The wealth gap is growing worse in Silicon Valley, and nearly half of children in the region are in households struggling to get by.
Officials from Joint Venture Silicon Valley, a group that analyzes regional issues affecting the economy and quality of life, highlighted these bleak findings and more at a Tuesday news briefing. Joint Venture’s Institute for Regional Studies will soon release its annual Silicon Valley Index, which contains data on last year’s economic trends.
Joint Venture defines Silicon Valley as all of Santa Clara, San Mateo and Santa Cruz counties, and part of Alameda County, including Fremont. The report’s data comes from a variety of sources, including the census and California’s Employment Development Department.
Stratification of wealth
Shocking wealth disparity is one of the most significant trends described by Russell Hancock, CEO of Joint Venture and president of the Silicon Valley Institute for Regional Studies.
“The income divide and wealth gap is just mind boggling,” Hancock said. “And it’s increasing—the pandemic has only amplified these trends.”
According to Joint Venture, the top quarter of Silicon Valley earners hold 92% of the region’s wealth; the top 10% of earners hold 75% of the wealth. Last year, the average annual income in Silicon Valley was $170,000, and the median income was $138,000—more than double the national median. But the average income for service workers in the region was $31,000.
“(Developmental economists) would tell you that if Silicon Valley were a country, that kind of wealth disparity would be considered politically unstable,” Hancock said.
Approximately 33% of Silicon Valley households are not self-sufficient, meaning they require assistance from the government or community. For Latino residents, that figure is 61%; for non-citizen Latino residents, it’s 82%; for Latino families where neither parent speaks English, the figure is 90%. Hancock said 46% of children in Silicon Valley live in households that are not self-sufficient.
Silicon Valley cities generally have higher minimum wage standards than the rest of California. But these wages are still grossly insufficient, Hancock said.
“It is not possible to survive in Silicon Valley on even the highest minimum wage,” Hancock said. As an example, he said each member of a two-person household would need to make $18.50 per hour to cover the most basic essentials of food, housing and transportation.
Last year, unemployment dropped to 2.9%, close to pre-pandemic record lows. Hancock said the region regained the 150,000 jobs lost during the pandemic, and actually added 15,000 jobs.
Most of the recovery is being driven by the tech sector. Since the start of the pandemic, the proportion of tech jobs to the rest of the workforce has grown from about 25% to almost 29%. While other industries such as retail and hospitality are still struggling to recover, Hancock said tech has seen incredible gains.
“We’ve actually had record-breaking years,” Hancock said. “We’ve blown the dot-com (era) out of the water.”
The market capitalization of public tech companies in Silicon Valley and San Francisco was $14 trillion last year. Apple, Alphabet, Tesla and Facebook were responsible for nearly half of that.
Even the pandemic couldn’t stop Silicon Valley from ongoing merger and acquisition activity. There were also 32 initial public offerings last year—more than any year this century. Hancock said it wasn’t just large companies making gains: over the past four years, Silicon Valley has seen the birth of at least 2,000 new startups—more activity in a single period than any other reviewed by Joint Venture.
Tech companies such as Meta and Google also drove commercial development across the region. In 2021, there were planning approvals for 21.5 million square feet of new space at 135 sites.
“A huge share of it, more than ever before predominantly because of planned development in San Jose, is going to be near transit,” said Rachel Massaro, Joint Venture vice president and director of research for the Silicon Valley Institute for Regional Studies. “That’s also a good sign for development and regional commute patterns.”
Where did people go?
Silicon Valley experienced its first decline in population in more than 12 years. There is no firm conclusion yet on what is driving this trend, but Hancock noted the region’s birth rate is the lowest it’s been since 1979.
Silicon Valley also experienced significant domestic emigration over the past two years. According to Hancock, 40,000 people left the region in 2021. One-third of that group migrated to cheaper Bay Area suburbs and another 25% moved to the Sacramento area. The remaining pool of people split to destinations such as Seattle, Portland, Dallas, New York and Las Vegas.
On the business side, four major companies left Silicon Valley last year: Palantir, HP Enterprise, Tesla and Oracle. Hancock noted these companies only moved their headquarters, leaving behind most of their workforces and operations.
“From that point of view, we’re not yet saying there’s been a major corporate exodus out of Silicon Valley,” Hancock said.