{"id":696,"date":"2007-02-09T08:29:35","date_gmt":"2007-02-09T15:29:35","guid":{"rendered":"https:\/\/www.roughtype.com\/wp\/?p=696"},"modified":"2007-02-09T08:29:35","modified_gmt":"2007-02-09T15:29:35","slug":"it_youtube_and","status":"publish","type":"post","link":"https:\/\/www.roughtype.com\/?p=696","title":{"rendered":"IT, YouTube and the wealth gap"},"content":{"rendered":"

Google has reported<\/a>, in a financial filing, that YouTube founders Chad Hurley and Steve Chen each pulled down about a third of a billion dollars in selling their video-sharing company to the search giant. That’s not a bad payday for a year-old, 60-person firm operating out of an office above a pizza joint. Running a digital sharecropping<\/a> operation – I mean, a social-production community – can be pretty lucrative.<\/p>\n

Hurley and Chen came by their windfall fair and square. They built a better mousetrap. But there’s a bigger picture here, too. It’s worth keeping the YouTube phenomenon in mind when reading a speech that Fed Chairman Ben Bernanke gave earlier this week in Omaha. The speech, called The Level and Distribution of Economic Well-Being<\/a>, examined the ever widening gulf between America’s rich and everyone else, a worrying trend that Bernanke’s predecessor, Alan Greenspan, also frequently addressed. Bernanke noted that<\/p>\n

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rising inequality is not a recent development but has been evident for at least three decades, if not longer. The data on the real weekly earnings of full-time wage and salary workers illustrate this pattern. In real terms, the earnings at the 50th percentile of the distribution (which I will refer to as the median wage) rose about 11-1\/2 percent between 1979 and 2006. Over the same period, the wage at the 10th percentile, near the bottom of the wage distribution, rose just 4 percent, while the wage at the 90th percentile, close to the top of the distribution, rose 34 percent … The long-term trend toward greater inequality seen in real wages is also evident in broader measures of financial well-being, such as real household income.<\/p><\/blockquote>\n

If Bernanke had provided data on the 99th percentile of wage earners, the rising inequality would have looked even more pronounced.<\/p>\n

The increasing polarization of wealth has long been attributed to “globalization.” More recently, though, economists like Jagdish Bhagwati have begun to argue<\/a> that the biggest driver of the trend is information technology, which tends to displace lower-skilled jobs and push economic rewards to higher-skilled workers. Bernanke picked up on that theme:<\/p>\n

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Economists have hypothesized that technological advances, such as improvements in information and communications technologies, have raised the productivity of high-skilled workers much more than that of low-skilled workers. High-skilled workers may have enjoyed this advantage because, for example, they may have been better able to make more effective use of computer applications, to operate sophisticated machinery, or to adapt to changes in workplace organization driven by new technologies. If new technologies tend to increase the productivity of highly skilled workers relatively more than that of less-skilled workers – a phenomenon that economists have dubbed “skill-biased technical change” – then market forces will tend to cause the real wages of skilled workers to increase relatively faster. Considerable evidence supports the view that worker skills and advanced technology are complementary. For example, economists have found that industries and firms that spend more on research and development or invest more in information technologies hire relatively more high-skilled workers and spend a relatively larger share of their payrolls on them.<\/p><\/blockquote>\n

Bernanke also noted some anomalies that economists are still struggling to figure out:<\/p>\n

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Although skill-biased technical change appears to be an important cause of the rise in earnings inequality, it does not provide a complete explanation for that trend. The hypothesis cannot explain, for example, why the sharp rise in investment in information technology in the 1990s was not accompanied by a higher rate of increase in wage inequality. Nor can it explain why the wages of workers in the middle of the distribution have grown more slowly in recent years than those of workers at the lower end of the distribution, even though, of the two groups, workers in the middle of the distribution are typically the better educated.<\/p>\n

Another challenge for the hypothesis of skill-biased technical change, at least in its basic formulation, is to explain the especially large wage gains seen at the top of the distribution. A possible link between technological change and the substantial increases in the wages of the best-paid workers is that some advances, such as those that have swept the communications industry, may have contributed to the rise of so-called “superstars” – a small number of the most-gifted individuals in each field who are now better able to apply their talents in what has increasingly become a global marketplace.<\/p><\/blockquote>\n

Bernanke, like Bhagwati, focuses on the displacement of relatively low-skilled jobs by information technology. But if you look at more recent trends, you see that software is becoming increasingly more adept at taking over work that has traditionally required relatively high skills – or even, in YouTube’s case, enabling the creation of sophisticated goods through the large-scale and automated harvesting of free labor. The next wave of “superstars” may be algorithms – and the small number of people that control them.<\/p>\n","protected":false},"excerpt":{"rendered":"

Google has reported, in a financial filing, that YouTube founders Chad Hurley and Steve Chen each pulled down about a third of a billion dollars in selling their video-sharing company to the search giant. That’s not a bad payday for a year-old, 60-person firm operating out of an office above a pizza joint. Running a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-696","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=696"}],"version-history":[{"count":0,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/696\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}