Technological advances and innovation are key to improving economic growth and have generated incredible advances in quality of life, transforming entire sectors, from manufacturing to media, health to agriculture, and contributing to improved productivity and access to services and supports. However, the benefits of this prosperity are not accruing equally and today’s economy remains one of stark contrasts and uneven playing fields. Highly-skilled tech workers are earning unprecedented salaries and perks, while wages in other occupations are becoming insufficient to cover basic needs. Access to economic opportunities remains uneven with gaps in pay, participation, and access to training and technology. Bringing an equity and inclusion lens into innovation policy, and into how we set up the rules of the market more broadly, is both possible and necessary if we are to build an economy that works for everyone in Canada and reaches its full potential.
In recent years, the goal of making the innovation economy¹ more inclusive has gained traction, with commitments from multiple levels of government to “inclusive growth”, and movements within and outside of the tech industry advocating for “tech for good”, the redistribution of tech-generated wealth through “tech taxes” and other vehicles, and embedding ethics into the design and operations of technology and tech companies.
However, policy conversations on inclusion and innovation still often occur in separate sectors and silos, without sufficient coordination between policy responses to support innovation, to address its negative impacts, and to make the economy more inclusive and equitable. The Brookfield Institute’s workstream on “An Innovative and Inclusive Economy” seeks to bring these conversations together, leading actionable research and policy analysis at the intersection of these goals.
To support this work, we are launching an article series under this theme, inviting leading experts from across the country and abroad to explore a range of topics, identifying areas where action is needed, and outlining potential solutions. The series launches in January and will be published on our website throughout Winter 2019. This Letter from the Editor sets the context for the series, providing an overview of some of the themes that our contributors will explore.
Big Tech and Economic Divides
In some cities, the concentration of innovation economy actors is significantly exacerbating inequality and affordability. In Silicon Valley, home to headquarters for many major tech companies and their high-earning employees, the cost of living is exploding. A family of four earning $117,400 USD now qualifies as low income, 26.8% of the population is food insecure, and the food industry and other lower-paid sectors, including the K-12 education system, are struggling to attract and retain workers, many of whom cannot afford housing within a reasonable commuting distance. For nearly all but the highest paid workers in the region, median earnings have actually declined since 2007 and labor’s share of total output declined overall from 2001 to 2016 and a striking 77% to 53% in computer and electronic products. National studies from the U.S. have linked “innovation intensity” (as measured by patents) to both the rising income share among the top 1% of earners and economic segregation between cities. Even venture capital investment and startup activity is clustering in a handful of neighbourhoods; in 2016, the top 20 neighbourhoods for venture capital in the U.S. accounted for almost one third of total investments. Nine of these neighbourhoods are in San Francisco, five in nearby San Jose, with the rest adjacent to major research universities elsewhere in the country.
Across North America, the competition to host the new Amazon headquarters (HQ2) has prompted debates on the impact of an influx of highly-paid tech workers and the incentives that state and municipal governments offered the company, ranging from billions of dollars in corporate, income, and property tax breaks to renaming a city Amazon and making CEO Jeff Bezos the mayor. In New York City, one of the winning bidders, the land that has been offered to Amazon was originally slated for affordable housing and the HQ2 announcement has already prompted an increase in real estate sales in adjacent neighbourhoods, including to some Amazon employees who appear to have bought pre-announcement. This is not just an American problem. Dublin, home to the European headquarters of a number of international tech companies (including Google, Facebook, Twitter, and Linkedin), became more expensive to live in than Silicon Valley last year and tech companies are offering workers housing subsidies to help them afford rent closer to their offices. Cities such as Bangalore that provide cheap outsourced labour to overseas companies are seeing traffic jams between call centre shift changes and rising property prices.
The Innovation Economy: Operating as Designed
In a recent report, which will be profiled later in our series, researchers at UC Santa Cruz and Working Partnerships USA argue that trends such as these are not accidental or a market failure, but a product of the “rules, incentives, and relationships that have been created over time to form the business models underlying the information economy”.
These include: the high sunk costs of digital product development and low marginal costs of production; technology firms operating in monopoly or near-monopoly markets (whether due to technological advances, the protection of patents, or winner-take-all-markets); the tech industry capturing value generated by the unpaid labour of platform users and of public investments in science and R&D; and business models where profit is disconnected from worker productivity or wages and where venture capitalists, financiers, executives, and an elite group of employees are accruing huge financial gains from the labour of other workers.
Broadening Access to Opportunities in the Innovation Economy
Broadening and diversifying the talent pipeline for high-paid opportunities in the innovation economy is one tactic for making it more inclusive, and an approach that becomes more imperative when you consider pay disparities between occupations and sectors.
In 2016 the average salary for Canada’s over 940,000 tech workers was $75,000, compared to $45,400 for non-tech workers. Even workers who have the skills or abilities to transition into and succeed in the innovation economy may be facing barriers to entry and discrimination in promotion and career progression. Through our research, we have noted significant pay and participation gaps in tech occupations for women, some visible minorities, and First Nations, Métis, and Inuit people. The Canadian Intellectual Property Office reports that in 2015-2016, only 12% of Canadian inventors filing patents were women, despite comprising a much higher proportion of STEM graduates. Studies from the U.S. have found that though excelling at math is a strong predictor of becoming an innovator, low-income third graders who scored in the top 5% are no more likely to become innovators than below-average math students from wealthy families.
Bridging the Digital Divide
Broadening the talent pipeline requires closing gaps in the digital divide and ensuring access to the right training and education. In Canada, high-speed internet is still not universal and some households lack computers and smartphones. Digital skills are becoming increasingly necessary, yet access to education and training that would support this skill development is uneven. Tuition is rising across colleges and universities, and private sector programs, such as coding bootcamps, are financially and geographically out of reach for many learners. Our research on the digital literacy education and training landscape identified significant gaps and barriers to access, including high fees, program requirements for personal devices, a lack of diversity in mentors and instructors, and a shortage of local programs and those designed to help learners transition from introductory classes to more advanced skills.
Inequality in the Innovation Economy
Although technology is enabling flexibility, autonomy, and remote work options for some workers, it is also being used to the detriment of workers’ rights and labour conditions, including surveillance and productivity monitoring, just-in-time scheduling, gamification, and the unbundling of work into tasks with little access to contract security, fair wages, benefits, or the ability to choose clients. Ursula Huws has described these global trends in subcontracting, on-demand services, and micro-task crowd work as creating a contingent workforce “managed by global companies to provide the social reproductive labour for the slightly more privileged members of the working class in order to enable them to work longer hours”. These shifts in the structure of labour also include a host of B2B services and outsourcing, as companies have shed functions such as human resources, janitorial work, and marketing in what David Weill has described as the “fissured workplace”.
A report from the UK Parliament’s Work and Pensions Committee found that some on-demand drivers earned less than one third of the national minimum wage. Researchers working on the Oxford Internet Institute’s international Online Labour Index report that wages for workers in the top six most-used platforms can be as low as $2/hr for data entry and other administrative tasks. Amazon warehouse workers in Europe went on strike recently to protest working conditions and wages, and in the U.S. warehouse workers successfully won an hourly wage increase but lost access to shares and bonuses.
The Ethical Use of Tech
While technology has improved access to education, information, social connection, and economic opportunities, there are growing concerns about how these technologies, and the data they generate, are being used and shared. This includes algorithms and software used to gate-keep access to services and opportunities such as hiring decisions and health insurance eligibility. In some social services and programs meant to support people that are out of work or unable to work, technology has been used to monitor recipients, ensure compliance, and automate eligibility decisions, putting unequal surveillance burdens on low-income individuals, families, and communities.
Building an Inclusive Innovation-Driven Economy
The potential benefits of an innovation-driven economy are high. With the right training programs, workers displaced by technological advances may find new roles in high-growth sectors. Online platforms and digital technology can support local economies, enabling workers and learners who want to stay in their home communities to do so without getting shut out of educational and economic opportunities. Work can become safer, with machines taking over some of the most hazardous jobs. But in order to ensure these benefits are shared, we need to design thoughtful innovation policy that takes economic distribution into account, looking beyond merely broadening access to jobs and training to understanding and addressing inequalities within the innovation economy, and establishing smart parameters for how tech is used that reflect public interest.
Canadian researchers Luann Good Gringrich and Naomi Lightman define “economic exclusion” as “the systematic denial of full access to legitimate means of acquiring economic resources, restricting the volume and functional quality of material, social and cultural capital and reinforcing dispossessed positions and economic divides.” A truly inclusive and more equitable innovation-driven economy will address economic divides, concentrations of wealth and power, and externalities such as housing affordability. It will close the digital divide, ensuring that everyone has access to and the ability to use technology. And it will support workers and communities who are displaced by technological change, across all sectors. To do this well requires responding to the impact of these trends on different demographic groups and geographic regions, with particular attention paid to those who have experienced historic and intergenerational exclusion.
Through this article series, we are excited to bring together contributors with a wide array of perspectives on Canada’s innovation economy. These leading thinkers will provide insight into the tech-hubs at the frontlines of debates on housing affordability and inequality; the international labour force of crowd workers doing online content moderation and training AI for less than minimum wage; the challenges that low-income individuals and households face in accessing the internet and online services; the “tech for good” movement and shifting norms around the neutrality of technology; and the discrimination experienced by some workers seeking entry and advancement in STEM occupations. Together, this series begins to answer questions about the impacts of the innovation economy and identifies approaches to making it more inclusive, more equitable, and of broader benefit to all Canadians.
This series is made possible thanks to the support of the McConnell Foundation and Power Corporation of Canada.
If you are interested in collaborating with us, already exploring these issues, or have a research question you think we should pursue, please contact Nisa.Malli@ryerson.ca.
¹ The term “innovation economy” is used variably to refer narrowly to the tech sector or STEAM fields (science, technology, engineering, art, and math), and as broadly as “economic activity driven by non-manual and non-routine technical skills, scientific knowledge, and intellectual creativity” (Gaetan and Berkes 2018)
For media enquiries, please contact Lianne George, Director of Strategic Communications at the Brookfield Institute for Innovation + Entrepreneurship.