Silicon Valley Economy: Good News for Some, Not Good for Many

Silicon Valley Economy: good news for some, not good for many

By Gil Villagrán, MSW El Observador, San Jose, March 6, 2008

On February 29, a State of the Economy in Silicon Valley (SV) forum was held at the City of San Jose Rotunda. As reported in Joint Venture’s Annual Index of Silicon Valley, the region has bounced back from the dot-com bust with high marks for high tech innovation with six of the top ten cities in the nation for patent registrations located in SV, and San Jose tops the list! Venture capital investment in SV has been more that $4 billion per year, more than 25% of the nation’s total such investment, and the value added per employee has steadily risen to $120,000 per year, while the national average is less than $100,000. With greater investment and innovation, as well as an educated workforce, SV both deserves and enjoys its reputation as a place where many dreams of wealth do come true.

However, there is a shadow behind the gleaming high tech industrial parks of SV. Most tech workers earn much less than the value they earn for their corporations. Twenty-two percent of households earned less than $35,000, with a number of such households having two or more workers. Thus even in our fabled community, many residents are not poor because they do not work, but rather, are poor because they work at very low wages.

In fact, there was a decrease of 13% in median household income in SV in the first four years the new century, and finally an increase of 6% in 2005. Yet even modest gains can be obliterated by inflation, which rose 14% since 2002. The grim reality for too many residents is that their American Dream eludes them with downsizing or outsourcing of jobs, higher costs of renting or buying a home, and longer more congested commutes. The Mercury News reports 13,300 lost their jobs in Santa Clara and San Benito Counties just from December to January (3-1-08, p. 1C). Carl Guardino, CEO of SV Leadership Group, reported that only 15 of 100 families can afford a median priced home, causing workers to move further away from their jobs to afford a home by commuting two or more hours.

Yet there is good news for some: the medium household income is $76,300, so half of our neighbors have incomes higher than that, many whose income is much higher, by hundreds of thousands and even millions. Though these stratospheric incomes are not likely to be from the wages of labor, but from stock options and capital gains of corporate wealth not available to working men and women.

One example reported in the Mercury News the next day (3-1-08, 1-C) exemplifies the phenomenon of a corporate King Midas who turned a bankrupt corporation into a shower of wealth for himself. Robert May “labored” for two years as chief executive of Calpine, the San Jose energy provider, managing its reorganization after its “self inflicted overambitious expansion plan that led to legal and financial woes.” In just two years, May, known as a turnaround specialist in the corporate world, “earned” $29 million for restructuring Calpine’s dept from $18 billion to $11 billion, along with the layoff of 1,000 employees. The company reportedly “understands the difficulty for shareholders (who lost all or much of their investment) who may be disgruntled.” There was no news on the corporation’s understanding of the woes of the fired workers.

There is mounting economic evidence that our community, as our nation, is becoming a bifurcated society of the haves-too-much and the haves-less-than-enough. Such social division has created tragic upheavals in other times and other societies, with dire consequences for millions.

As the forum speakers shared their insights on our valley’s economy, members of the Santa Clara Valley Impeachment (of Bush) Coalition held a large sign outside the glass of the Rotunda reading “for Truth, Impeach, for Peace.” Not one speaker remarked on the sign visible to all throughout the forum, nor did anyone make note of the same day article (SF Chronicle, A8) that Joseph Stiglitz, Nobel Prize economist, estimates the Iraq war may cost our nation up to five trillion dollars: $ 5,000,000,000,000!

Could such a cost have an effect on our Constitutional Preamble to promote the general welfare (of a quality life) for all? Perhaps the subject of another forum?