Middle-class eroding in Silicon Valley
SAN FRANCISCO: Silicon Valley is in danger of creating its own digital divide.
The California region is losing its middle-class work force at a significant rate, according to an annual report that tracks the economic, social and environmental health of the region that is the U.S. technology heartland.
The 2008 Index of Silicon Valley, sponsored by the Silicon Valley Community Foundation, found that mid-wage jobs fell to 46 percent of the work force in 2006 from 52 percent in 2002. At the same time, while the percentage of higher end jobs rose slightly from 26 percent to 27 percent, lower-wage jobs expanded to 27 percent of the work force from 22 percent. In all, more than 50,000 middle-income jobs have disappeared over the four years measured by the study.
The vanishing mid-wage jobs - defined as those that pay from $30,000 to $80,000 a year - come from workers who had previously been the lower part of the white-collar pyramid, including secretaries, clerks and customer support representatives. The picture was blurred, however, with growth in some blue collar, middle-income categories, like electricians and plumbers, and several white-collar areas, like computer support technicians.
The consequence of the shift may undercut some of the basic mechanisms of the areas economy, according to the authors of the report, by making upward mobility more difficult.
“If you lose the middle, its harder to support the top,” said Doug Henton, an economist at Collaborative Economics, a research and consulting firm in Mountain View, California, that helped prepare the annual report.
The short-range outlook for the region appears to be more positive, with the overall rate of job gains outpacing the growth for the country as a whole.
For example, for the first time since the dot-com collapse of 2001, median household income rose, and Silicon Valley added 28,000 jobs, an increase of 1.7 percent, in the past year. Over all, the region is far more wealthy than the rest of the country, with per capita income 57 percent higher than the national average.
Despite fears of outward migration in the wake of the Sept. 11, 2001, attacks, the region continues to see a healthy inflow of talent from outside of the United States. More than 17,000 foreign citizens came to the region last year, reversing a decline that began after the number peaked in 2001 at above 30,000.
Currently, 48 percent of the households of the region speak a language other than English in the home.
Reflecting the changing boundaries of what is defined as Silicon Valley, this year the authors of the report added all of San Mateo Countys work force to their definition of the geographic boundaries of the region. It was the first change to the definition of the region that has been made since the study was first published in 1995. By moving the northern border of the Valley past the San Francisco airport, the region now reflects more the impact of biotechnology companies like Genentech. The region does not include San Francisco.
Venture capital investment continued to climb at a healthy clip during 2007, rising by 11 percent, and 62 percent of the so-called clean tech venture investment for California was invested in Silicon Valley during the year.
The Valley continues to stand apart because it is a center of technical innovation, said Russell Hancock, president of Joint Venture, a promotion group for the region that was a co-sponsor of the report. But he also said it was unlikely that the region would be able to avoid being affected by an impending recession or the impact of the subprime mortgage crisis.
Still, the researchers said they believed that the Valley was largely distinguished by the flexibility of its economy and its ability to adapt to change.
“What were talking about is a Valley that continues to reinvent itself, and its not in any one sector,” Henton said.
One notable category where the region is lagging is the use of home broadband networks. Currently only 51 percent of the homes in the region has access to broadband - defined as more than 200 kilobits a second. In contrast, 65 percent of the households in Japan and 94 percent in South Korea are wired for broadband access.
