Net Results Karlin LillingtonThe New York Times has an interesting piece this week about how Silicon Valley is on the rebound, but curiously, it is not in terms of the number of jobs in the technology industry.
Company profits are up, and more venture funding is flowing into Valley companies notes the Times - $7.4 billion went into 724 Silicon Valley companies in 2004, up 17 per cent from 2003, according to the National Venture Capital Association (keep in mind that $34 billion went into Valley companies in 2000, the peak of the economic boom).
But this is the relevant bit in the story: "In the last three years, profits at the seven largest companies in Silicon Valley by market value have increased by an average of more than 500 per cent while Santa Clara County employment has declined to 767,600 from 787,200. During the previous economic recovery, between 1995 and 1997, the county, which is the heart of Silicon Valley, added more than 82,800 jobs."
Why this odd situation? Well, greater automation across the sector is cited, as is the tendency to move lower-level jobs outside the Valley to cheaper jurisdictions.
These can range from other states with far lower costs, to neighbouring Canada, where a weak currency helps boost the bottom line, and further afield: Europe, India, China.
Companies are also beginning to move divisions to locations where their customers are based rather than developing or selling products from abroad.
Stephen Levy, director for the Center for the Continuing Study of the California Economy, describes what is happening as "a high-productivity jobless recovery".
Still, has productivity increased so much in the past five years that profits can grow at these high rates even as job numbers remain stagnant?
I think the figures bear further examination and more context. First of all, measuring profit growth over the past three years means starting from the ultra low point of the crash as the point of comparison.
Declines were so severe for so many companies in 2001 and 2002 that a solid recovery alone would pump up the profit figures. New workers would not really be needed to generate those rebound profits, nor vastly increased productivity.
Indeed productivity in new-style knowledge jobs is extremely difficult to measure anyway - how to do it has been the subject of much study, and is still poorly understood - so I am not sure how a productivity rise has been calculated.
If jobs aren't on the increase in the Valley, it doesn't necessarily follow that fewer workers labouring more productively are contributing towards the growth in profits.
After all, one reason cited for the lacklustre jobs figures in the Valley is that the workforce is located elsewhere, either through outsourcing or relocating parts of companies to other areas. That speaks more of a redistribution of labour than any steep rise in Valley employee productivity.
Ireland has benefited from these relocations and outsourcings from the Valley and other parts of the US. Many of the multinationals in this State are here in order to get certain operations closer to the actual customer base - Dell, Apple, IBM and Oracle being cases in point. Others find that even this high-cost environment competes well with the very high costs of Silicon Valley.
These are some of the reasons those same companies are not likely to move away, and failed to budge even during the harsh start of the downturn, when many commentators, from economists to union officials, predicted the tech sector would be particularly volatile and was a poor choice on which to anchor an economy.
Five years later the State continues to hum along quite nicely, thank you, with several of those volatile tech companies right at the heart of our continued economic health, and the sector as a whole remaining one of our economy's anchor tenants.
As another New York Times article by author and columnist Thomas Friedman recently pointed out, Ireland is now the second wealthiest state in Europe after Luxembourg: "Yes, the country that for hundreds of years was best known for emigration, tragic poets, famines, civil wars and leprechauns today has a per capita GDP higher than that of Germany, France and Britain. How Ireland went from the sick man of Europe to the rich man in less than a generation is an amazing story."
It is a story closely connected to the expansion of the information and communications technology sector here.
It is also a story supported by figures which bear a little bit of scrutiny and context, just as with Silicon Valley's jobs situation.
Higher GDP than Germany, France and Britain? Maybe, but you can't even begin to compare our public transportation, our health services, our arts programmes, our level of literacy with those countries.
Still, there is indeed much to be amazed by, and sometimes, it is nice to be reminded - by somebody looking in from the outside - that Ireland isn't just about traffic jams, nursing home crises and tribunals.
klillington@irish-times.ie weblog: http://weblog.techno-culture.com
