Silicon Valley Is America's Wealth Engine, Not Its Job Engine

The New York Times’s Catherine Rampell might have been one of the first to notice that Silicon Valley’s magic isn’t creating an enormous number of jobs. Today’s front-page article cites Redfin’s endless demand for the world’s best engineers, but mostly it focuses on unemployed folks in markets like Corvallis, Oregon, the home of the Beaver and, as the article would have it, once “a hotbed of startup activity.”
The engineers in Rampell’s story aren’t the ones that Redfin has been eagerly recruiting for job openings here and in Seattle. Corvallis and most of the rest of the US are in a different world than the tech centers in the Valley, Seattle, New York or Boston, which now seem more like Las Vegas: oases of fantastic wealth in the center of a desert. The agonies of this recession have hardly affected many technology companies, and we have hardly affected the course of the recession.
Reading Rampell’s statistics about rising unemployment among software engineers, I thought about Paul Graham’s argument that fewer and fewer engineers will have more and more power. Paul argued that the gap between “haves” and “have-nots” will continue to widen not because of social policy but because of the increasing importance in our economy of leverage. Leverage is what allows one very smart person to invent a new financial instrument or technology that widely propagates throughout the world. The more widely that instrument or technology propagates, the more that one smart person is worth.
And now leverage is creating divisions even among engineers, placing such a premium now on the very best that the “haves” are getting smaller in number and wealthier, while the “have-nots” swell in size. Silicon Valley will continue to head in that direction, with startups staying lean so a smaller number of employees can get a larger piece of their own pie.
Efficiency is a good trend. That said, we should stop thinking about the Valley as a panacea for unemployment. Government programs to drive down unemployment should focus on more employment-intensive work like solar panels or roads, or just educate people better so that the next generation can be on the right side of leverage.