When you emerge from the chaotic and surprisingly small San Francisco International Airport and drive through the ribbon-like freeway, the giant billboards on either side carry names of companies such as Inktomi and Webvan, many of which did not exist a few years ago. Between the gaps, you see the bricks and mortar of the net economy: futuristic buildings, all glass and chrome, belonging to some of the hottest names in the hi-tech world today – for example, Oracle Systems, Unisys and Sun Microsystems.
San Francisco is the home of the new economy. This is where young men and women from all over the world land, clad in jeans and T-shirts, eager to become the latter-day 49ers (the original gold-diggers who came during the 1840s California gold rush).
Their wealth is powered by venture capital firms and initial public offerings. During the relentless surge in stock valuations, analysts were valuing ideas at unimaginable prices, making a company that might offer a smarter way to harvest mailing-lists on the web seem more valuable than, say, a Fortune 500 company that makes cars.
The premise of the net economy is simple: you stay at home or at your desk, click a mouse here, key in a few details there, and you’ll be able to download movies painlessly, buy books and music easily, order groceries effortlessly, study courses at your convenience, as well as find mates, get rich and pursue life, liberty and happiness. That’s the American way.
The problem is, the industry that is supposed to transform the way we live has an ugly underbelly. For every windsurfing net millionaire (and despite the recent slump, there are still a few), there are dozens of blue-collar workers, struggling to make ends meet. They have no job security, limited insurance cover and few opportunities to improve their skills in a manufacturing set-up that is obsessed by speed, youth and specialisation.
Bill Gates has decreed that business must move at the speed of thought. To keep up with the managers of the new economy, the foot soldiers must run faster. According to Raj Jaydev, a health activist in California, in the ever-changing globalised economy of northern California, the only work that has remained constant in the past two decades is low-wage electronic assembly.
Jaydev spent a few years working on the assembly line. He has written a fascinating journal of his time on the factory floor of a large firm in the Silicon Valley. He recounts the story of a new employee. One day, while putting hundreds of foam bases in hundreds of cardboard boxes, he grazed his hand. Maybe I should wear gloves to prevent cuts, he thought. But after he had put on the gloves, he realised that they hindered the speed with which his fingers could move. He could no longer open the plastic bags in time, and the work began to pile up. A supervisor yelled “Come on, box load!”, while staring at the rookie accusingly.
Jaydev describes the scene in his journal: “He puts down the gloves, gets cut repeatedly, and never tries to be innovative about his well-being at work again. I asked them why the rush. The woman next to me, who has been at the plant for over four years, said it was because ‘they want to make target’. ‘Why do they want to make target?’ ‘I don’t know.’ “
The target-setting works like this: companies now believe in focusing on doing what they know best. All other tasks are outsourced – that is, given out to other companies which can do those jobs better, faster and cheaper. Companies want to focus on their core competence. They have broken down tasks to minute levels, such as assembling keyboards and providing components for modems. A Fortune 500 company would go to an efficient subcontractor such as Manufacturing Services Ltd to have parts of its products made to precise specifications, so that it could concentrate on carrying out higher-end research and development.
The other management idea that drives this model is keeping its own payroll low (which reduces fixed costs such as workers’ benefits) and its inventory lean (goods lying around earn nothing and cost rent). Wall Street and Nasdaq love cost-cutters; they reward lean and mean companies that continually increase profits by cutting costs and by appearing nimble and willing to change as the industry itself changes.
Even a company such as Solectron, the tenth-largest firm in Silicon Valley, does not need to be a major employer. Such a company will often have negoti- ated a contract with another company – for example, Manpower, which specialises in providing a skilled workforce. Jaydev explains: “Agents trade humans – you want a 20-year-old Latino woman in good physical shape, with good hand-eye co-ordination, and you don’t want the hassle of checking her immigrant status? Come to us, we’ve got her. It is dehumanising, because it means commodification of people, but it builds new economies of scale for the factories.”
Jaydev is associated with Healthwatch, a pressure group that works for the welfare of immigrant labour in hi-tech industries – people from the Philippines, Vietnam, Mexico, Korea and Ethiopia. These workers perform the numbing task of assembling electronic components, one eye constantly on the clock measuring their speed, and their mind in fear of their jobs flying to Thailand.
The hi-tech industry employs one out of five workers in the Valley. But for the 200,000 or more people in the manufacturing sector, working conditions are poor. Although factory-floor workers are free to move from one job to another, they have limited skills, which are not necessarily transferable to other jobs. The speed at which the industry changes has also made assembly-line labour immobile.
As Silicon Valley has become the norm for the global information technology industry, others will imitate the model. The glamour surrounding the Valley has spawned a host of imitators: Massachusetts’s Route 128, India’s Bangalore, Kuala Lumpur’s Multimedia Supercorridor (Cyberjaya), Singapore’s “intelligent island” and Taiwan’s science park in Hsinchu are all me-too imitators. Government officials from these places bend over backwards to woo the likes of Larry Ellison and Andy Grove, offering them cheap land and cheaper labour. All those officials want to live like Californians.
But that American way of life, at least for some of the new Californians, is “eight bucks an hour, no benefits”, as one worker bluntly put it to me. For more than a decade, this woman had worked with a large corporation for $16 an hour with health benefits. She was looking forward to a good package of retirement benefits and pension when the employer decided to cut costs by subcontracting. She was fired. Being an older woman with very specific skills, all she could do was go to an employment agency. The agency found her a job at the same plant, doing the same work, with the same physical motions, but for $8 an hour without health benefits.
According to some experts, however, the overriding problem facing the workforce in Silicon Valley is poor safety practices. When workers are conditioned to believe that talking back can lead to dismissal, they accept whatever the managers decree, including safety measures. Amanda Hawes, an attorney, wrote in her 1996 study “Workplace hazards for hi-tech workers” that electronics manufacturing plants and their surrounding low-income neighbourhoods are saturated with carcinogens, acids and toxic gases.
There is much that is not yet known about the chemicals. The Santa Clara Center for Occupational Safety and Health has revealed that less than 2 per cent of the 80,000 commonly used industrial chemicals have been comprehensively tested for potential long-term effects on humans.
Social activists in the Valley claim that safety information is given to workers in a perfunctory manner. Workers are often given stacks of forms on the day they join, all of which have to be signed quickly and without discussion. Activists believe that many workers, some of them from non- English-speaking countries, may have signed away their rights in these jargon-filled documents.
Last year, the San Jose Mercury News highlighted the equally dismal cases of piecework/homework in the Valley. In order to continue reducing costs, some companies had begun to encourage workers to take part of their work home and do it from there. This may sound like a wonderful, flexitime solution, but it was far from that. The idea was to shift the pattern of wages from hourly payments to piecework.
The Mercury News report said: “This home assembly work often took place within a loose-knit, word-of-mouth network of Asian immigrants who often didn’t understand US laws and were willing to work at low wages to support their families, even using children to help out.” These home workers earned barely the equivalent of the state minimum wage (then $5.75 an hour) and none received overtime for work done at home, the newspaper claimed.
Mercury News reporters saw employees performing dangerous soldering and manufacturing tasks and handling explosive chemicals in kitchen sinks, surrounded by pets and children.
The expose prompted Cisco Systems – the fourth-largest company in Silicon Valley, with revenues in fiscal 1999 of $12.2bn – to review its relationships with those doing assembly work off-site for the company. Other companies have reviewed their practices and made changes to their contracts.
But as long as markets reward companies that drive down costs and increase production speeds, these problems will remain. Producing things cheaply and quickly are desirable goals, but should they be the only ends?
That question will remain rhetorical as long as the computer industry is geared towards planned obsolescence. The personal computer you buy today is cheaper within two months and worthless in two years. This forces companies to plan for ever shorter horizons.
Contract manufacturers have to respond to such signals. So they market themselves to the brand-name manufacturers by highlighting their ability to trim hours off the time it would otherwise take to get new products to the market. To do this, they have to operate on thin profit margins.
This would be fine if all the work in a factory were being done by robots. But while technology has grown more complicated and automation has increased, detailed work that can be done only by hand still accounts for between 5 per cent and 10 per cent of the manufacturing process.
In a postmodern twist, the people of Silicon Valley are being taught to imitate robots – unlike in the past, when robots were made to imitate people. The appropriate Chaplinesque metaphor for the Valley, then, would be Modern Times, not The Gold Rush.
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