Thursday, Aug 28, 2008
In California, birthplace of the high-tech boom, the wage gap is growing, setting yet another national trend.
Oct 26, 2000 | Silicon Valley is home to some 65,000 millionaires, plus a bumper crop of billionaires. It's one of the richest regions in the country, and a driving force behind the nation's record economic boom. But it's also the setting for a vexing national conundrum: The gap between rich and poor is growing, and nowhere faster than in California, birthplace of the new economy.
Even if families work hard at multiple jobs, they often have a hard time making ends meet -- especially after paying for high-cost housing. Technology drives the area's economy, but the industry leaves many people behind.
Concepcion Garay, 49, lives in Silicon Valley. After 21 years of working in the factories of companies like Control Data, Sperry Univac, Amdahl and Fuji Optical -- most of which moved to Asia or Mexico -- she's now working for $8.40 an hour as a home healthcare aide. It's less than she was making years ago in the factory -- despite the big boost in pay and benefits that came after she and fellow aides organized into a union.
Marcella Juarez, 29, recently emigrated from Mexico. She makes $488 a month at a Taco Bell; her husband makes around $1,000 a month as a day laborer. The rent on their rundown two-bedroom apartment in a crime-burdened neighborhood of East San Jose is $1,225 a month. They manage to survive on an income that officially puts them well above poverty level by living with their two children in one bedroom, then renting out the other bedroom to four other hardworking immigrant men.
James McCuiston, 28, found a home in San Jose when he moved from Texas as a teenager. He graduated from high school, then worked in a variety of jobs, including several computer-chip manufacturing companies, but he was laid off in one of the frequent and sudden twists of corporate fortunes characteristic of the Silicon Valley economy. Now through a temporary employment agency he found a job running the stockroom of a small company, earning $10 an hour -- full-time employees who used to do his job earned $16.25 an hour. In the evening he waits tables. He figures that with the two jobs he might make enough to rent a room in an apartment with someone else. For now he's crashing for free with a friend and sharing his car.
"Some things are unfair," he reflected as he took a lunch break in the glaring San Jose sun. "You see people younger than me driving around in a BMW or Mercedes who don't have a care in the world. It's real difficult for those of us who don't have Mom and Dad looking out for them and can back them up if something goes wrong ... I'd like to think of myself as middle class, but now I definitely fall into the poverty level. I see myself as working class, and I don't see myself getting out of it for a while."
Despite the long run of economic growth in the 1990s, the economic chasm between the rich and the rest of the nation that first opened up more than 25 years ago has continued to grow. In some respects, that growth has slowed somewhat in recent years. The wages of the poorest Americans have risen significantly, and the median family income has crept upward, thanks to minimum wage increases and a tight labor market.
On Monday, California decided to raise its minimum wage by $1, to $6.75, over the next two years. Congress is expected to back a similar raise in the national minimum wage, which is $5.15.
But the gap has continued to spread between the average worker and the richest 5 percent of Americans, an elite that has been the principal beneficiary of both soaring executive salaries -- up 63 percent from 1989 to 1999 -- and the booming stock market (despite the hype about the growing proportion of Americans invested in the stock market, the nation's richest 5 percent own four-fifths of all common stock).
California's economy is still booming, outperforming the rest of the country by many measures since 1995. But at the same time, income inequality in California is greater and growing faster than in the rest of the country taken as a whole, and compared to almost every other state.
In late August a San Francisco Federal Reserve Bank study reported that median family income dropped by 4 percent from 1989 to 1999, even though it rose 8 percent for the rest of the nation. "In 1998," the bank reported, "a greater number of Californians lived in poverty, a smaller number were in the middle class and a majority had family incomes below those of comparable families living outside of California." Only the top 30 percent of families outperformed the rest of the country. (This in a state where incomes had been well above average at all levels for most of the decades after World War II.)
In addition, the cost of living in California is much higher than in most of the United States, making California workers even worse off. Taking into account the cost of living, the Los Angeles Alliance for a new economy recently calculated that 40 percent of Angelenos live in poverty.
The biggest factor in high living costs is housing -- especially in the Bay Area. In San Jose, for example, the median house costs more than $400,000. Because of those prices, fewer Californians own homes than other Americans. Renters suffer the greatest hardship: Forty percent of San Jose renters spend more than 30 percent of their income on housing.
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