People often ask me, how is the economy in Silicon Valley. And I always tell them its good if you are good. I am not sure if its helpful for them, but truth be told, its as clear as it can be. It all depends on your skill-set and your ambitions. There is no clear yes or no answer when it comes to economy. The umemployment is 8%, but if its you who lost your job, the unemployment is 100%. And if you are earning in six-figures or as an enterpreneur raking in multi-millions after IPO of your latest brainchild, the economy is as good as it gets.
I read the following article on the weekend in San Jose Mercury News. And its quite interesting. Reproducing the whole thing, because after 7 days SJMN starts charging to access their archives. Some parts are highlighted for emphasis. You can change the names, and you can change the nationalities of these three men, and you will have the same stories all around you.
A tale of two valleys](http://www.mercurynews.com/mld/mercurynews/news/local/states/california/the_valley/10772265.htm)
THREE WORKERS’ STORIES ILLUSTRATE WIDENING ECONOMIC GAP IN AREA
By Chris O’Brien
Mercury News
Ask K.B. Chandrasekhar, 44, about the Silicon Valley dream, and he’ll tell you it’s alive and well. Since arriving from India in 1992 with almost nothing, he is now on his third start-up, Jamcracker. His company is growing. His venture capital investments in India are going strong. It may not be the boom, but the view from the seven-bedroom house he built in Saratoga still looks good.
Ask Doroteo Garcia, 40, and he’ll tell you the dream of prosperity is further out of reach than ever. Nine years after arriving from Mexico, Garcia spends his days cleaning the Stanford University art museum before pedaling his bike to a part-time job washing dishes. From the studio apartment he shares with his son in East Palo Alto, he laments that he has less money to send home since he lost his second full-time janitorial job.
Ask Steve Clough, 39, a former technical support worker who fell from Chandrasekhar’s world to Garcia’s during the tech bust, and he’ll tell you the transition is jarring. Since losing his job in 2003, Clough has struggled to pay bills while piling up debt. From his part-time job as a high school math teacher, Clough wonders if the doors to high-tech prosperity have closed for good.
All three men are right. By the numbers, the economy is getting better and worse – depending on who you are. Silicon Valley has developed two separate economies that have drifted further apart ever since the dot-com bubble burst in 2000.
**In the valley’s technology economy, profits, revenues and average pay are up dramatically. **But fewer people are sharing in the good fortune because tech companies are doing more with less – they have cut tens of thousands of jobs and continue to do so, boosting the productivity of their remaining workers.
People like Clough are being pushed out of this first economy and falling into the second, non-tech economy, which includes health care, education, construction and tourism.
In that world, employers are beginning to add more jobs but pay and benefits are falling. With the ever-increasing cost of living here, workers in the second economy are increasingly being squeezed.
The economy and businesses are doing well,'' said Doug Henton, president of Collaborative Economics, a Mountain View research firm. But the people aren’t benefiting as much. And as a result, more residents are under economic stress.‘’
**Living the valley dream
**• Indian immigrant says opportunity remains
If ever there was a poster child for the Silicon Valley dream, it would be Chandrasekhar. Working for a tech company in Bangalore, India, during the early 1990s, Chandrasekhar constantly heard tales about the wonders of Silicon Valley. In 1992, he moved his wife and two kids here with $2,400 to his name.
He immediately started a company with a friend that they sold two years later for $400,000. They plowed that money into another start-up that became Exodus Communications. The company went public in 1998, and by the time he left two years later, Chandrasekhar had sold more than $135 million in stock.
His entrepreneurial passion undimmed, Chandrasekhar started Jamcracker. The company stumbled during the downturn, running out of venture capital and paring its workforce from a peak of 200 people to just 25. Chandrasekhar invested $10 million of his own money to keep the company going. Last year, business picked up. The company hired 60 people and is close to being profitable.
Chandrasekhar spends about two months every year in India, where he’s an investor in three companies. He also has donated about $4 million to charity through foundations he has created in the United States and in India to fund everything from education to hygiene in his native country.
Despite the recent downturn, Chandrasekhar says the spirit of innovation and entrepreneurship remains strong in Silicon Valley.
It's tougher today than it was in the 1990s,'' he said. But the opportunity is still there.‘’
Indeed, on paper at least, 2004 was a boom year for the valley. Valley companies are on pace to post record profits for 2004. During the first three quarters, the combined profits of the 150 largest companies in the valley grew 515 percent to $22.2 billion, up from $3.6 billion during the same period in 2003. Venture capital investment rose for the first time in three years.
According to a recent report from Joint Venture: Silicon Valley Network, average pay increased 8.2 percent in 2003 for people working in high-tech industries. The San Jose-based research and advocacy organization, which prepared the report in conjunction with Collaborative Economics of Mountain View, also said more than half of jobs in key sectors such as software and chips are now high-level design jobs. Productivity rose 4 percent in 2003. And the number of patents issued to Silicon Valley residents grew 6 percent from 2002 to 2003.
So if the good times are back, why don’t more people feel it?
`It’s beating me down’
• Layoff leaves family struggling to get by
The problem is that while the high-tech pie remains plenty tasty for people like Chandrasekhar, it’s also getting smaller. That means there’s less room for those like Clough, who has discovered just how far the fall is from the first to the second economy.
**Clough finished business school in Ohio in July 2000 and moved his wife and two kids to Silicon Valley after he landed a technical support job with Silicon Graphics. They bought a three-bedroom home in Sunnyvale for just under $400,000. **While she got a job teaching at Palo Alto High School, he survived several rounds of layoffs, finally losing his job in February 2003.
His severance and unemployment checks were a sharp drop from the high-five-figure salary he had been making. The family refinanced the house and took out equity to pay other bills.
Although they haven’t missed any major payments, they have accumulated $50,000 in debt over the past two years. While Clough has been looking constantly for new work, he has never gotten far.
In the meantime, he took a job as a substitute math teacher at Santa Clara High School. This fall, his hours increased, turning the job into 80 percent of a full-time position. He’s now making about 40 percent of his salary from two years ago.
Complicating all this: Clough’s wife was diagnosed with multiple sclerosis last month, and there’s no way to know how long she’ll be able to keep working.
Despite the setbacks, Clough said he and his family are determined to stay.
When I finished business school, I saw an opportunity in Silicon Valley,'' Clough said. It was the pot of gold at the end of the rainbow. But it never opened up. It just turned sour. Maybe things will grow enough so that something opens up for me. Right now, it’s beating me down.‘’
Unfortunately, it’s probably only going to get tougher.
The valley lost jobs for the third consecutive year in 2004, although losses slowed to 1.3 percent from 5.3 percent in 2003. And according to the recent Joint Venture report, the rate of job loss was higher within the tech economy: 3.2 percent.
Non-tech sectors such as business services, construction and health care all added jobs. But with the exception of health care, average pay fell in most of these categories.
The result is that people are being pushed out of higher-paying tech jobs into lower-paying non-tech ones.
The Rev. Scott Wagers of the Community Homeless Alliance Ministry said he has seen a rising number of former tech workers pass through his homeless shelter in downtown San Jose.
When they lose their jobs, it's a free fall,'' Wagers said. And it’s shocking where they land.‘’
On outside, looking in
• Mexican janitor sees income gap firsthand
They land in Garcia’s economy.
Garcia left his wife and two children in Mexico and came to Silicon Valley in 1996 to earn money to send back home. He rented a studio apartment in East Palo Alto for $600, which he split with two friends.
The boom economy for Garcia meant that work was so plentiful that he could work two full-time jobs.
Five years ago, he landed a job with the company that contracts to provide janitorial services at Stanford. He still holds that job, which pays $10.14 per hour.
But when the downturn happened, Garcia lost his second full-time job cleaning dorm rooms at Stanford for another contractor. So now when he’s done cleaning the Stanford art museum, he rides his bike to a part-time job washing dishes for $8 per hour.
And he has one fewer roommate, which has made rent more expensive.
Two cousins for whom Garcia had helped find work returned to Mexico after they lost their jobs. Garcia doesn’t want to leave because he feels that he has built a community here. At the same time, he has become painfully aware that his lack of education means he will always be on the outside looking in on the first economy.
``We clean the office buildings of the magnates and the leaders of the high-tech companies and we see the luxury they live in,‘’ Garcia said through an interpreter.
``We go into the parking lots and see their BMWs when we have to ride bicycles to work. It’s quite a contrast.‘’
From 1993 to 2003, income for those in the 20th percentile in Santa Clara County fell 6 percent, according to the Joint Venture report. Nationwide, incomes in the same category rose 14 percent.
And the number of residents who can afford to buy a median-priced home in Santa Clara County fell from 41 percent in 1994 to 23 percent in 2004.
People have this notion that if they flourish, everyone else rises with them,'' Wagers said. It isn’t true. There’s always been that floor in Silicon Valley where things never seem to get any better.‘’
Building a safety net
• Agencies try to help people weather storm
Governments and social-service agencies across Silicon Valley are struggling to cope with the impact of these changes. They have tried to step up programs that help people cover utility bills, get enough food or find housing and shelter.
The non-profit Urban Ministry recently expanded a five-day-a-week meal program by adding one day on the weekend because there were so many people coming who work full time.
``One bump in the road, and they are one step away from becoming homeless,‘’ said Brooke Scharnke, the program’s director.
Many groups are still just trying to get a sense of how big the problem is. Santa Clara County is in the middle of a project to officially count its homeless population. United Way Silicon Valley is conducting its first needs assessment since 1997 in an attempt to re-evaluate the way it provides services and expects to release the results in April.
And Thursday, when Joint Venture released its Silicon Valley Index at a breakfast forum at HP Pavilion, it also held a panel discussion about the problems confronting the region.
Members of the panel generally agreed there needed to be more emphasis on education and retraining programs. They also called for the development of more affordable housing.
One panelist, Manuel Pastor – director of the Center for Justice, Tolerance, and Community at the University of California-Santa Cruz – said that if the region is going to continue to thrive, it’s important that it find a way to make sure people in the second economy share in the prosperity.
One of the concerns is that there's a wider gap, and that it's persistent,'' Pastor said. And that could wind up being the Achilles’ heel of the region.‘’