High-Tech Model of Inconsistency
One of California’s key engines of economic growth--Silicon Valley--is in danger of stalling because of a severe shortage of affordable housing and a widening income and education gap between rich and poor, whites and minorities, according to a report to be released Sunday.
“These issues are on the minds of virtually everyone. They really see a threat,” said Doug Henton, research director of the report, produced for the nonprofit Joint Venture: Silicon Valley Network. “Companies are mobile too; companies can leave.”
While such problems are not unique to Silicon Valley, the area’s vast wealth and luster of innovation mean that the response of regional government and high-tech industries could profoundly influence other areas--including Los Angeles, New York, Boston and Austin, Texas--that look to expand their economies using the Silicon Valley model, said Ruben Barrales, Joint Venture’s chief executive.
The “1999 Index of Silicon Valley” notes that the area, which includes Santa Clara County and portions of three adjoining counties, saw key barometers of economic success rise in the last year. The average wage rose to nearly 60% above the national average, while business investment boomed. Unemployment remained low and violent crime declined.
But job growth of about 19,400 was down sharply from 1997’s 62,000; regional exports declined; and 1998 was punctuated by downsizing at many large companies. Meanwhile, some aspects of environmental quality, education and living standards worsened, according to the report by the San Jose public-policy group.
Among the study’s key findings:
* Top professionals enjoyed soaring wages, but inflation-adjusted incomes of the poorest households declined 8% from 1991 to 1997; the same group saw a 2% rise statewide.
* Outside the high-tech industry, average wages were 25% above the national average, but the local cost of living was 37% higher.
* Families earning the median area income of about $74,000 could afford 38.8% of Silicon Valley housing; nationwide, the median income of $45,300 was sufficient to buy 66.2% of houses on the market.
* Particularly hard hit by the dearth of affordable housing and high living costs have been Latinos, whose high school graduation rate stands at only 56%--only slightly higher than the rate for Latinos in the rest of the state.
* In Santa Clara County, 31% of freeway miles received the worst possible rating for traffic congestion.
“All the very productive industries here depend on human capital. If the quality of life deteriorates, that human capital walks out the door,” Henton said.
Lawmakers say they are working with diverse coalitions to tackle the problems. “In Silicon Valley, the industrialists and all of us together recognize that these quality-of-life issues, what are sometimes called ‘soft’ issues, are key to economic success,” said state Sen. John Vasconcellos (D-Santa Clara).
The Silicon Valley Manufacturing Group, a San Jose-based trade organization whose members supply one-third of local private-sector jobs, was instrumental in enacting a half-cent sales tax hike in Santa Clara County that will raise $1.5 billion over nine years for transit improvements.
“We recognize that our success also leads to challenges,” said the group’s chief executive, Carl Guardino. “We’re going to address those challenges directly, rather than with the foot dragging that business often engages in.”
Guardino’s group, working within a broad community coalition, has won planning agencies’ praise for building thousands of units of affordable housing. And it recently started building a $20-million trust fund to assist first-time home buyers, and develop affordable rental units and homeless shelters.
The group’s fledgling education initiative will concentrate on teacher recruitment and retention.
“Our overall goal is always local kids for local jobs, while also recognizing that with international companies there is inherent strength in having a diverse and international work force.”
John E. Neece, chief executive of the Santa Clara and San Benito Counties Building and Construction Trades Council, the lone labor representative on Joint Venture’s board, gives local employers credit for working cooperatively to solve common problems.
But many people say such initiatives seem long overdue.
“Most companies and most people in the private sector are almost exclusively focused on their bottom line,” said Leo E. Chavez, chancellor of Foothill-De Anza Community College District and a board member of Joint Venture.
Victor Garza, chairman of La Raza Round Table, a community group in San Jose, said that high-tech firms have done little to assist in the training of Latino youths--in the schools or with summer jobs. “They invest millions of dollars to bring people in from other countries to fill their jobs, when they could invest in the community,” he said.
The Service Employees International Union Local 1877 represents about 2,800 janitors who clean local computer companies. Its president, Mike Garcia, takes a dim view of the industry’s community spirit, saying it took several years to persuade most high-tech employers to hire unionized contractors that provide health benefits to janitors. A few notable holdouts include the largest microprocessor maker, Intel Corp.
“A janitor making $7 to $8 an hour in Silicon Valley is equivalent to minimum wage just about anywhere else,” Garcia said.
Despite agreement on the need to improve the schools and transit services and to provide more affordable housing, consensus on how to move lower-income service workers up to a living wage in an area where the median home price is $304,500 seems elusive.
“[In Silicon Valley] a real living wage is probably $15 an hour for a single person, and for a family of four at least $25 an hour,” said Steve Tedesco, San Jose Silicon Valley Chamber of Commerce chief executive, who criticized some high-tech companies for letting technical employees slide into poverty by failing to help them keep their skills current in a fast-changing industry.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Silicon Valley: Growing Apart
Economic inequality and environmental growing pains are endangering Silicon Valley’s reputation for innovation and expansion. A new report on regional development may convince competing high-tech areas--from Boston to Los Angeles--to reevaluate their emulation of the Silicon Valley model.
Wages Are Up . . .
Average employee wage, in 1998 dollars, in thousands:
Silicon Valley: $49,061
United States: $30,857
. . . but the Income Gap Is Widening . . .
Incomes of Santa Clara County households, adjusted to represent a household of four, in 1997 constant dollars, in thousands:
80th income percentile: $130,755
20th income percentile: $34,752
. . . and Homeownership Remains Elusive
Percentage of residences affordable for households, based on median income:
United States: 66.2%
Silicon Valley: 38.8%
*Estimate
Source: Joint Venture: Silicon Valley Network
