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Silicon Valley: getting poorer?

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The good fortune of Silicon Valley's technology entrepreneurs isn't advancing economic mobility within the community. Income inequality and poverty are rising; a sprawling tent city of homeless residents is growing.

Apple, Google and a sundry of start-ups are generating substantial equity. Once-vacant office parks are abuzz with activity, stock prices are soaring, and the Valley is attracting new investments. Wealth is pouring back into the Valley after many difficult years. It's fair to call it a comeback, because it is.

The peculiar thing is that a great many residents wouldn't even know it. The Associated Press published a report on Sunday detailing the disparity among Valley residents. It cites statistics from a community foundation, which find that more residents receive food stamps now than any period over the past decade.

Another major finding was that the average income of Latinos fell 14 percent over five years, to US$19,000. Meanwhile, expenses have risen to levels that people earning low wages couldn't possibly afford.

The average price of a house in the Valley is $550,000, and living expenses are so high that a family of four must spend nearly $90,000 annually for basic necessities, according to the AP report. Homelessness has risen 20 percent over the past two years, and the aforementioned tent city now covers 28 acres near the airport.

It's easy to say that people who can't afford those prices should relocate, and some people commenting on the story did. But it used to be much more common for mixed income families to live in the same neighborhood.

What's changed is that the United States is gradually segregating itself by wealth. In 1980, 9 percent of upper-income families lived in exclusive developments; that number soared to 18 percent in 2010. Likewise, lower income families tend to reside in lower income areas. Income inequality is worse than many Latin American countries.

Demographics and population remained nearly constant from 2000 to 2010, according to U.S. Census data.

National trends like these matter to the context of the AP article. After all, Silicon Valley doesn't exist in a bubble. What's happening in Silicon Valley is also happening nationally. Last June, over 64 million Americans - or approximately 15 percent of the U.S. population - received benefits from the government's Supplemental Nutrition Program. The median household income fell significantly during and post Great Recession.

Some would argue that the wealth will eventually trickle down, but household income has remained stagnant in the U.S. for the past several decades even as the country's overall wealth has grown. Silicon Valley is almost a microcosm for the entire U.S., though some conditions may be unique to the region.

Silicon Valley's innovation and manufacturing laid the foundation for a strong middle class decades ago. Investments in the public sector, excellent public schools, genius, and insane work ethic allowed for middle class children like Steve Jobs to flourish. Will the next generation have the same capacity to realize their potential?

(image credit: University of Washington)

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— By on March 11, 2013, 4:28 PM PST

David Worthington

Contributing Editor

David Worthington has written for BetaNews, eWeek, PC World, Technologizer and ZDNet. Formerly, he was a senior editor at SD Times. He holds a business degree from Temple University. He is based in New York. Follow him on Twitter. Disclosure