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San Francisco, Austin Seek to Include More Residents in Tech Prosperity

October 23, 2014

On the heels of a recent memo from the President’s Council of Advisors on Science and Technology (PCAST) highlighting the difficulty middle-skill workers are having finding a route into the modern economy, reports from two tech hotspots suggest that local action is needed to ensure that tech success translates into widespread economic prosperity. San Francisco and Austin are leaders in the nation’s innovation economy and fared better than most of their peer cities through the Great Recession. However, rising housing prices and a lack of resources for middle- and low- wage workers have led to rising inequality and less robust economies in both cities.

A recent MIT Technology Review article explores the phenomenon of tech prosperity fueling, rather than reducing, regional inequality. Author David Rotman uses the writings of Erik Brynjolfsson to explain why new technologies and increased productivity aggravated the divisions between the wealthy elite and everyone else. Brynjolfsson argues that tech-based economies amplify the winner-take-all characteristics of capitalism, with the majority of benefits reaped by small groups of people. Much of the work that would have formerly been done by middle-wage workers is done through information technology. The highest-revenue companies have become smaller and the number of people earning high, or even middle, incomes within those companies has fallen.

 The biggest winners in the new arrangement are not the owners of conventional capital, but entrepreneurs with successful products and business models. Though this model is embraced in many state and regional economic strategies, the net effect is to remove large portions of the population from the view of the economic development and innovation community. Read Technology and Inequality

Economic Prosperity Strategy, a report by SPUR, the Center for the Continuing Study of the California Economy, the San Mateo County Union Community Alliance and Working Partnerships USA, documents the effects these trends can have, even in a metro economy as dynamic as the Bay Area. While the region fared better through the recession and has experienced significant job growth during the recovery period, most of these jobs have been at the top and bottom of the wage scale. The downturn in construction and manufacturing has led to a decline in middle-wage jobs, with the boom in tech and service companies doing little to replace them. Few pathways through higher education, public workforce programs or private apprenticeships exist to help lower-wage workers move into middle- wage jobs. In the Bay Area, as in many booming tech cities, this problem is exacerbated by high housing costs and long commute times.

In many ways these problems are fueled by the characteristics of modern high-tech economies. Industries that employ large numbers of middle-wage workers are replaced by smaller companies employing high- and low-wage workers. Despite Silicon Valley’s meritocratic philosophy, employment in IT is still largely driven by traditional education pathways and by personal networks, both of which may be inaccessible for lower-wage workers. The lack of non-university training programs makes this a very difficult gap to cross.

In order to address these issues, the report includes several strategies to strengthen career pathways to middle-wage jobs, grow the economy with a focus on middle-wage work and improve conditions for workers in lower-wage jobs. Combining the region’s existing innovation infrastructure with these kinds of economic inclusion strategies could help transform the tech boom from an agent of inequality into a way to bridge the gap.

Read Economic Prosperity Strategy: Improving Economic Opportunity for the Bay Area’s Low- and Moderate-Wage Workers

In a recent presentation, Brian Kelsey of Civic Analytics attempted to outline a “theory of everything,” specifically the economy of Austin. Like San Francisco, Austin weathered the recession better than most and has outpaced the rest of the country in both economic and population growth. The region has also had remarkable success in attracting skilled workers. The number of residents with a bachelor’s degree in Austin has risen by 80 percent since 2000 (the overall population grew by 49 percent during that same period). Kelsey notes that these skilled workers, most of whom have moved to Austin from other parts of Texas, have been a key driver of wealth creation in the city over the last 14 years.

Rising housing prices and declining middle-wage jobs, however, have contributed to growing residential segregation and declining prospects for many residents. Many of these new residents with bachelor’s degrees end up underemployed and few pathways exist for current low-wage workers to enter middle-wage jobs. Kelsey suggests support for career and technical education as a potential way to increase opportunities for more people in the region.

Kelsey plans to explore the topic further in a series of blog posts over the next few weeks.

Read Austin, Texas : A Theory of Everything


California, Texasmetros, inclusion