Former Sun CEO on prospects for Silicon Valley now

Scott McNealy, founder and former CEO of Sun Microsystems, talked with the Wall Street Journal about employment and the economy in the supposedly booming Silicon Valley. He thinks much has been lost and may not come back. His comments about the Valley apply to the state and country at large too.

It’s not a terribly job-filled recovery. Productivity gains continue to push the need to hire out. A lot of the jobs today are around two areas: government-sponsored green initiatives and the social-networking space.

I’m skeptical that the green jobs are [going to drive the recovery]. So far, the track record’s been terrible. That’s going to be a challenge for the people here who stuck their neck out to go green.

Much as I strongly support cleantech and renewable energy, he’s right. There’s just no way that government-mandated cleantech initiatives will create jobs anywhere on the scale needed for California. Plus, many such initiatives are wrong-headed and doomed, like California’s coming cap-and-trade system or forcing dump trucks to get new engines, something which will certainly drive many of them out of business.

Then there’s social networking, which is a pretty interesting phenomenon. There’s a lot of energy there, but that’s not a terribly labor-intensive kind of activity. I don’t think social networking is the jobs driver.

Facebook, Twitter and the rest of the social networking sites can maybe create 100,000-150,000 jobs. Again, that’s not going to spur a recovery in the state .

I see a migration from the early days of the Valley. We aren’t doing manufacturing; we aren’t doing design; we aren’t doing computers. It’s all moving to Asia and other places where there are lots of technical engineers who are willing to work at a more reasonable salary because they don’t have to spend $3.5 million on a home and pay half of it to taxes.

Hey, so someone graduates from a prestigious college with a degree in engineering, math, or programming and goes to work for a big tech company in Silicon Valley for $100,000 a year. He’s got it made, right? Not really. He might get a one bedroom apartment for $1500 a month. A car, insurance, utilities, food, and that big student loan could easily chew up another $2,000 a month. So that’s $42,000 a year in expenses. Federal taxes at that bracket are 33% and state tax is 10%. Toss in another 7% for the combined totals of sales taxes and country and city fees and you get 50% tax. Out of that $100,000 a year salary, $7,000 remains after basic expenses and taxes. Yikes.

I think every new transition has created less job opportunity as technology has become very leveraged. I don’t think our education system, our regulations, our government policies have kept pace with the changes that technology is driving.

Our education system is becoming a shambles. Everyone knows it is crumbling yet not much of real substance is being done. Why is this?

I’m not young with my whole future in front of me. My kids are the ones who are going to have to learn Mandarin. I’ve suggested that to all four of them.

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