CONTRIBUTOR

Digital transformation may not be the economic panacea that most communities dream of. In fact, it is likely accelerating income inequality and overall inequity — particularly in Silicon Valley — based on a sobering new study released Tuesday.

A main culprit is artificial intelligence, whose adoption and growth is hastening and deepening an alarming trend over the past few decades, in which more wealth is being concentrated among fewer people in the valley, according to one of the report’s co-authors.

“We need major structural change to address income inequality. Unless it changes dramatically, it will only worsen with AI and its impact on displacing jobs,” Scott Myers-Lipton, professor emeritus in the sociology at San Jose State University, said in a phone interview. “There has been a huge movement of wealth from the middle class to the 1%, the tippy top.”

As AI grows in influence on the local economy, Myers-Lipton warned, it is likely to disproportionally disrupt rank-and-file jobs, gouging the shrinking middle class, while enriching a small group of AI companies.

AI is the chief form of digital transformation that should act as a warning cry to those regions pining to be the next Silicon Valley: Be careful what you wish for.

Income inequality, escalating housing costs, and homelessness bedevil the San Francisco Bay Area, where just .001% of households (nine each with more than $12 billion) command $110 billion in total liquid wealth, 12-times more than the bottom 50% of the region combined.

San Jose State University’s Human Rights Institute, which produced the report, measures the 2024 pain index, and there is plenty to spread around.

The fifth edition of the annual survey highlights worsening wealth and income disparity, as mentioned above; a failing coefficient score of 82 on income inequality (100 equaling total inequality), compared with 80 a year ago and 38 in 1990; debilitating expenses of about $3,500 a month, making San Jose the most expensive city in the U.S.; and the metro area’s dubious status as the national leader in unsheltered homeless.

The negative fallout of breakneck economic expansion by the few should give pause to other areas — among them, Houston; Richmond, Va.; Cincinnati; Toronto; Kansas City, Mo.; Las Vegas; Birmingham, Ala.; Colorado Springs, Colo.; and Fargo, N.D. — all of whom have aggressively pursued and poached tech jobs with tax breaks, land deals and infrastructure projects in recent years. One early success story, Austin, Tex., has enjoyed tremendous growth, but at the cost of choked traffic and overtaxed city services after a run-up in construction to accommodate tech expansion.

“It’s a conundrum we’re in. Any other state would kill to have Silicon Valley in their community,” Evan Low, a California state representative running for the 16th Congressional district in the heart of Silicon Valley, said in a phone interview. “They want to replicate our success but may not like everything that comes with it.”

He points to Apple Park as a prime example. The opulent spaceship-shaped campus in Cupertino, Calif., looks like something out of “Alien” or “Star Wars” but it also required major (and expensive) upgrades of roads to handle the swell of employees commuting to work.