Job Slowdown Offers Respite for Silicon Valley

SAN FRANCISCO â€”  Silicon Valley’s surging job growth has slowed substantially in the last year, suggesting that the area’s unstoppable surge in home prices and transit problems may have finally reduced its desirability for some businesses.

Yet authors of a report released today say that this respite in the explosive rate of new jobs may give the area a chance to catch up with the last decade’s rapid surge in high-tech industries.

“The idea of Silicon Valley’s runaway growth is over,� said Doug Henton, president of Collaborative Economics in Palo Alto, which conducted the “2000 Index of Silicon Valley� for Joint Venture Silicon Valley, a San Jose-based nonprofit public policy group.

The region added only 21,000 jobs last year--compared with 36,600 in 1998 and 61,400 in 1997. But per-capita income jumped much faster than the national average, leading the report’s authors to conclude that the region is trading sheer employment growth for higher quality jobs. Silicon Valley’s average wage in 1999 rose 5.1% to $53,700, compared with $33,700 nationwide.

Slower job growth combined with higher wages is critical to sustaining the region’s long-term economic vitality, said state Sen. John Vasconcellos (D-Santa Clara), who represents Silicon Valley.

“The valley cannot continue to grow at [such a high] rate without suffocating,� Vasconcellos said.

The trends may offer a modicum of breathing space to tackle traffic congestion and housing shortages, while holding out hope for lower-wage workers who struggle to survive in one of the nation’s most costly regions.

Even so, the so-called digital divide between affluent technology professionals and the huge, largely minority population of service workers, has widened in the area.

The report indicated that African American and Latino students enjoyed modest gains in some standardized test scores and in high school graduation rates. But they continue to lag behind the performance of white and Asian American peers. Latinos, who make up 31% of school-age residents, earned only 6% of all engineering degrees from local universities.

“There’s no one answer� to the education disparities, said U.S. Rep. Zoe Lofgren (D-San Jose). However, new efforts such as homework centers serving minority high school students, staffed by college-age tutors, should have some impact, she said. “It’s not rocket science, but it’s helping kids become rocket scientists.�

But many more such programs are needed, she added.

Among the report’s other key findings:

* Fewer than 38% of area homes were affordable to those earning the median household wage.

* Annual wages in the service sector--the largest single employment category, which includes hotel and retail employees--stagnated at about $23,000 in 1998, the latest year data were available. This suggests that average wage rate improvements were due to fast-rising salaries among high-tech occupations such as software engineers. But the poorest, predominantly minority households found their real income, adjusted for inflation, hovering below 1992 levels.

“The structural problems in the new economy are still there,� said Bob Brownstein, policy director of Working Partnerships USA, a San Jose group that works closely with organized labor. A rapid loss of manufacturing jobs, continuing reliance by local companies on hiring outside contractors for many tasks, have kept wages low in service jobs and have left many local workers without insurance benefits, he said.

“In this region the cost of living is still shaped by the people in the upper half of the hourglass,� whose wages are rising, Brownstein added.

But there were also some positive signs in the Joint Venture report:

* Venture Capital investment jumped to $6.1 billion in 1999 from $3.2 billion in 1998, showing that despite slower job growth Silicon Valley maintained its firm hold as the epicenter of high-tech entrepreneurial ventures.

* Local universities awarded 3,398 engineering degrees in 1998 (the most recent year available), a modest increase over 1997. Growth in home-grown engineers is considered crucial for solving a host of problems associated with housing availability and traffic congestion.

The lack of qualified technologists has caused high-tech companies to import about one-third of all employees from around the world.

* The area also experienced large increases in the proportion of new housing and jobs located near public-transit hubs--a key step toward reducing urban sprawl, said Henton. Unfortunately, the region added only 1,700 new affordable housing units, a fraction of the need.

That record reflects the difficulty local planners and businesses face in getting affluent communities to agree to support higher-density, lower-cost housing developments.

Henton blames “not in my backyard� attitudes for making approval for new housing a battle.

“Forty years of bad land-use planning can’t be fixed overnight,� said Carl Guardino, the manufacturing group’s chief executive in an interview last fall. “It’s going to take a Herculean effort to gain ground.�

But the region must gain ground, or risk a brain drain as more-affordable, less-congested areas recruit top talent--a process that is underway, according to some experts.

“The recognition is growing rapidly that housing here is not what is must be, that transportation and work force preparation are not what they must be,� Vasconcellos said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

SILICON VALLEY SLOWDOWN

Silicon Valley’s explosive job growth has come down to earth in the past year, even though venture capital outlays in the area skyrocketed. But signals remain mixed about the region’s ability to solve daunting problems involving soaring housing costs, traffic congestion and the growing disparity between the haves and have nots.

The money keeps pouring in, but the job growth has slowed ...

... In part because housing is out of reach for many.

*

Source: Joint Venture: Silicon Valley Network

*

Times staff writer Charles Piller can be reached at [email protected].