To Increase Diversity, U.S. Tech Companies Need to Follow the Talent

It is no secret that tech has had a long-standing diversity and inclusion problem. The homogeneity of the industry isn’t just a superficial issue — it’s arguably a root cause of many larger issues that plague tech. It has implications for justice and fairness; it also results in devastating flaws in the industry’s own products. Consider unjust facial recognition technologies that exacerbate discrimination against people of color or virtual reality headsets — designed primarily by and for men — that could cause women to feel nauseous. These are just two examples of products in an industry with an insufficient diversity of perspectives going into the product design. Now, amid building social pressure, the industry is pledging to take new steps to narrow its persistent diversity gap.

Tech companies have made similar promises before, but have had little success in following through. Consider the case of Google, which has been among the more transparent when it comes to its challenges. Its proportion of employees from underrepresented backgrounds barely budged over the period between 2014 and 2018. In the meantime, since 2016, it had cycled through three chief diversity officers. Google’s 2020 annual diversity report shows some improvement, but is still far from any semblance of balance: 5.5% of employees identify as Black or Black and any other race, and 6.6% identify as Latinx or Latinx and any other race, and 32.5% employees identify as women. Google is not atypical; its industry peers have similarly skewed statistics. Amazon and Apple show relatively higher proportions of Black and Latinx employees because of the greater representation of such communities in the retail and warehousing units of these companies.

But now, the pandemic and the changes it has brought about in how work gets done provide an unprecedented opportunity for a turning point. One roadblock on the path to closing the diversity gap is the extreme geographic concentration of tech companies, which limits the industry’s ability to connect with, recruit, and retain talent from a widely dispersed pool. Seventy-five percent of venture capital funding is concentrated in just three states — New York, California, and Massachusetts — and more than 90% of technology-intensive innovation-sector growth between 2005 and 2017 occurred in just five metro areas, of which four — New York, Boston, San Francisco, and San Jose — are in those three states.

Even if the tech companies go beyond these locations to hire talent, it is harder to convince recruits from a different part of the country — especially those from underrepresented communities — to move. Their social networks and support systems are elsewhere, and the concentration of tech workers drives up the cost of living in cluster locations, such as the Bay Area or Boston. Companies have been experiencing a difficult time convincing recruits to move to the Bay Area, for example, and two-thirds of current tech employees say they would leave the Bay Area if they could, according to a recent survey.

To truly make the industry more inclusive, tech companies need to let go of their geographic biases and change the way they recruit, organize teams and allow employees to work. As companies have moved to remote work during the pandemic — and possibly forever — tech companies ought to envision a recruitment and retention strategy targeted at talent from places far from the usual clusters. (If they’re already doing so, they should double down on this strategy.) Even if the work-from-home trend does not take off across the board, the current enthusiasm for it creates a window of opportunity to narrow the diversity gap by recruiting under-represented groups and retaining them.

Identifying the opportunities

To succeed where it has failed in the past, the tech industry needs a new approach to finding and retaining talent. We suggest it starts with meeting high-quality recruits where they are without being constrained by geography and identifying regions that also have suitable conditions to retain such talent.

As part of our research initiative, Imagining a Digital Economy for All (IDEA) 2030 (established in collaboration with the Mastercard Center for Inclusive Growth and support from the Mastercard Impact Fund), we developed two key measures: One is a “tech talent diversity” score which analyzes the proportion of underrepresented groups in the tech pipeline (using STEM or STEM-related degree holders as a proxy for the pipeline of talent relevant to the tech industry) and how it is distributed across the states in the U.S. The second measure is a “digital readiness” score for each state in the U.S., which captures key attributes such as the ease of working from home in the state, availability of public services online, and inclusive access to the internet. We mapped these scores against two critical socio-economic factors that contribute to attraction and retention: the cost of living and the proportion of the state’s workforce in the tech industry, thereby creating a sense of a supportive proximate professional network.

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