Study: Silicon Valley is mostly working from home — and service industry is paying the price

In non-pandemic times, Voyager Cafe in downtown San Jose would be teeming with customers, often workers lined up looking to get their morning coffee or something to go with their lunch.

Not anymore. Revenue is down 40% to 50%, according to co-owner Sameer Shah.

Voyager’s location inside the San Pedro Square Market means it’s walking distance from several of the city’s biggest employers, including Adobe and San Jose State University, and dozens of office buildings and startups.

But as most of the work in big companies has shifted virtually due to the COVID-19 pandemic, so too have the customers.

A new study from the Bay Area Council shows just how much of an effect working from home has on Silicon Valley, and how it’s disrupting the service industry, reshaping business districts and disproportionately affecting workers of color.

It also looks at the longterm effects working from home can have if remote work becomes more widespread in the next few decades.

According to the study, Santa Clara County leads the region in jobs eligible to be done from home — 51%. Silicon Valley’s tech industry has allowed many workers to seamlessly make the transition from in-office work to working from their kitchen tables.

The study defines jobs that are eligible to work from home as those in the professional service sector, which include in offices, computer-based, financial, education, sales, legal and media, among others, totaling an estimated 1.79 million jobs in the Bay Area.

The shift to virtual work has proved devastating for the service industry, however, an industry that almost exclusively employs essential, in-person workers. These workers are disproportionately Black and Latino and low-income workers who have been hit the hardest by the pandemic.

The study examined 12 cities across the Bay Area and found a permanent shift to remote working could impact 265,000 jobs in other industries.

“The businesses that are relatively dependent on that daytime population — the small businesses in particular — will be challenged, even as we get a vaccine and life begins to look normal,” said Jeff Bellisario, executive director of the Bay Area Council Economic Institute.

The study shows income is tied to a worker’s ability to work from home: The higher one’s income, the higher the possibility that one has a job that is eligible to work from home.

The opposite is also true: low-wage jobs, such as servers and minimum wage workers, are less likely to work in remote-eligible jobs and more likely to work in essential businesses.

When COVID-19 health directives urge people to stay home to curb the spread of the virus, that isn’t possible for essential workers, who have been disproportionately infected.

Among those employed in the Bay Area in occupations with an average annual income below $40,000, only 6% are eligible to work from home, while 76% of workers who have an average annual income of over $150,000 are eligible to work from home.

In the Bay Area, 51% of the white workforce held jobs that were eligible to work remotely, while only 33% of the Black workforce and 30% of the Latino workforce were employed in occupations that are able to work remotely.

A long-term shift to remote work could widen the inequality gap in both income and employment, according to the report. For example, lower- and middle-income workers would be forced to pay for transportation — either through public transit or a car — while higher-income workers can work from home, greatly reducing their personal transportation costs.

Even with a massive shift to remote work, tech giant Google recently walked back its promise to allow its employees to work from home permanently, possibly opening the door to some returns to normal days for surrounding businesses.

The company also still is pushing forward with its 80-acre megacampus around San Jose’s Diridon Station, though it’s slated to not have as big an impact on the city’s jobs-to-housing imbalance as some have hoped.

“I don’t think that everyone’s going to get up and move away to Boise or Montana or Texas. There are still going to be people living in the (Silicon Valley) region,” said Bellisario. “We’re still going to have a housing affordability challenge. And I think those companies that are most interested in affordable housing are also the ones that want to ensure that at least some of their workforce can live close to where they work, even if there is a remote work environment going forward.”

But the damage and potential recovery of downtown centers and small businesses, local experts say, can’t be fully measured until cities have fully reopened after the pandemic.

“Until we emerge out of workplace use restrictions, we won’t be able to fully understand any long- or short-term impacts on how corporations make use of their spaces, or how any change in office use impacts housing, transportation or retail,” said Chris Burton, San Jose’s deputy director of business and economic development.

“Office-based employers have a lot more flexibility coming out of the shelter in place, but San Jose is fortunate to have a significant employer base in research and development and in manufacturing,” he added. “These more capital-intensive facilities are less flexible and will continue to represent an important base for our local economy.”

While the study paints a grim picture for the service industry, Bellisario said the longterm impacts of working from home are still speculative.

Shah, who opened another Voyager location in Santa Clara in April, said he hopes at least some of the day business in downtown will come back once the COVID-19 vaccine is more widespread.

Meanwhile, like many businesses, Voyager has cut hours, but Shah hasn’t needed to cut staff. He said he’s learned the skill every business owner needs to survive in the pandemic: adapting and not cutting corners — even at the expense of the pandemic.

Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.