Silicon Valley has been an engine for economic growth in the last few decades, but that wealth is not being shared with most of the workers in the industry. Nine in 10 workers in Silicon Valley make less now than they did in 1997 after adjusting for inflation, according to a new report from the University of California in Santa Cruz.
Middle-class workers are being hit the hardest, with their earnings down by 14 percent after inflation. For those at the lowest rung of the income ladder, incomes have gone down less, dropping just 1 percent. This may be because minimum-wage hikes are having some impact, suggests Chris Benner, Ph.D., director and chair of the Institute for Social Transformation at the University of California, Santa Cruz, who published the study, along with worker advocacy group Working Partnerships USA.
The report showed that wages are stagnant despite economic growth and overall wage growth. Overall per capital economic output increased by 74 percent between 2001 and 2017 in inflation-adjusted terms. Overall wages increased, too. Wages rose 3.1 percent in the last quarter, the highest increase in a decade, according to the Labor Department.
What is driving this shocking trend of stagnant wages and widening income disparity in Silicon Valley? Brenner says a confluence of factors, including the "winner take all" dynamics of the information economy, which creates huge tech companies and doesn't leave room for many others, and the outsourcing of more job roles.
Only wages at the very highest levels increased, after adjusting for inflation, over the last 20 years. Between 1997 and 2017, hourly wages for the top 10 percent increased by 0.7 percent. The most significant decline was for those at the middle income level. Those in the 50th percentile have seen wages decline by 14.2 percent over the same 20-year period, while those in the 60th percentile have seen a 13.2 percent decline.
"The problem is as bad as it gets in Silicon Valley. Wages for most working people don't even come close to what is needed to pay for housing and to survive in the area. Many service workers are part of the working homeless, which are people that work full time and are still homeless," said Stephen Boardman, communications director, Service Employees International Union of United Service Workers West, which represents more than 45,000 service workers in California, including janitors, security officers and airport service workers.
Economists are paying close attention to deepening wage inequality in the heart of America's innovation hub that may indicate what lies ahead for the job market.