Thank you to David Brownell for suggesting we post this article on our blog.
Apple offers few a bite at employment
Apple employs just 47,000 people in the US, compared to General Motors' 600,000 at its peak. Does that mean the knowledge-based economy is a jobless one?
(Patrick Collinson is money editor of the Guardian and the newspaper's personal finance editor)
Apple is the embodiment of the knowledge-based economy. It is America's biggest stock-market quoted company, and with the advent of the iPad 3 will be adding to the 100m in tablet sales it has already chalked up. Yet it employs just 47,000 people – a tiny fraction of the workforce in its home state.
While California proudly hosts the paragons of the new economy – Google, Intel, eBay and Cisco – it suffers from 11.1% unemployment. Is a knowledge-based economy also a jobless one?
When General Motors was America's biggest company it employed more than 600,000 people. Semi-skilled workers could earn decent wages, with pensions and healthcare benefits to boot. An eco-system of suppliers generated many more jobs and helped build the world's most prosperous middle class.
Does Apple show that a hi-tech new economy enriches just a few and hollows out the rest? It's not the only "designed in America, built in China" tech giant to employ few people on its home turf. Google has just 24,400, and eBay only 17,700.
Apple is mindful of accusations over jobs. Last week it issued a study claiming it has "created or supported" 514,000 jobs in the US. This includes 210,000 jobs connected to the creation of apps, plus 304,000 in such roles as making "planes and trucks that carry our products to our customers". Some economists argue that taking credit for such jobs is stretching Apple's halo towards the limit.
But other economists highlight how in areas of the US where tech dominates, it goes hand-in-hand with huge income disparities. San Jose, home to Silicon Valley, is the second worst city in the US for income inequality, according to a study by the Martin Prosperity Institute, with San Francisco not far behind. Hi-tech brings winner-takes-all wealth to a few, but creates little for the traditional middle class, says the report's author Richard Florida.
"The job market has literally cleaved in two. On one side are high-paying, professional, knowledge and creative jobs that require considerable education and skill. But the number of lower-wage jobs in fields like personal care, retail sales and food service is expanding even faster."
A more benign interpretation focuses on the boom-bust nature of IT in the US. Jobs in California soared during the dotcom bubble between 1997 and 2000, then peeled away.The financial crisis also hit Silicon Valley hard, as companies deferred major capital expenditure on new technology.
But economist Ross DeVol of independent thinktank The Milken Institute is more optimistic than others about a jobs recovery. He says jobs growth in California is running at 2%, compared to 1.2% in the rest of the US. "Hi-tech is still the unique engine of the US economy, and now we are in the midst of an upcycle," he adds. "California has a unique innovation eco-system based around its universities such as Berkeley, Stanford, UCLA, CalTech, USC and Irvine. Yes, it can be a high-cost state, and yes manufacturing jobs go offshore, but the engineers are resident here."
He blames much of California's job woes on the sub-prime mortgage industry "which was virtually headquartered in southern California". When the bust came, the state suffered disproportionately from both the loss of construction and finance jobs.
Today the Bay area around San Francisco remains the beating heart of new business start-ups in the US tech sector. This small corner of one US state attracts, astonishingly, 46% of all the venture capital in the entire US, says DeVol. "If anything, venture capital has become more concentrated in California than before the recession," he says.
The focus of many start-ups is social media, the third "mega trend" driving the hi-tech sector, according to Justin Kistner of consultancy Webtrends. The first wave was about connecting to the web, which saw the rise of AOL; the second was search, which gave birth to Google; the third is social media, with Facebook (number of employees "3,000+" according to the company's website) moving swiftly to total dominance.
"Facebook probably has two to three years before it reaches its peak, and there is probably another five years before it is replaced by the next mega trend," Kistner predicts. Meanwhile, he says, Google is destined to head the way of Microsoft – cash generative but no longer at the forefront of the internet.
At companies in the Bay area, Facebook and social media are the focus of almost every discussion. At salesforce.com, a company using Cloud computing to bring more efficient software and marketing tools for corporates, the talk is of its social media application, called Chatter, creating the next wave of sales.
But at Autodesk, virtually a granddaddy in the local tech sector at 30 years old, visitors are shown the extraordinary technological leap that might, just, eventually lead to the return of manufacturing jobs to the west. Autodesk specialises in design software, largely for architects, builders and engineers. Now it's working to develop 3D printing. If that sounds innocuous, it's not. 3D printing is not about pieces of paper that have a 3D look to them. It's about printers that actually "print" in three dimensions. It means that a printer squirts resins and metals instead of ink to physically produce goods. Autodesk's showroom features items from vases to seat springs made by the printer. It even displays an entire motorbike made of parts "printed" by a 3D printer.
The last generation has seen jobs flee east. Maybe the next will see products made much closer to home. The next manufacturing revolution might well be in your garage.
Patrick Collinson was a guest on a trip organised for the British press by Neptune Investment Management.