Don't Blame Apple For Inequality

A blog about business and economics.
Nov. 21 2011 12:36 PM

Don't Blame Apple For Inequality

Apple's Phil Schiller speaks about the iPod Nano during introduction of the new iPhone 4s in October.

Photograph by Kevork Djansezian/Getty Images

Former National Economic Council Chairman Lawrence Summers has a new op-ed out on the hot subject of inequality that I largely agree with, but that repeats a specific line about Kodak and Apple that I've heard from him before and I think is wrong: 

Why has the top 1 percent done so well relative to the rest? The answer lies substantially in changes in technology and in globalization. When George Eastman revolutionized photography, he did very well, and because he needed a large number of Americans to carry out his vision, the city of Rochester, N.Y., had a thriving middle class for two generations. When Steve Jobs revolutionized personal computing, he and Apple shareholders did very well, but those shareholders are all over the world, and a much smaller benefit flowed to middle-class American workers, both because production was outsourced and because the production of computers and software was not terribly labor-intensive.

The idea here is that the technological innovations of yore had broad benefits for the whole community in which they were produced, whereas todays innovations only serve a narrow elite of shareholders and a mass public of manufacturing workers in Shenzhen. The problem with this is that if you look median household income by metro area you'll see that the San Jose MSA, home to Apple, is one of the richest in the country with a median household income of $85,267. That's a median, not a mean, so it's not like one of these things where Larry Page walks into a bar and suddenly the "average" person is a millionaire. The median household income in Silicon Valley is about $30,000 higher than in the country as a whole. Next door in the San Francisco MSA it's $74,000. In Boston it's $70,000. Just like in the days of yore, these centers of high tech entrepreneurship not only make fortunes for company founders, they're breeding grounds for a strong and prosperous middle class.

The real differences from the Kodak era are twofold. One is that we arguably have fewer of these companies. America in 2011 has a few high-tech clusters, including the three names above and also Seattle, Austin, and arguably Washington DC. But we used to have dozens of cutting-edge manufacturing clusters. The other thing is that back in the day if you wanted to take advantage of the growth and prosperity in Rochester, you just had to go move to Rochester. Today, a working class person looking to get ahead by moving to the Bay Area is going to find that it's prohibitively expensive to afford a reasonable place to live. Of America's 15 highest-wage metro areas, all but Minneapolis feature exorbitant housing costs (it's very cold in Minneapolis). That depresses real earnings and discourages efficient population migration. The policy shifts that have pushed housing costs through the roof in prosperous cities have more to do with the contrast than any particular feature of building cameras versus building computers.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

How Tattoo Parlors Became the Barber Shops of Hipster Neighborhoods

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
  News & Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
Buy a Small Business
Oct. 1 2014 11:48 PM Inking the Deal Why tattoo parlors are a great small-business bet.
Oct. 1 2014 6:02 PM Facebook Relaxes Its “Real Name” Policy; Drag Queens Celebrate
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
Brow Beat
Oct. 1 2014 9:39 PM Tom Cruise Dies Over and Over Again in This Edge of Tomorrow Supercut
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?