Tuesday, August 28, 2012

Jobless Economic Growth?

Note: This blog took an unofficial summer sabbatical, but I hope to start posting again as the school year gets rolling.

Why does a company like Apple boom at the same time that few jobs are being created?

Over the last few years the U.S. economy has been growing (according to GDP figures) and corporate profits have been solid (record-setting, in Apple's case). But job creation is stagnant. What gives?

One big reason is the spread of automation, outsourcing, and cloud computing (using networks of others' computers to complete tasks). Today's New York Times ran a prominent  story on Amazon's cloud computing services with two rather telling quotes in it.

First was a quote from the founder of a young company called Cue, which scans huge amounts of data and provides personalized services with it. Its founder said,
I have 10 engineers, but without A.W.S. [Amazon Web Services] I guarantee I’d need 60,” said Daniel Gross, Cue’s 20-year-old co-founder. “It just gets cheaper, and cheaper, and cheaper.” He figures Cue spends something under $100,000 a month with Amazon but would spend “probably $2 million to do it ourselves, without the speed and flexibility.”
So his company may become profitable (as will Amazon) but he can employ a fraction of the engineers he once would have needed.

Another quote reinforces the point. This was from the CEO of Good Data, a company that sifts through data to help with sales:
“Before, each company needed at least five people to do this work,” said Roman Stanek, GoodData’s chief executive. “That is 30,000 people. I do it with 180. I don’t know what all those other people will do now, but this isn’t work they can do anymore. It’s a winner-takes-all consolidation.”
From 30,000 to 180. And we wonder why profits and unemployment (even among tech-savvy groups like engineers) are both up at the same time?

No comments:

Post a Comment