A recent blog post on TechAmerica’s California tech labor payroll report, showed that California now has one million workers with a total payroll topping $120 billion a year. They are the highest paid in the nation at $123,900 a year. Now you might be muttering to yourself: “How on earth can you run a business on that rich a payroll?,” or something like that. Assume for a moment that they are successful. They make lots of money and grow faster than fast. How do they do it? It’s not just the well-known outsized IPO’s that drive results. It’s more than that. California tech is almost like its own country with its own economy. In Mountain View, California, where Google and Facebook are headquartered, each company bids up the cost of tech labor against the other. Their mostly salaried employees, most of them happy, burn the midnight oil. Their services don’t require paper boxes, or printed anything. They conceive, write and manage billions of lines of code. Almost 100% of all their plant and equipment is organized into computer server farms in places called “data centers.” They are not like the rest of us. Really? Yes, really.
So why should you care about what goes on in the California technology sector?
It might be a vision of America's future labor force. Or, if we are not successful, it might not. A major way California technology companies move so quickly to develop and produce new products and services: they have simpler labor arrangements. They have few if any workers organized by unions. Tesla, the electric car maker, with no unions, produced the award-winning Model S, from conception to rolling off the assembly line, in two years. Two years! GM and Ford take five to six years. Tesla is in fact a controversial company. It is pissing off car dealers everywhere by insisting (maybe foolishly) on having their own wholly owned dealerships. They got government funding like Solyndra or Fisker. Mitt Romney said Tesla would fail. Solyndra has failed. Fisker is going to soon. Yet Tesla produced Road and Track’s car of the year. It’s an interesting case to think about: a car maker headquartered, unbelievably, in one of the highest cost of living places on earth! Is its manufacturing plant in South Carolina or Mexico? No, it’s in Fremont, California (part of Silicon Valley). How could this be? We’re not entirely sure yet, but we should keep paying attention to what they are doing.
The Cause is the Effect?
Software, semiconductor, life and bio science firms have lots of salaried workers who are not covered by onerous daily overtime and double time rules, missed meal penalties and other rules. It is well-known that California's manufacturing job base has deteriorated significantly over the years. California’s tough workman's comp and other rules have created that "sucking sound" that Ross Perot spoke of, but in this jobs are being sent to Texas, or the South. In a way, the tech job base in California might represent the future, with the high cost of living conspiring to support the mostly high-paid salary workers who live there. Or, it might only support the more nimble hourly workers who are able to continually learn new skills and jobs. Then what choice is there but to build the first high-performance electric car there?
Perhaps the higher cost of an employee in California tech companies makes them gravitate to producing products and services that create high revenues and profits per employee. Google has certainly figured this out: $29 billion per year in pay per click ads created and managed completely by their customers using a portal. Ebay’s golden goose: a business that carries no inventory, does no shipping, but is one of the world's largest sellers of stuff, some of which is heavy cars and trucks, not just knickknacks and collectables. Nice business if you can found it.
The California tech sector labor force is the cause and the result of the drastic changes we are all going through.
Going, going, soon to be gone are the old beautiful print ads that get ink on your fingers as you turn the pages, the storefronts with limited parking, the friendly faces that tell you where to find what you need. The new tech firms get the job done faster, cheaper, and ultimately that is becoming the better way.
Photo Credit: PC World