All the success of the Silicon Valley start-up scene hasn't done much for the rest of the area's economy, which has a higher than unemployment rate than the national average. Jumping off of today's jobs report, Wired's Marcus Wohlsen notes that the Northern California technology hub has 8.8 percent unemployment, compared to the 8.3 percent national average. Considering the burgeoning start-up culture out there, that doesn't make sense. "Shouldn’t a place as exceptional as Silicon Valley be able to do better than that? Shouldn’t such an engine of economic vitality stand out more in its prosperity compared to the rest of the United States?" he asks. Yes. We too expect more from a culture that wants so bad to make the world a better place. One would think it would start in its own backyard.
But, this technology bubble has remained contained, as we've discussed before. The start-ups invest in more start-ups, which just don't need that many people to operate. Instagram had just four employees, for example. This is called a "hollowing out" of the economy, Wohlsen explains. "Highly skilled, highly educated workers do increasingly well in an increasingly specialized economy driven by knowledge work. Their prosperity feeds demand for low-paying service work. But when tech companies grow, they no longer create the kind of medium-skilled, middle-class jobs they did in the past," he writes.
There is something comforting about this, however: The fall out will hurt less. With Facebook's stock languishing, the suffering will stay relatively contained. There has been talk of the state of California losing billions that it had expected to get from taxing Facebook, which could hurt school budgets, but at least we won't see the massive lay-offs that came with the dot-com bust.