California Forum

If Silicon Valley is the knowledge work capital of the world, why does it have so many lousy jobs?

Supporters of a bill to raise California's minimum wage celebrate last year in Sacramento. Policymakers are struggling to soften the nation’s transition to a knowledge economy, which has left millions of low-skilled and less educated workers behind. (AP Photo/Rich Pedroncelli)
Supporters of a bill to raise California's minimum wage celebrate last year in Sacramento. Policymakers are struggling to soften the nation’s transition to a knowledge economy, which has left millions of low-skilled and less educated workers behind. (AP Photo/Rich Pedroncelli) AP

Over the years, Silicon Valley’s tech elite – Andy Grove of Intel, Eric Schmidt of Google, Mark Zuckerberg of Facebook – have paid close attention to the writings of Peter Drucker.

And why not? Besides being celebrated by BusinessWeek as “the man who invented management,” Drucker coined the term “knowledge worker” more than half a century ago, anticipating the prosperity and ascendance of those who would make a living with the stuff between their ears, and not with their calloused hands.

“Today the assembly line is obsolescent,” Drucker observed with remarkable foresight in “Landmarks of Tomorrow,” his 1959 book. “Automation may well eliminate the unskilled worker from the production floor. But it replaces him by ... men of high skill and judgment: machinists, instrumentation specialists, programmers, engineers, mathematicians, business analysts and so on.”

In the decades to follow, before he died in 2005 at the age of 95, Drucker would hail the virtues – or at least the potential virtues – of this new age. “The knowledge society,” he asserted, “is the first human society where upward mobility is potentially unlimited. Knowledge differs from all other means of production in that it cannot be inherited or bequeathed. It has to be acquired anew by every individual, and everyone starts out with the same total ignorance.”

But Drucker was no utopian. Despite his hopes, he came to recognize that all too many people were being left behind, unable to access the formal education – even community college or a technical-certificate program – that almost any good job now demanded. The assembly line work that you could once obtain with just a high school degree or even less, and thereby reliably carve out a middle-class life, was vanishing fast.

More and more, what was available to the undereducated and unskilled, Drucker realized, was low-wage service work – an unsustainable situation that would, in his words, invariably lead to “increasing social tensions, increasing polarization ... possibly even class war.”

Nowhere can this split be seen more vividly than in Silicon Valley, the knowledge-work capital of the world.

At the top of the economy, according to the Silicon Valley Institute for Regional Studies, are some 335,000 people in highly skilled occupations: professionals (lawyers, doctors, accountants), senior managers and tech employees such as software developers and data scientists. They pull down, on average, more than $120,000 a year.

In the middle are 580,000 librarians, teachers, salespeople, machinists, electricians and so on. They earn about $57,000 a year on average. But here’s the rub: Since 2010, this has been the slowest expanding tier of the labor force. (Slicing the numbers differently, other analyses suggest that the Silicon Valley economy is extremely polarized and that the middle isn’t nearly so big – with just 16 percent of those in the area holding such jobs, while 52 percent are in high-wage positions and 32 percent do low-wage work.)

Meanwhile, the fastest growing segment has been at the bottom, among the 438,000 waiters, child-care aides and others who earn about $30,000 a year – less than a living wage.

Many who fall within this last category are representative of another trend that spans the nation – the fracturing of employment into temp work and “gig jobs.” In this case, they are contract employees at Silicon Valley’s tech giants: cafeteria servers, janitors, security guards, groundskeepers and shuttle-bus drivers. This group, the majority of which is made up of African Americans and Latinos, averages less than $20,000 in earnings.

Tellingly, it’s estimated that more than 70 percent of low-wage workers in the Bay Area have no degree beyond high school.

And finding a better path for their kids is all but impossible. “Not only do low-wage households suffer from current hardships, but living paycheck to paycheck impairs their ability to finance a college education for their children,” notes a 2016 study from Working Partnerships USA, a San Jose-based community organization that is trying to tackle the root causes of inequality and poverty through both public policy and grass-roots organizing.

Derecka Mehrens, the executive director of Working Partnerships USA, is quick to point out that providing more education and training isn’t a silver bullet – especially when many of those with a college diploma have seen their pay stagnate and those with an associate’s degree have actually seen a decline in wages since 2000. “It alone is not enough,” she says.

That’s why she and other experts are calling for a holistic set of strategies that would also improve compensation and conditions for those in low-wage jobs, while simultaneously growing the regional economy with a focus on creating more middle-wage positions.

Yet many of those middle-tier occupations have been reconstituted for a knowledge economy. The days when you could walk into, say, the old Ford plant in Milpitas without much schooling and land a decent job are long gone. Now, “a ‘new middle’ set of jobs” in health care, advanced manufacturing, information technology, transportation, logistics and more often “require some postsecondary education,” Georgetown University’s Harry Holzer remarked in a Brookings Institution report last month.

As a society, we simply have no choice: Both government and the private sector – where training for most workers has become nonexistent – must invest much, much more in developing relevant skills and cultivating in people a true habit of lifelong learning.

As Mehrens stresses, it’s not the only solution; but it’s crucial.

Indeed, there is no single reason that so many workers in Silicon Valley – and across the country – have been beset over the past 40 years by unstable jobs, flat paychecks and the erosion of their health and retirement benefits. Culprits abound: the steady deployment of labor-saving technology; globalization and heightened competition from low-wage countries; the fading influence of unions.

All the while, these forces have been fueled by corporate America’s obsession with “maximizing shareholder value,” which has explicitly elevated the wants of investors over the needs of employees.

But in many respects, our nation’s most basic problem is this: We live in a knowledge age, and we are not preparing folks accordingly.

“The knowledge society is a society in which many more people than ever before can be successful,” Peter Drucker wrote. “But it is therefore, by definition, also a society in which many more people than ever before can fail.”

And you can be sure that they will continue to do so – unless we make a concerted effort to step up and actually do something about it.

Rick Wartzman is director of the KH Moon Center for a Functioning Society at the Drucker Institute, a part of Claremont Graduate University. His new book is “The End of Loyalty: The Rise and Fall of Good Jobs in America.” He can be reached at @RWartzman on Twitter or Rick.Wartzman@cgu.edu.

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