Silicon Valley’s economy may be booming, but according to a new report, in recent years, the region has also “lost its spine”—that spine being the middle class.
In its new Silicon Valley Index, the research organization Joint Venture Silicon Valley delivered a glowing report of the Valley’s economy in 2014, from its high rate of job growth to the cushy venture capital environment to the rush of patent activity. The region is strong economically, the report argues, and will be for “the foreseeable future.”
But while the news may be heartening to those worried that the tech industry is in the middle of a bubble, it may be frightening to anyone who wants to see more equality between races, genders, and the haves-and-have nots in the Valley.
“The growth is uneven,” Russell Hancock, president and CEO of Joint Venture Silicon Valley, writes in the report. “Though we’re proliferating high-wage and low-wage jobs, we’re steadily losing share in the middle. It’s as if the economy has lost its spine, and this has important implications for the kind of community we become.”
Silicon Valley added roughly 58,000 jobs in 2014, a 4.1 percent increase from the year before. The nationwide job growth rate, by contrast, was 1.8 percent. And yet, even as the number of jobs in the area increases, the wage gap between low-wage and high-wage jobs is ever widening. In 2014, the difference in median income between high wage and low wage workers was around $92,000, compared to around $70,000 elsewhere in the Bay Area. Meanwhile, the number of mid-wage jobs in Silicon Valley has also declined 4.5 percent since 2001, reflecting a larger trend across the country.
The report also lays out in stark detail the vast difference between what people of different genders and races are paid in the Valley. Men in the region make up to 61 percent more than their female peers, the report notes, a number that “is more pronounced in Silicon Valley than in San Francisco, California, or the United States, and is getting larger over time.”
The same goes for black and Latino employees. According to the report, the wage gap between white employees (the highest earning racial group) and black and Latino employees (the lowest earning groups) is around $40,000 and $44,000, respectively. In the rest of the country, that gap is around $18,000.
For Elise Gould, a senior economist at the Economic Policy Institute, one particularly significant finding of the study is the change in per capita income by race between 2007 and 2013. Since 2007, black Silicon Valley residents have experienced a nearly 21-percent drop in per capita income, compared with a 4.9-percent drop for the same group throughout the rest of the country. Latino citizens in the Valley have also been hit hard, with a nearly 12-percent drop in per capita income, compared with a 7.5 percent drop in other parts of the country. Meanwhile, white employees in the Valley have experienced a .2-percent increase.
“That is really a striking finding that the loss of income in the Valley was greater than the loss of U.S. income as a whole for both black and Latino workers,” she says. “The disparities between racial and ethnic groups appear to be widening faster in this area than they are in the U.S. as a whole.”
Gould notes that one way to fix this inequality would be to make it easier for low-level employees to form unions and negotiate their wages collectively. “Whatever policies can boost the bargaining power of workers at the bottom, that can help reduce the income inequality you’re seeing,” she says.
Reducing that inequality, she argues, is critical to the ongoing economic recovery in the Valley. And it is very much ongoing, she warns. It’s easy to celebrate 4.1-percent job growth, and $7.3 billion in venture capital investment. But it’s equally important to realize that median income in the Valley is still lower than it was before the Great Recession. That, Gould says, has implications not only on people living in the Valley, but for the many companies launching and working there.
“When people don’t have enough money in their pockets to go spend on things they need, then you can’t spur more economic activity,” she says. “There hasn’t been great growth at all in income, which means it’s still very early in the recovery.”
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