Do Tech Companies Wield Too Much Power?

It's an increasingly important question to ask these days.

I’m a big fan of maxims and technology. It should be no surprise, then, that Melvin Kranzberg’s six laws of technology really speak to me. Perhaps my favorite is, “Technology is neither good nor bad; nor is it neutral.” There have always been – and will always be – winners and losers. Lately I have been wondering if there have been too many of the latter and not enough of the former.

What specifically am I talking about? I’m talking about how there are only a few companies and industries actually creating jobs these days – and how they’re certainly in the driver’s seat. In this post, I’ll take a realistic (as opposed to moralistic) look at the power that technology companies are wielding these days vis-à-vis job creation.

Supply and Demand at Work

Consider the recent announcement by Facebook to create 200 jobs in Austin, Texas. However, there’s a hitch. The company’s U.S. expansion is contingent upon Austin officials approving considerable tax breaks.

Some might question why local governments would essentially bid for jobs. It’s really quite simple: supply and demand. In this case, the demand for jobs is quite high while the supply is not. What’s more, from Austin’s perspective, the costs of lost tax revenues need to be viewed against the self-explanatory benefits of newly created jobs.

Google in North Carolina

With that in mind, it’s hard to blame Facebook or Austin city officials for trying to make a deal. In fact, they are hardly the first parties to work out a sweetheart deal. I can cite a number of recent examples of organizations that have played would-be suitors against each other for the purposes of procuring the lowest corporate taxes.

Perhaps the most publicized recent case involved Google and Research Park, North Carolina. In that very piece, Rick Smith writes about the complicated negotiations that Google executives held with public officials about job creation – and the subsequent public backlash. Smith rightly asks two questions: Should North Carolina government officials accede to Google’s demands? And what’s the alternative?

Technology’s Role in Unemployment

So there’s a fundamental imbalance between the supply and demand of jobs. Let’s not pretend that this has never happened before. However, let’s compare The Great Recession with previous economic crises. What’s different this time? Two things.

First, technology has made jobs more portable, less tied to an individual community. It’s not as if Procter & Gamble in 1932 could make contemporary arguments in an attempt to bargain for tax concessions from local government. Employees had to work near other employees; they weren’t virtual.

Now, my plumber still needs to be local but he is increasingly the exception to the rule. High-tech companies such as Facebook and Google can take their operations virtually anywhere around the globe. What’s more, without getting all political, U.S. tax laws are hardly as employer-friendly as that of other countries that are equally if not more desperate for job creation. Don’t think that tech companies are not acutely aware of these facts when they make local U.S. communities in essence bid for job, a trend that will continue.

Second, technology seems to be destroying jobs much faster than it is creating others. German economist Joseph Schumpeter coined a term for this phenomenon in 1942: creative destruction. No doubt that has endured for both its relevance and its wonderful dichotomy.

Technology has always been a disruptive force, but has it become a net negative with respect to job creation? Journalists certainly come to mind. Also, what about the downward pressure that technology exerts on wages? What about the emergence of “The Disposable Worker.” As Peter Coy, Michelle Conlin and Moira Herbst argue in a recent BusinessWeek article, more and more people are forced to work as independent contractors, absent the benefits of W-2 (read: health benefits, sick time, etc.)/

Business Realities and the Swinging Pendulum

Let’s not kid ourselves here. No economic system is perfect. With capitalism, you have to take the fleas with the dog. Publicly traded corporations such as Google have a fiduciary obligation to their shareholders to maximize profits. As for privately held companies such as Facebook, venture capitalists investing millions of dollars surely want to see a ROI sooner rather than later.

Is the pendulum permanently stuck on the side of employers?

Bottom line: We can’t blame any organization for minimizing expenses and seeking the lowest taxes, the biggest loopholes. Current economic conditions allow companies to be extremely picky with regard to hiring and establishing new offices. The pendulum has swung squarely to their side.

The Downside of the Internet and Globalization

The question becomes: Is the pendulum permanently stuck on the side of employers? In other words, have globalization, the widespread adoption of broadband, and collaborative tools collectively put too much power in the hands of employers? If so, then are employers unjustly wielding their power to extort onerous terms from communities desperate for job creation?

I know enough about economics and history to rarely use the term “permanently.” To me, it’s the acme of foolishness. I’d also argue, however, that it’s equally foolish to take a Pollyanna view of technology. Returning to Kranzberg for a moment, technology always creates winners and losers. For the foreseeable future at least, it appears as if employers will fall into the former group.


Originally published on ReadWrite. Click here to read it there.

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