Poverty grows in Silicon Valley as tech boom drives income gap
People line up at the food pantry at Sacred Heart Community Service on Friday, Feb. 21, 2014, in San Jose, Calif. (AP / Marcio Jose Sanchez)
Martha Mendoza, The Associated Press
Published Saturday, March 8, 2014 3:46PM EST
SAN JOSE, Calif. -- Arwin Buditom guards some of the most successful high-tech firms in America. Joseph Farfan keeps their heat, air and electric systems humming. But these workers and tens of thousands like them who help fuel the Silicon Valley's tech boom can't even make ends meet anymore. Buditom rooms with his sister an hour's drive from work. Farfan gets his groceries at a food pantry.
"It's unbelievable until you're in the middle of it," Farfan said, standing in line at the Sacred Heart Community Center in San Jose for free pasta, rice and vegetables. "Then the reality hits you."
Silicon Valley is entering a fifth year of unfettered growth. The median household income is $90,000, according to the Census Bureau. The average single-family home sells for about $1 million. The airport is adding an $82 million private jet centre.
But the river of money flowing through this 1,800-square-mile peninsula, stretching from south of San Francisco to San Jose, has also driven housing costs to double in the past five years while wages for low- and middle-skilled workers are stagnant. Nurses, preschool teachers, security guards and landscapers commute for hours from less-expensive inland suburbs.
Now the widening income gap between the wealthy and those left behind is sparking debate, anger and sporadic protests.
"F... the 1%" and other rants were spray-painted last month on walls, garages and a car in the Silicon Valley town of Atherton, home to many top tech CEOs that Forbes magazine last year called the nation's most expensive community. In Cupertino, security guards rallied outside Apple's shareholder meeting on Feb. 28 demanding better wages. "What's the matter with Silicon Valley? Prosperity for some, poverty for many. That's what," read their banner.
Farfan, 44, a native of the valley, said he figured he must be mismanaging his $23-an-hour salary to be struggling with what seemed like a decent paycheque. But when he met with financial counsellors, they told him there was nothing left to cut except groceries because rent, child support and transportation expenses were eating away the rest of his money.
Buditom, also 44, said the reality of working for some of the nation's richest companies has sapped his belief in the American dream. For the past four years, he has been living in his sister's apartment, commuting an hour in stop-and-go traffic for a $13-an-hour security job.
"I'm so passed over by the American dream, I don't even want to dream it anymore," said Buditom, who immigrated from Indonesia 30 years ago. "It's impossible to get ahead. I'm just trying to survive."
From the White House to the Vatican to the world's business elite, the growing gap between the very wealthy and everyone else is seizing agendas. Three decades ago, Americans' income tended to grow at roughly similar rates, no matter how much they made. But since about 1980, income has grown most for the top earners. For the poorest 20 per cent of families, it's dropped.
A study last month by the Brookings Institution found that among the nation's 50 largest cities, San Francisco experienced the largest increase in income inequality between 2007 and 2012. The richest 5 per cent of households earned $28,000 more, while the poorest 20 per cent of households saw income drop $4,000. To the south, Silicon Valley's success has made it a less hospitable place for many, said Russell Hancock, president of Joint Venture Silicon Valley, an organization focused on the local economy and quality of life.
"We've become a bifurcated valley, a valley of haves and have-nots," Hancock said. "The economy is sizzling any way you slice it, and it's about to get hotter. But having said that, we are quick to point out there are perils to our prosperity."
Once a peaceful paradise of apricot, peach and prune orchards, the region is among the most expensive places to live in the U.S. Those earning $50,000 a year in Dallas would need to make $77,000 a year in the Silicon Valley to maintain the same quality of life, according to the Council for Community and Economic Research; $63,000 if they moved from Chicago or Seattle.
Housing costs are largely to blame. An $800-a-month, two-bedroom apartment near AT&T's Dallas headquarters would cost about $1,700 near Google's Mountain View, Calif., headquarters. Dental visits, hamburgers, washing machine repairs, movie tickets -- all are above national averages.
Five years ago Sacred Heart was providing food and clothing for about 35,000 individuals a year. This year it expects to serve more than twice that. On one brisk morning recently, families, working couples, disabled people and elderly lined up out the door for free bags of food, just miles from the bustling tech campuses.
Those firms, meantime, are increasingly opting to build their own infrastructure rather than depend on public systems and have become social bubbles, with their own child-care centres, cafes, dry cleaning services, gyms, onsite health providers and hair salons. eBay changes its employees' oil; Facebook repairs their bikes. Some of those workers are in-house, with good salaries and benefits. Others are contracted out.
The companies have also put some money back into the communities. In the past three years, Google has given nearly $60 million to area nonprofits, including Second Harvest Food Bank. The firm also gives grants to advance math and science education, and every June workers are encouraged to volunteer during a weeklong event called GoogleServe. Apple donated $50 million for new buildings at Stanford University.
"Google strives to be a good neighbour in the communities where we work and live," Google spokeswoman Meghan Casserly said.
Still, said Poncho Guevara, who runs Sacred Heart: "The juxtaposition of the innovation and growth happening here, compared to the social needs, portends what's going to be playing out in the rest of the country in years to come."
While some are struggling to survive, others are fighting back.
Twice in December and again in January, activists in San Francisco, where recent tax incentives have lured Twitter, Yelp, Spotify and other firms, swarmed privately run shuttle buses that ferry workers for Google, Facebook and other tech companies from the city to work. Tires were slashed, rocks hurled. Signs taped to the buses read: "Gentrification & Eviction Technologies: Integrated Displacement and Cultural Erasure" and "F--- Off Google."
Last month, as protesters beat drums outside, former Daily Show member and comedian John Oliver mocked the tech elite during an annual awards ceremony in San Francisco that honours startups and internet innovations. "You are no longer the underdogs," he told the audience. "You're pissing off an entire city, not just with what you do at work, but how you get to work. It's not easy to do that."
The crowd roared with laughter, and he went on.
"I heard the latest design for your buses is to use tinted windows but reverse, with the tint on the inside, the reason being, 'Look, I don't mind if the peasants see me, but I would rather not see them, hmm?"
Fewer laughs followed that one.
The protests and critiques have left some who work in the industry nonplussed.
"I'm not a billionaire. Like many people, I'm still paying off my student loans," said Google maps program manager Crystal Sholts during a meeting in which San Francisco officials approved a plan to charge a fee for the corporate shuttles to use municipal bus stops.
Activist Sara Shortt of the Housing Rights Committee of San Francisco said the protests weren't intended to target the workers themselves.
"We're going after the bus as a symbol, a very palpable symbol, of the dramatically growing income divide in our city," she said. "Frankly those gleaming white buses with their tinted windows are a slap in the face to the rest of us who are waiting for the public bus or riding our bicycles down the bike lanes competing with these mammoth vehicles."
Last month during a conference aimed at helping tech workers find more wisdom and peace in their lives, protesters with a banner reading "EVICTION FREE SAN FRANCISCO" drew nervous applause when they jumped on stage. But when a woman with a megaphone began jumping up and down and yelling "San Francisco, not for sale!" and guards scuffled with the group to move them offstage, the audience grew silent and a live stream video was cut.
When calm was restored, Google's Bill Duane, a senior manager for well-being, led the crowd in meditation.
Economist Steven Levy has tracked the region's economy through boom and bust. He said talking about the wealth gap "gets you nowhere."
"It's an indicator that the top are getting richer, but the folks at the bottom are stuck, with stagnant wages and not enough housing, not enough transportation, not enough infrastructure," he said.
Solutions abound: Build more affordable housing, raise the minimum wage, train locals for high-tech jobs. But they all cost money, and advocates such as Guevara said not enough has emerged.
"There is this sense of disconnection," he said. "The techies may live and work in the same city, but their kids are not going to the same schools. They don't live in the same neighbourhoods. There simply isn't much engagement across the divide."
A few prominent figures in the tech elite have fanned flames on the issue of income disparity. Greg Gropman, CEO of the tech startup AngelHack, ridiculed San Francisco in a now-deleted Facebook post in December: "Why the heart of our city has to be overrun by crazy, homeless, drug dealers, dropouts, and trash I have no clue."
A month later, venture capitalist Tom Perkins likened what he called "the war on the one per cent, namely the 'rich"' with fascist Nazi Germany in an open letter to The Wall Street Journal: "Kristallnacht was unthinkable in 1930; is its descendent 'progressive' radicalism unthinkable now?" He apologized a few days later, calling his choice of words "terrible."