Google’s Schmidt: Either get a STEM job or prepare to live on welfare.

Google’s Eric Schmidt told a SXSW audience in Austin today that Google is “very, very worried about” the growing financial inequality and subsequent protests in San Francisco. “The average person there has benefited from the automation, the globalization, the technology,” he said, and predicted that inequality will become “the No. 1 issue of democracies.”

Schmidt was promoting his book, The New Digital Age, with his co-author, Jared Cohen, in a wide-ranging interview on privacy, government, and the social impacts of technology.

Google has been embroiled in the unrest of growing financial inequality, with San Francisco activists targeting the company’s private charter buses as a symbol of the social divide. A few economists we spoke to believe that the tech industry’s presence in San Francisco has generally buffered the city’s middle class from the ravages of recession, but skyrocketing rents have forced out many long-time residents.

Technology can help some, but inequality is growing. ”The US labor market, and many others in Europe and elsewhere, have experienced sharply increasing inequality. Though other factors also do play a role, technological change is the most important driver of this explosion in inequality,” MIT Professor Daron Acemoğlu writes to me, echoing a common theme among labor economists.

Schmidt proposed three solutions. First, support startups. “When you look at the solutions to the problems that you’re describing, which ultimately lead to severe joblessness, they all involve creating fast-growth startups.”

Second is “more education, more information, more connectivity.” He and President Obama have both pushed for more education in science, technology, engineering, and math to help fill unmet demand for tech jobs. Schmidt predicts that jobs that are not related to “creativity and caring” will ultimately be eliminated by robots who can automate “repetitive” tasks — even knowledge workers, such as some reporters.

Finally, there are upper limits to the number of people who can hold advanced STEM jobs. Those who lose out will need government assistance. Schmidt argued that society needs a “safety net” for those who lose their jobs so they can “at least live somewhere and have healthcare.”

Either way, change is coming. “The longer term solution is to recognize that you can’t hold back technology progress.”