How can we stop automation causing unprecedented inequality?

The Fourth Industrial Revolution will bring robots en masse and the Internet of Things. Can we cope? Image: ICA Plants

Economic inequality and the travails of the American middle class loomed large in the US presidential election.

From Trump’s bombastic attacks on unfair trade deals and the worsening fortunes of the ‘Rust Belt’, to Sanders’ critique of crony capitalism and the disenfranchisement of the worse-off in society, the grievances of the so-called middle class fuelled populist rage.

In the past three decades, Silicon Valley and the San Francisco Bay Area have emerged at the forefront of disruptive innovation and unequalled wealth generation. The region’s billionaires, ranks filled with the likes of Zuckerberg and Musk, have stormed America’s rich list and usurped thrones that once took generations to build.

It isn’t just billionaires being created either. The last two decades of Silicon Valley is widely considered the greatest concentration of legal wealth creation in history.

The Bay Area as a whole, now boasts over 387,000 high tech jobs with an average salary standing at £116,000. San Jose and San Francisco now rank as among the wealthiest cities in the country on per capita terms, standing at £84,973 and £64,963 respectively.

The Bay Area is the world's start-up capital. Image: Paul.H

Technology, disrupted

However, even as the region harnesses the awesome wealth-building power of disruptive technologies, its society is increasingly feeling the strains of inequality. According to a study by the California Budget Centre, San Francisco ranks as the most economically unequal region in the state, with the top one per cent earning 44 times the average income of the bottom 99 per cent.

Income growth has also significantly favoured the wealthy few with the top one per cent in the South Bay experiencing an explosive 248.8 per cent growth in wealth from 1989 to 2013, while the bottom 99 per cent only gaining 23.2 per cent.

Undoubtedly, with living costs skyrocketing and San Francisco’s median home prices hovering at £866,000, requiring a minimum household of income of £205,000 and the requisite deposit just to be able to buy the average home, roughly 90 per cent of the population is priced out of home ownership, a critical vehicle of wealth consolidation.

A wonderful world... if you're rich enough. Image: Kitchen

What this translates to is an increasing struggle for the middle class, and particularly the lower-skilled, to even survive at the lowest threshold in society. San Francisco and San Jose rank as second and fourth on a list of American metros with the smallest middle class, standing at 47.4 per cent and 48.5 per cent respectively.

New York and San Francisco rank as the worst cities in which to live the American dream, according to a study by Redpin – where ‘the American dream’ consists a modest 1,480 square foot home, a car, education for your two children and a comfortable standard of living. The difference between the cost of living expenditures required to live the American dream in these two cities and the median income, came out as negative, at -£72,194.66 and -£29,379.46 respectively.

The study concluded that higher production cities on the coasts tended to harbour greater inequality, while the American Dream was far more attainable in inland cities where the cost of living was lower despite the lack of dynamic wealth building industries.

One of America's most common jobs, under threat. Image: Americantruckgroup

The Revolution of Things

As the fourth industrial revolution is revving up, accelerating the use of robotics, artificial intelligence, autonomous vehicles, big data and the internet of things (IoT) in our daily lives, can the lessons of high tech regions such as the Bay Area teach us how technology may impact society?

This is a question that is in dire need of an answer.

As the election exposed the pain of deindustrialization and the loss of entire manufacturing industries, it is also clear that trade wars and tariffs would not only do little to bring back many of those jobs, but completely misses the trends set to revolutionize the role of technology in industry and our daily lives.

A robot revolution will dramatically replace jobs and perform tasks that humans currently do, from flipping burgers to driving trucks to caring for the elderly. While it is estimated that companies who ship jobs overseas save 65% of labour costs, the savings potential of switching to a robot workforce jumps to 90 per cent. In the next 20 years, it is estimated that 47 per cent of American workers are at risk of losing their jobs to a robot. The size of the robot industry is expected to reach £122billion by 2020 with an increase of productivity of above 30 per cent in many industries – but just with fewer people earning a wage as a result.

The growth of automated vehicles is expected to destroy one of the most common jobs in the United States, and one that provides workers with little formal education a solidly middle class average salary of £34,500 – that of the truck driver. Over 1.7million trucking jobs are likely to be eliminated in the next decade as the technology for autonomous vehicles and increasing connectivity make the position economically obsolete.

In addition, there are another 1.7 million drivers of taxis, buses and delivery vehicles who have already been hurt by sharing technologies such as Uber and Lyft, but may be made obsolete altogether by the growth of robotics and automated driving.

An elderly-care robot gets tested in Japan. Image: YouTube / Plastic Pals

It will be the best of times, it will be the worst of times

As we enter a future where lower-skilled jobs are increasingly difficult to come by, while opportunity is increased astronomically for those who possess the necessary knowledge base, can we use hi-tech regional hubs such as the Bay Area as a bellwether of the direction our society is heading towards?

If so, this proposition should fill us with both great excitement and angst, as the potential for excellence has never soared so high alongside a lurking darkness of extreme social inequality.

Opportunity will come hand in hand with loss.

As the advancement of intelligent robots wipes out entire working-class professions, new ones, focussed on the creation, maintenance and logistics of this new infrastructure will be created. Service jobs requiring human judgment, ingenuity and connection will continue to thrive. But the minimum requirements for individuals to learn a living wage in a world of robots would be far higher than they are now.

However, as technology may make life more competitive, it will also be used to dramatically raise efficiency in industries, which may translate to far lower costs of living. From the construction of homes to the cost of deliveries, the age of robotics could significantly lower the cost of housing and consumer goods.

These possibilities present opportunities to harness technology to bring about tremendous gains in the quality of life for the average person, parallel to what we’ve seen in prior industrial revolutions. The transition however, will also come with growing pains as old industries are wiped out or remade.

San Francisco must learn to 'like' its tech overlords. Image: LPS.1

Education, education, education 

Technological innovation is a neutral variable. It can be used to greatly benefit mankind, or it can also cause tremendous suffering. How we respond to the likely social changes caused by disruptive innovation will be crucial.

The availability and accessibility of education for all citizens will be crucial in giving not only displaced workers, but also future generations the tools to compete effectively in a world where the barriers of entry will be significantly higher than they are now. A special emphasis on the STEM subjects will be crucial.

Additionally, marked changes are necessary to shift our education system from one geared to train workers, to one that creates entrepreneurs. A painfully large number in our society lack a keen understanding of entrepreneurship and how businesses function, while such skillsets tuned to adaptability would be critical to success in societies experiencing massive technological disruption.

Education and a frame of mind geared towards opportunity is key. A society in a fourth industrial world with large populations of undereducated people who lack the wherewithal to compete will inevitably face drastic social inequality and political turmoil.

Using tech cities as a bellwether is again useful.

Ooh look, houses you can't afford! Image: Urban

San Francisco in the past decades has witnessed increasing political tensions over housing, gentrification and class. Passionate battles have ensued over the role of tech companies such as AirBnB over housing, grumbling resentment over Google buses and gentrification, to public protests over evictions.

The percentage of Bay Area residents feeling that the region is headed in the wrong direction jumped to 39 per cent at the end of 2015 compared to just 29 per cent before – even as the region experiences unprecedented wealth creation and robust economic growth.

From the experience of the San Francisco Bay Area, we can see that disruptive technology has the potential to create immense opportunities but also cause widespread pain when the relative living standards of a substantial portion of the population fails to keep up.

The municipal governments of the region have done well to foster environments where start-ups and entrepreneurs can succeed, but have fallen behind in reforming antiquated regulations and policies that have impacted the cost of housing or the ease of transportation that are necessary to keep the American Dream alive for the average citizen.  

If there is one thing we can learn from the history of Silicon Valley it is that innovation will bring about change at a speed and scale far greater than we can imagine.

Tech cities should be regarded as the canaries in the coalmine; valuable testing grounds providing lessons in solutions that ensure disruptive innovation is being harnessed to create healthy and prosperous societies that improve the lives of the majority of its citizens. 

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To see how a city embraces remote work, look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”

Katie Bishop is a freelance writer based in Oxford.