In Silicon Valley, the rich get richer while wages stagnate for the rest

Silicon Valley isn't just a hub of inequality — wages are declining for everybody but the rich

By Nicole Karlis

Senior Writer

Published October 9, 2018 7:00PM (EDT)

 (AP/Marcio Jose Sanchez)
(AP/Marcio Jose Sanchez)

Silicon Valley is considered an economic powerhouse, lauded as a model of economic growth the world over. Yet the wealth disparity between low, mid and high-level tech workers is far greater than it was two decades ago; worse, the economic impact of the tech industry in the Bay Area has been making the rich richer and the poor poorer, according to a new study published on Monday.

The report, entitled “Still Walking the Lifelong Tightrope: Technology, Insecurity and The Future of Work,” analyzes how wealth and economic gains by big tech companies are being distributed in Silicon Valley. The report is a follow-up to a similar one conducted in the late 1990s called “Walking the Lifelong Tightrope: Negotiating Work in the New Economy,” which was conducted by the same author, Dr. Chris Benner, in the midst of discussions at the time around tech being the "new economy."

Benner, professor and director of the Everett Program for Technology and Social Change at UC Santa Cruz and lead author of the study, told Salon he was surprised by the latest study’s findings this time around, and is sounding the alarm that Silicon Valley's economy could create wealth inequality across the world if replicated.

“We were surprised by the results,” Benner told Salon. “We expected to see growing inequality, but I didn’t expect to see the level in declining wages across income distribution and the extent in which returns to labor have declined.”

The decline found by Benner and his colleagues is significant. Specifically, the study found that over the past 20 years, economic input in Silicon Valley increased by 74 percent, but inflation-adjusted wages fell for 90 percent of jobs. Nine in 10 Silicon Valley-jobs pay lower wages than they did in the late 1990s. A brief of the report stated: “In fact, if labor’s share of GDP had been the same in 2016 as in 2001, the average Silicon Valley worker would have received an additional $8,480 in pay and benefits that year alone.”

“Owners of high-tech firms and investors are making tremendous gains over last 20 years,” Benner told Salon.

As a result, this disparity is causing a trend of growing low-wage jobs in Silicon Valley — and tech workers over the age of 50 could be the most vulnerable to this trend. As the report states:

Net job growth in the last 20 years has been disproportionately in low-wage jobs, with the proportion of workers in low wage jobs increasing by 25%, while the proportion of workers in middle and upper wage jobs declined [...] Challenges for older workers in the industry have accelerated in the region. In the mid-1990s, the highest paid workers in high tech had an average age of 51; today, that average age has crept down to 48. High-tech workers older than 48, on average, earn less than younger workers.

The authors of the report don’t place blame on the technology industry though. Instead, they conclude the disparity and disconcerting wage trend is a result of the lack of public policy.

“The recommendations we laid out 20 years ago still make sense as public policy, but calling for national change in labor market institutions and policies is no longer sufficient,” the report notes. “Especially in the current political climate, we need to also be exploring local, regional and state level solutions to these problems. Such innovations, in addition to supporting workers in Silicon Valley and California, can serve as a model for national policies in the future. “

Benner said policies such as increasing minimum wage, creating affordable housing, and lowering the cost of living are essential to closing the wealth gap — especially since it is the tech industry's contract workers who suffer most from the high cost of living. This category includes janitors, cafeteria workers, and security guards.

Derecka Mehrens, executive director of Working Partnerships USA — which collaborated in the research for the report — said in a statement Silicon Valley’s trend could be problematic, especially since other cities are trying to replicate it.

“Cities across the country are falling head over heels to emulate Silicon Valley’s boom, but the reality is that tech's business models mean 9 in 10 workers here don’t share in the benefits – only the costs in sky-high housing prices and gridlocked traffic,” Mehrens said. “It’s clear those business models need to change so that the workers and communities who make the tech industry’s success possible see a fair return on their work.”

By Nicole Karlis

Nicole Karlis is a senior writer at Salon, specializing in health and science. Tweet her @nicolekarlis.

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Income Inequality San Francisco "silicon Valley" Tech Industry Wealth Gap