In America’s tech capital, the rich are getting richer and the poor are getting poorer.
For nearly twenty years, Silicon Valley has led the nation in economic growth. But most of its workers have been excluded from reaping the rewards of this boom.
Nine in ten workers in the California region make less than they did in 1997 after adjusting for inflation, according to a new report. The study shows a pattern of income inequality in tech’s home turf that’s even worse than the national average. Authors of the report point to an increasing concentration of company profits going toward the salaries of a select few — largely, high skilled tech workers.
“I see this as a real warning sign,” says University of California Santa Cruz Professor Chris Benner, who published the study with worker advocacy group Working Partnerships USA. “Tech has been a tremendously successful business market, but we need business leaders to ensure that our workers are benefitting from economic growth.”
Middle-class workers in Silicon Valley are being hit the hardest by stagnating wages, seeing their earnings go down by as much as 14 percent. For those at the lowest rung of the income ladder, incomes have gone down by about one percent. Unlike in Silicon Valley, nationally, median and very-low-income earners have still seen some wage growth, even as the rate of that growth has slowed down in comparison to high income earners.
Meanwhile, tech workers in the Valley have seen their incomes go up across every bracket — with the highest gains in real wages at the 80th and 90th percentile of tech’s income earners, at around 38 and 35 percent, respectively.
Specific reasons behind this deepening income inequality in Silicon Valley, according to the report, include:
- Tech companies are spending a large portion of their capital toward paying a limited number of research and development staff to design new products and software, but not toward maintenance and service staff like factory and maintenance workers — roles that are increasingly outsourced to third-party firms.
- A “winner-take-all market” for many tech companies. Increasingly, a few tech companies have been able to dominate as “winners” in their markets — such as Google in search or Uber and Lyft in ride-sharing — and the report argues that this leaves the other “loser” companies in those markets more likely to pay their workers less than they did before.
- Growing inequality between global and local industries. Local service industries face lower margins than globalized tech firms and can’t keep up with paying their employees as much.
To improve workers’ wages across the board, the report calls for local and state government to support workers’ rights to organize, adopt better labor standards for subcontracted workers, increase taxes on corporate headquarters and provide affordable housing.
With more political debate around how big tech companies pay employees and impact the communities they’re headquartered in — most recently seen through the political pressure placed on Amazon to raise its minimum wage — we might very well see more of a public debate over income inequality in years to come not just in Silicon Valley, but at tech companies across the nation.