As big tech’s grip on Silicon Valley strengthens, the gap between the rich and the poor widens.
A new report highlights the downsides of the region’s booming economy: Exacerbated inequality, rising housing and transportation woes, and a stifled market for competitors to break into. The 2019 Silicon Valley Index by Joint Venture Silicon Valley showcases why more people are leaving the region than arriving as residents continue to face an overwhelming set of challenges.
“The truth is, we’ve been telling the same story for a long time,” said Russell Hancock, President & CEO of Joint Venture Silicon Valley that released its annual Silicon Valley Index Report. “We have this incredibly amazing, prodigious economy, and we’re reinventing the world and changing the future. But we’re so successful that we’re drowning in our own exhaust.”
Joint Venture will delve into the report’s findings during a conference Friday at the San Jose McEnery Convention Center featuring Los Angeles Mayor Eric Garcetti and presidential historian Jon Meacham.
Steady job growth
The region created nearly 36,000 jobs in 2018, and more women and minorities continued to diversify both tech and government with their presence. In the tech industry alone, nearly 75 percent of women were foreign-born, while immigrants accounted for 38 percent of the valley’s overall population.
For the first time, the average per capita income rose to an all time high of $102,000 a year — almost double that of California’s overall average, though the top 2 percent of households held more than a quarter of all the wealth. While jobs continue to grow at a steady, but slower rate, unemployment rates are at an all time low at 2.2 percent, compared to 3.9 percent in the state, and 3.5 percent in the country on average.
Silicon Valley generated at least $19 billion in venture capital, “influenced by the unprecedented number of extremely large deals,” indicates the report.
Big tech companies have strengthened their hold in the region, buying out smaller, innovative competitors. As a small handful of these companies such as Apple, Google, Facebook, Microsoft, and Adobe continue to stifle competition, new startups and other entrepreneurial ventures look elsewhere to start their projects.
A decline in quality of life
The Valley’s economy is booming, yet the quality of life for most has declined. Despite having the highest income rates in California, Silicon Valley residents can barely keep up with inflation — and this stark reality gets worse down the economic ladder.
The income gap in Silicon Valley far exceeds any other region in the country. Adults with a bachelor’s degree or higher earn “an average of $88,000 more than those with less than a high school diploma.” Additionally, the gender pay gap is by far one of the most disparate in the country, where men with a bachelor’s degree or higher earn 43 percent more than women with the same level of education.
The number of mid-tier jobs have shrunk, signaling a strong relationship between income inequality and affordable housing. And while the growing demand for housing is unmet, at least a third of residents are exceedingly dependant on some form of assistance to get by.
“They’re just not developing housing for the missing middle,” said Bob Staedler, principal at Silicon Valley Synergy. “We need more mixed-income projects, and to get developers to be more creative. Look at the housing being built — all that stuff is luxury. That’s not going to make things better.”
The lack of units available to accommodate long-term population growth is evident, making it more difficult for potential first time buyers to break into the housing market. As more people populate the region, some are forced out — and in some cases into the street.
The housing crisis
According to the 2019 study, more than half of Santa Clara County’s homelessness is due in part to lost jobs or evictions, and in just the last year alone, only 7 percent to 8 percent of new housing units were considered affordable.
“The greatest asset to Silicon Valley is its people who drive the economy. Well, why aren’t cities investing in their people?” said Staedler. “I think the economy is coming along but the speed bumps are the housing gaps and we need to start paying attention to those gaps.”
“It’s been like this for the last 5 or 6 years,” he added, “and someone has to have the guts to do something about it.”
The housing crisis, in conjunction with unequitable living standards, is intensified along racial lines. The poverty rate among Latino and African American residents are nearly three times higher than those of white residents, resulting in more than 57 percent of Latino households in Silicon Valley failing to meet self-sufficient standards.
As a result, 1 in 3 young adults in the region live with their parent, and nearly a quarter of Silicon Valley residents live in multi-generational homes for economic reasons. The lack of affordable housing has lead to a decrease in public transit use. Three quarters of people commute to work in cars from longer distances in the valley, causing significant traffic congestion of “at least 50 minutes weekly per commuter.”
“Suddenly we became an hourglass economy,” Hancock said. “I don’t know how we fix such a deeply rooted problem. The question is, how do you create opportunities for people to climb that ladder? I think part of it is our companies. They need to continue creating opportunities and look for ways to take full advantage of a workforce.”
Contact Nadia Lopez at [email protected] or follow @n_llopez on Twitter.
Editor’s note: A previous version of this story contained information from an outdated report. We regret the error.