BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Study: Tech Firms Create Wealth, Not Jobs

Following
This article is more than 8 years old.

Has the “job” run its course? Although U.S. unemployment remained at 5% for the second straight month, new research at the Oxford Martin School at the University of Oxford suggests that far fewer people will work in traditional jobs in the more digital world of the future--and that anyone who wants to keep working needs to plan for this.

Only .5% of the U.S. labor force was working in new industries that did not exist in 2000 by 2010, and only 1.8% of Silicon Valley’s workers were employed in these new fields, the study found. In some cities, the percentage is even lower. In Grand Rapids, Mich., for instance, it is only .2%.

“Quite a significant slowdown in job creation has taken place,” says Carl Benedikt Frey, who wrote the study, Industrial Renewal in the 21st Century: Evidence from US Cities, with Thor Berger at the Oxford Martin Programme for Technology and Employment.

The study looks at jobs that did not exist 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. Most of the 71 new ‘tech’ jobs are digital ones, in fields such as online auctions, video and audio streaming and web design, but they also include renewable energy and biotech.

“Relative to major corporations of the early computer revolution, the companies leading the digital revolution have created few employment opportunities: while IBM and Dell still employed 431,212 and 108,800 workers respectively, Facebook’s headcount reached only 7,185 in 2013,” the study notes. “Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as the U.S. economy is becoming increasingly digitized.”

So how can you prepare for this future? Getting the right type of education is a part of it. The study found that the cities where the most digital job creation took place had more college educated workers, with the authors concluding “industrial renewal mainly stems from skilled workers being better able to adapt to technological change.” These workers were much more likely to have a STEM degree and they earn, on average, more than twice the U.S. median wage, Frey says.

Choosing where you live carefully may also determine how much opportunity you have. “The location you’re in matters vastly,” says Frey. “Whether you are actually based in Silicon Valley or somewhere in the countryside in the Midwest, it’s going to have huge implications for your chance to get a new job.”

The study found that new digital jobs tend to cluster in cities where the population is highly skilled. Silicon Valley, San Francisco, New York and Washington, D.C., for instance, see more job creation from new industries. This is leading to a concentration of economic activity, and not just for techies. Even if you don’t work at the next Snapchat, the presence of a robust tech industry may lead to work in ancillary businesses that serve these companies and their workers, from restaurants to accounting firms.

“When one new tech job is created, it tends to create five other jobs,” says Frey.

But this trend is also exacerbating disparities in wealth that policymakers will need to address. “If you take the cities of San Francisco and Detroit, you see that computer technology has made a lot more people redundant in Detroit and created a lot more jobs in San Francisco,” says Frey. “What happens then is it has implications for regional inequality. Detroit becomes poorer and San Francisco becomes even richer. That, in turn, has implications for San Francisco. It drives up housing prices and makes it more and more difficult for workers to move to San Francisco, where the jobs are emerging.”

The study didn’t look at the gig economy, but with the less traditional job creation expected in the future, it seems likely that more people will turn to freelance and other forms of flexible work. Not everyone will like this option, but it may well be where the best opportunities of the future are.