Technology increases income inequality

The tech CEOs of companies like Apple, Microsoft, Amazon, Facebook are convincing the world that they are making the world a better place. But there are those who have started to say that technology, like globalization, is adversely affecting the lives of many people.

The internationally acclaimed British physicist, Stephen Hawking has warned that technology is partly to blame for the rise in income inequality; and, that great technological advances can leave most people “miserably poor.”

He said: “Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine owners successfully lobby against wealth redistribution... so far the trend seems to be toward the second option with technology driving ever-increasing inequality.”

Professor Erik Brynjolfsson of the MIT Sloan School of Management, recently wrote: “My reading of the data is that technology is the main driver of the recent increases in inequality. It is the biggest factor.” The problem is that technology has replaced many blue collar jobs that paid well.

Workers in the manufacturing sector have to switch to other lower paying jobs. In a recent interview, the Honeywell CEO said half of their manufacturing jobs are actually in software and not the physical assembling of parts. But Honeywell is considered as one of the biggest manufacturers in the world.

Even those in the BPO industry have begun to prepare for the time that process automation will result in technologies that will make call center agents or manpower obsolescent. While BPOs will decline, Knowledge Process Outsourcing (KPOs) will increase. But KPOs will need skills at a much higher level than the BPOs.

The rise of populism and the electoral victory of populists like Trump and the Brexit vote are actually partly the result of anger of people at the loss of jobs due to technology. According to Stephen Hawking: “The automation of factories has already decimated jobs in traditional manufacturing and the rise of artificial intelligence is likely to extend this job destruction deep into middle classes, with only the most caring, creative or supervisory roles remaining.”

The loss of jobs in the manufacturing sector due to technology is now beginning to happen in the service sector. Amazon is the largest distribution company in the world. In 2016, the company announced that it now has 45,000 robots across 20 fulfillment centers. A year before, it announced it had 30,000 robots. This means that in a single year, Amazon had increased its robots from 30,000 to 45,000 or a 50 percent increase.

Amazon bought a robotics company called Kiva Systems in 2012. Its robots automate the picking and packing process, can run five miles per hour and haul packages weighing up to 317 kilograms. This has improved the efficiency at their warehouses. But how many human jobs have been lost?

Now Amazon is automating its delivery by using automated drones. Again, how many more human jobs will be lost. Of course, the argument is that technological progress cannot be stopped. But, at the same time, the elites will have to understand that the loss of thousands of blue collar jobs will lead to further income inequality which will lead to greater resentment and will lead to the continuing rise of populism.

Several billionaires have already expressed concern about the rise of income inequality. But so far, while they express concern, no one has any concrete program to address this festering, obscene issue.

Bill Gates, Microsoft founder (estimated net worth: $84.7 billion) said: “High levels of inequality are a problem – messing up economic incentives, tilting democracies in favor of powerful interests, and undercutting the ideal that all people are created equal... Capitalism does not self correct toward greater equality – that is, excess wealth concentration can have a snowball effect if left unchecked.”

Charles Koch, chairman and CEO, Koch Industries ( Estimated net worth $44.1 billion) said: “We’re headed toward a two-tiered society – a society that’s destroying opportunities for the disadvantaged and creating welfare for the rich. Misguided policies are creating a permanent underclass, crippling our economy and corrupting the business community.”

Warren Buffet, Chairman and CEO, Berkshire Hathaway (estimated net worth $64.1 billion) in an interview with Reuters, Buffet expressed a view that was about the United States but is applicable towards this global phenomenon of income inequality. He said: “As the economy gets more specialized...as a natural consequence, a lot of wealth flows to the top. And of course, you expect unequal results in a market economy, very unequal. But you really should not have an economy with over $50,000 per person and have lots of people living in poverty who are willing to work. I mean that makes no sense and we need government policies to correct that.”

Perhaps, the billionaires of the world should listen to a fellow billionaire, entrepreneur and investor Nick Hanauer who sold his Internet advertising company to Microsoft for $6 billion. He told his billionaire friends and associates: “If we do not do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality.”

Stephen Hawking

Stephen William Hawking is probably the most famous living scientist in the world. His life has become the subject of a movie and numerous television specials. He is a theoretical physicist and cosmologist. He is best known for his theoretical prediction that “black holes” in space emit radiation and for his book A Brief History of Time.

He has a rare form of amyotrophic lateral sclerosis (ALS) that has paralyzed him. He communicates using a single cheek muscle attached to a speech generating device.

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