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Tech industry creating wealth, but not jobs
Recent research indicates that, although the tech industry is booming, it isn't producing jobs to replace those in the old industries that Silicon Valley is rendering obsolete. - photo by Daniel Bendtsen
A big question on Wall Street is whether the boom of the technology industry which has fueled growth over the last few years is a financial bubble doomed to burst.

For many investors, their finances hinge on Silicon Valley. Yet even if the tech industry succeeds in bringing perpetual financial gains for its shareholders, that wont necessarily be accompanied by a wave of new jobs.

According to new research from the University of Oxford, the emergence of the new tech sector is naturally causing the obsolescence of older industries, but the new industry is failing to generate the jobs. The studys researchers looked at data from the first decade of the 21st century and found that in 2010, only 0.5 percent of the U.S. population was employed in industries that did not exist in 2000.

Relative to major corporations of the early computer revolution, the companies leading the digital revolution have created few employment opportunities: while IBM and Dell still employed 431,212 and 108,800 workers respectively, Facebooks headcount reached only 7,185 in 2013.

Although IBMs value was nearly three times that of Facebook in 2010, the social network had already eclipsed Dell in its valuation. There have long been concerns that computers could make much of the labor force redundant a fear that is partially validated by this study.

Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as the U.S. economy is becoming increasingly digitized, the authors wrote.

This new tech industry is also more likely to require skilled expertise than the industry that it is replacing. This is concentrating the bulk of new job creation to major cities workers in new industries are substantially better educated and earn more than twice the U.S. median wage, the paper said.

The creative destruction of old industries by the new has historically meant growing pains. Demand for labor is typically squeezed during such transformations, but if Silicon Valley and its peers do not eventually become more liberal employers, it would likely exacerbate the growing inequality of wealth in the U.S.

Michael Strain, a scholar at the American Enterprise Institute, wrote last year in The Washington Post that a tech industry usurption of the American economy could require an expansion of socialist programs, especially wage subsidies.

It could be necessary to keep the peace, he said. We may end up in a world where the federal government pays over half of the salary for workers in some occupations.

A further concern is the disconnect between available jobs in the tech industry and the skills that new workers are developing. Attempting to address this, the White House launched a $100 million initiative earlier this year called TechHire that aims to empower Americans with the skills they need for tech jobs, with grants for technical training, as well as unorthodox methods like coding bootcamps. The White House also formed private partnerships as part of the initiative, with more than 300 employers developing new ways to attract people to its 120,000 open jobs.

According to job website, the tech jobs currently in greatest demand are in software engineering and various forms of programming.

Yet Uday Karmarkar proposed an alternative career path in the Harvard Business Review. He wrote that as jobs in manufacturing continue to decline, American workers will do better in the service sector rather than relying on an uncertain tech industry.