No Surprise: New Economy Faces Old Problem of Poverty
Silicon Valley’s techno-riche looked awfully petty when the local United Way was recently reduced to begging to make up an $11-million shortfall in funding for the area’s underprivileged.
The valley, despite a few famously modest twentysomething tycoons who share apartments and wear sneakers to work, is fast becoming an orgy of conspicuous consumption. So the hand wringing over geek greed in the local media seemed justified.
And when Bill Gates, the David and Lucile Packard Foundation, Infoseek Chairman Steve Kirsch, Intel co-founder Gordon Moore and others bailed out United Way, plaudits appropriately followed.
It’s tempting to frame the situation as a classic case of the wealthy being shamed into moderating a callous disregard for the poor. But the United Way fiasco doesn’t really capture the dynamics of need, greed and generosity in Silicon Valley.
By keeping the focus on philanthropy, high-tech do-gooders miss a golden opportunity to demonstrate the superiority of a genuine private-sector solution to the valley’s poverty problem:
* Pay a living wage with benefits to all employees. Use regular employees for essential services such as cleaning offices, or insist that contractors offer temps a living wage with benefits.
* Give every employee affordable stock options.
* Train at-risk employees and workers in local communities for better or more stable jobs, even if it costs more than importing professionals from India.
* Commit 1% of annual profits to supporting public schools.
To understand the logic of this four-point plan, first consider the philanthropic alternative.
United Way’s ineptitude was certainly part of the problem. Why did it suffer such an egregious budget miscalculation in the first place? That agency may not offer the best conduit for the area’s social conscience.
In fairness, more than 8 in 10 households in Silicon Valley make charitable contributions--well above the national average, according to a survey published last year by the Community Foundation Silicon Valley. And a concentration of donations to education--a cause strongly supported by TechNet, the industry’s political lobbying and fund-raising arm--is arguably among the most durable and farsighted ways to contribute to a community’s well-being.
Meanwhile, the Silicon Valley Manufacturing Group a high-tech industry group has actively encouraged the development of affordable housing.
On the other hand, as the stock valuations of Internet companies reach the stratosphere, only 7% of valley residents donate stock to charity. Corporate giving has not kept pace with the rise in corporate profits, and many of the wealthiest in the valley are amazingly stingy--giving no more than $1,000 to charity annually, according to the foundation’s survey.
So is the glass half empty or half full? Either way, overemphasis on philanthropic solutions distracts dangerously from fundamental contradictions in the vaunted New Economy in Silicon Valley and beyond.
Wondering why so wealthy an area has so many who need United Way support? One number tells the story: The high-tech boom has pushed the median selling price for a home in Santa Clara County past $400,000. (Floor space--a patch of someone’s living room to sleep on--reportedly goes for as much as $200 a month.)
As Joint Venture: Silicon Valley Network pointed out earlier this year, household incomes reflect growing class divisions. As manufacturing jobs fled the area for developing nations, two kinds of employment took over: highly paid tech professional jobs and low-wage service work. Only one of those groups can afford Valley prices.
And despite the area’s professed commitment to education, the high school graduation rate for local Latino students (by far the largest minority) has plummeted to 55% in recent years, and only 19% of those graduates meet basic college-entrance requirements. (The voting public and politicians depress tax rates while local officials dangle tax breaks and service incentives to high-tech employers. So what did you expect to happen to the schools?)
Outside its work on education, TechNet has worked to boost tax credits for research and development, increase the number of foreign engineers high-tech companies can hire, keep the Internet tax-free and limit the liability of corporations sued by shareholders--not exactly technology solutions for the problems of the working poor.
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Meanwhile, Santa Clara County’s childhood immunization rates--these are a key indicator of public health in an area (and also the prevalence of health insurance)--have fallen precipitously in recent years.
The entire state, moving rapidly to emulate the high-tech mecca, shows parallel trend lines, according to a report issued last week by San Jose-based Working Partnerships USA and the Economic Policy Institute in Washington.
Those avowedly liberal or labor-based groups pointed out that the fastest-growing industry in California from 1993 to ’98 was temporary employment. It added about 183,000 jobs, more than the software and electronic-component industries combined. Temp jobs pay an average of $19,000 per year, usually without benefits.
Why such a demand for temps? The fast-growing New Economy is about churn. California companies laid off 700,000 people in 1998, 56% more than in 1997, the report says. Sure, an even greater number were hired, including many by software companies at high salaries. But how many plum jobs go to older workers or those whose skills need an upgrade (often the ones who get laid off)? And the companies that account for most of the job growth are small firms that generally offer fewer benefits and lower pay, yet experience greater vulnerability to changes in their markets.
The problem with the poor is that they are so intransigently, so anachronistically, well, poor. Can’t they understand that the Internet changes everything?
Maybe not, but they know something from personal experience that the captains of high-tech industry would do well to learn: No amount of charity or volunteerism can fix the New Economy structural problems that have created a burgeoning underclass.
Times staff writer Charles Piller can be reached at charles.piller@latimes.com.
