The Silicon Valley economy improved in 2013 but the overall number of middle class households declined as shown by the results of a recent survey. The annual Silicon Valley Index, in partnership with the Silicon Valley Community Foundation, recently released the results of their survey which measured the overall economic performance of the region vis-à-vis the performance of California and the whole of the United States.
The total job growth for 2013 in the Santa Clara County and San Mateo County areas, collectively known in the study as Silicon Valley, was pegged at 3.4 percent which is double the job growth rate in California, and the U.S. Silicon Valley added close to 47,000 new jobs last year which surpassed the pre-recession levels. Also based on the results, 45 percent of the total households earn more than $100,000 annually and the per capita income is more than $70,000 per year. The region’s per capita is much higher than the state average of roughly $44,000 annually.
However, in terms of household income, especially pertaining to the low income and middle income households, the figures remained stagnant and dropped respectively. Low income households are defined as those earning below $35,000 per year, and were 20 percent of the total population in the recent survey, compared to the 2006 survey where it was pegged at 21 percent.
On the other hand, the middle income households defined as those earning between $35,000 to $99,000 per year, were 35 percent in the recent survey compared to the 2006 survey where this household income type was 40 percent of the total household population.
The upper income households (earning $100,000 and more), on the recent survey were 45 percent of the total household population compared to 2006’s 39 percent of the total.
According to Russell Hancock, the president of Joint Venture Silicon Valley, “The wage distribution gap is actually growing… We are losing our middle class in Silicon Valley.” The authors of the study also mentioned that the economic boom being experienced in the region is not enough to translate to an equal increase in the financial standings of some residents.
The study also noted that one of the factors in this growing income divide is the demand for housing. Last year, Silicon Valley gained more than 33,000 new residents however only 6,500 new homes were built. James Gonzales, a San Jose Police Department veteran and a leader of the police union sold his condominium unit during the recession, took drastic pay cuts and now is staying in a rented home in nearby Sunnyvale. He says that recent pay increases are not enough for him to get back into the housing market.
According to the President of Silicon Valley Community Foundation Emmett Carson, income inequality is a problem and will not be solved because by an improved economy. He added that a firm policy direction is needed.
Analysts cited possible solutions like building more housing units around transit hubs, encouraging the private companies in the Silicon Valley region to partner with several educational institutions to establish more job training, as well as more active involvement of the local governments and the private sector to solve the problem of wage inequality.
The Silicon Valley economic improvement may be remarkable in any measure but the fact that the ranks of the middle class are declining and that low income households are stagnating may mean that more work must still be done not only by the government but also by the private sector too.
By Roberto I. Belda