to denizens San Francisco.         

    • #5
  6. Profile Photo Member

    Britain had this push to bring in immigrants as they would work the cheap wages because, guess what, they had grown up seeing beans as a luxury.

    It has changed Britain and immigration will change the US.

    • #6
  7. Profile Photo Inactive

    See,thisis why inequality is a bad thing…it leads to these highly stratified social structures where people have no clue what their neighbor’s lives are like.  The enserfed poor, forced to dote on the whims of the mega-rich in order to scratch a living, see the gaudy baubles and rarified air, and start to get resentful…

    I dare anyone to tell me that this isn’t a recipe for social problems. 

    • #7
  8. Profile Photo Member

    I’m not sure I get the point of this post.

    I’ve lived in Silicon Valley for 24 years. It’s absolutely not like anywhere else.

    Here there’s an enormous density of companies that have changed the world, and they’re located just down the block from each other. And this has created a lot of wealth. That shouldn’t be a surprise.

    The price of houses is high because they’re in demand. But isn’t that also the case of penthouses in Manhattan?

    And there’s an incredible level of entrepreneurial energy just about everywhere you go. Bop into a coffee shop an you’ll see people going over business plans and refining pitches.

    Is Silicon Valley a leading indicator? I doubt it. If it were we’d have the equivalent of Googles, Apples, Oracles, and Netscapes popping up all over the country, down the block from each other. But that’s not happening.

    Should the rest of the nation be like Silicon Valley? I don’t thinkso. It works here, but that doesn’t mean it will work anywhere else.

    Although I think the rest of the country could some more entrepreneurial spirit.

    • #8
  9. Profile Photo Member

    I am so happy that I work in automation.  Wiring the machines may be the last blue collar jobs for electricians like me. 

    • #9
  10. Profile Photo Inactive

    Cheap servants for the rich. What’s to dislike?

    • #10
  11. Profile Photo Member

    What’s the point of noting the employee count of Google, Facebook, et al….?  Are we supposed to bemoan the fact that it’s not more?

    As for “only” 1 in 2 engineers and IT grads being hired despite a doubling of graduates that stat is meaningless without something to compare it to.  I suspect relative to the number of policy sci and history majors, 50% is pretty high.  And despite a doubling?  In the Econ 101 i’m familiar with that’s increasing the supply so the fact that it’s still (I suppose, again, there’s no point of reference) at 50% implies demand has increased as well.

    More importantly, I reject the article’s (and by association, Stuttaford’s) static, zero-sum economic model where corporations are the equivalent of pigs and cows with a maximum output and a fixed number of teats for workers to suck off of, the more the better.

    • #11
  12. Profile Photo Inactive

    Steve Jobs said one of the biggest things different about his industry is that the difference between average and the best is so much greater than in any other field: the difference between the best surgeon and the average might be 30%, the difference between the best lawyer and the average might be 90%, but the difference between the best engineers in Silicon Valley and the average engineer turned out by American colleges is hard to quantify, but over 1000%. I am against relaxing immigration rules in general, but in this specific field I think an exception should be made.

    • #12
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