Robert Reich: So Much Innovation and Profits — So Few Jobs

Monday, 24 Feb 2014 12:04 PM

By Michael Kling

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Facebook's purchase of WhatsApp, a company with 55 employees, for $19 billion highlights the problem with our economy, according University of California, Berkeley, professor Robert Reich.

Although praised for innovation and profitability, companies like WhatsApp and Facebook are behind the trend of increasing inequality, the former Labor Department secretary writes in his blog.

The $19 billion — made up of$12 billion in Facebook shares, $4 billion in cash and $3 billion in restricted stock — will be split among the online messaging service's 55 employees, which includes its two founders.

Editor’s Note:
These 38 Dates Are Key to Bagging $313,038

"The winners here are truly big winners. WhatsApp's 55 employees are now enormously rich. Its two founders are now billionaires."

What about the rest of us, Reich asks.

In the past, valuable companies had large numbers of employees, Reich laments. That's no longer the case. Technology has pushed the "ratio of employees to customers to new lows." WhatsApp has 450 million customers for its 55 employees.

At the same time, jobs for postal workers, call-center operators, telephone installers and other telecommunication workers are disappearing. As tools like the WhatsApp messaging service replace telecommunications workers, Amazon is replacing retail workers, and Google is replacing librarians and encyclopedia editors.

"Unless we figure out how to bring all of them back into line — or spread the gains more widely — our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together."

The Telegraph columnist Jeremy Warner sees a similarly frightening trend in the United Kingdom.

"Watch out for the second machine age — it's about to eat your job, and your income," he declares. "It's also destined to shake systems of government and taxation to their very foundations."

The technology-driven disruption explains the growing income divide, he argues.

"The middle ground, the traditional backbone of the tax system for all advanced economies, is depleting fast."

We're heading to a society with a small group of highly paid technology experts sitting on top masses of unemployed and underemployed ordinary workers. Societies like that rarely last.

New technologies may eventually lead to new jobs in new industries, but history shows us that the transition will be "long, painful and profoundly disruptive," Warner warns.

Editor’s Note: These 38 Dates Are Key to Bagging $313,038

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