Jobless Data Hides Great Divide in Digital Economy

There’s a lot of confusion out there as our real economy finally begins shifting from talking about the digital economy to actually becoming one. Much of that confusion centers around the current focus on our 9.2% unemployment rate.

Seeing the high jobless rate as a measure of the lingering recession, analysts have been nattering on about whether we are experiencing a double-dip recession. What we’re really experiencing is an epochal economic shift wrought by the long-heralded digital revolution. The jobless rate is a mere symptom, albeit a painful one for many.

That figure is misleading because it hides a growing chasm between a prospering population of digital elites and a struggling population of digital laggards.

To most, talking about the economic impact of computers and the Internet sounds like rehashing old news because the digital age was trumpeted so loudly starting about three decades ago. Yes, most us have been using PCs to send emails for 15 or 20 years and we’ve been downloading music files and sharing information online for almost as long. And of course sizable industries have sprung up to make personal computing devices and provide online services.

Let’s not confuse widespread adoption of conveniences with a first-order reshaping of the way we live, work and play.

Relying on an on-board GPS navigation system to get us to a new market, for example, is a nice convenience, but it’s a far cry from having that new market deliver our groceries to us by early the next morning. Millions of us are doing the first but only a relative handful are doing the latter.

Using our smartphones to book flights for distant sales meetings is one thing; holding international sales meetings in rooms equipped with life-size video-conferencing monitors is something else. One is a mere convenience — which millions of us use – the other is a fundamental shift in the business world that only very companies have adapted, though the capability has existed for some years now.

Many businesses use terminals linked to servers to have employees log and update customer and inventory data, but only few use intelligent systems that communicate on their own with various transaction points to update data automatically.

About seventy percent of us get some of our news online or in digital form, but the majority of us still also read newspapers, magazines and books. Our reluctance to make the leap to a fully-digital lifestyle forces many major publishers to continue spending billions of dollars a year printing paper media while also serving up HTML pages or digital files online, delaying the cost savings and other efficiencies that they hope to realize some happy future day.

I could go on and on about the lag between the early adoption of conveniences made possible by the digital age and actually adjusting our physical habits to fully embrace major first-order changes enabled by the same technology.

For a quarter century after practical autos were invented, the horse-and-buggy industry co-existed with the auto industry until driving became universal enough to obsolete all horse-drawn conveyances.

The same thing is now just beginning to happen with digital technology. The 2008 financial crisis pushed many businesses to make the scary leap to embrace efficient new ways, replacing millions of paper-shufflers, customer handholders and widget assemblers with a fraction of that number of skilled workers equipped with digital automation. That shift has saved billions, powering robust corporate profits and investment in overseas markets and production facilities even as millions of workers have suffered layoffs.

At the same time, the demand is surging for workers trained to produce, implement and operate the digital technologies. Unfortunately, there is very little overlap between the laid-off industrial-age workers and the digital-age workers in short supply. Major tech firms are now offering double-digit salary increases and five-figure signing bonuses to lure skilled workers from other firms. They are also stepping up efforts to recruit tech workers from China, India, the Philippines, Vietnam and even Europe.

The result is the creation of a divide in the U.S. economy. A quarter of American workers — mostly in manufacturing, construction, retail financial services — are suffering layoffs and pay cuts as their functions fall to automation or overseas outsourcing. On the other side of the coin, about ten percent of workers — mostly in tech, engineering and financial analysts — are enjoying boom times as they are wooed by recruiters armed with generous signing incentives. These rising stars of the new digital age are enjoying growing disposable incomes amid falling home prices and flat prices for most consumer goods.

An unfortunate side-effect of this trend is a sharp division between America’s racial minorities. On the one hand, a disproportionate share of the beneficiaries of this shift to a digital economy are Asian Americans — inevitable given our prominence in the science and engineering departments of America’s leading universities. On the other hand, Hispanics and African Americans — the groups who have had the least access to science educations — make up the majority of workers hit hardest by the layoffs.

Between the beginning of 2001 and the end of 2009, the number of employed Asian Americans actually rose 5.5 percent, while the corresponding number for white Americans fell 1.4 percent, African Americans fell 2.1 percent and Hispanics fell 4.7 percent, according to the U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey.

In the third quarter of 2009 the median weekly earnings of Asian Americans was $877.22, compared with $753.19 for whites, $608.33 for African Americans and $527.13 for Hispanics, according to the U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey.

In terms of median household incomes in constant 2008 dollars, Asian Americans reported $65,567, while White Americans reported $55,530, African Americans reported $34,345 and Hispanics reported $37,913, according to U.S. Bureau of the Census, Historical Income Tables.

The various earnings and employment data are contrasted in terms of ethnicity, but they can be seen as being broken down by degree of integration into the digital economy, with Asian Americans being the best integrated due to our overall tendency to focus more on scientific educations.

As more Americans come to understand that the current high jobless rate hides a painful epochal shift from an industrial economy to a digital one, the pessimism will give way to optimism and a sense of direction that can help speed up the change for the rest of America.