San Francisco tech boom lifts all boats — if you’re on board Page E6
The labor market for high-tech workers in the Bay Area is the strongest in a decade. Thousands of new positions are being offered by small startups and established tech giants. Scores of young, well-educated tech workers are flocking here, a phenomenon reminiscent of the dot-com boom of the late 1990s. Yet the vast majority of us will never work for Google, Apple or a social media startup. How does the growth of high-tech jobs affect the rest of us?
Skeptics question whether the hightech boom is good news for the average family. Progressives from San Francisco to Berkeley worry that the rise of the high-tech sector benefits only young workers with engineering degrees and leaves behind most other workers.
Local housing activists complain that the inflow of tech workers hurts the poor by raising rents and fueling gentrification. Labor activists chastise Apple and other Silicon Valley giants for outsourcing production to China and shedding blue-collar positions.
San Francisco Magazine reported recently that “many San Franciscans don’t feel as if they’re benefiting from the boom in any way. While 23-yearolds are becoming instant millionaires and the rest of the digital technocracy seek out gourmet restaurants and artisanal bars, a good portion of the city watches from the sidelines, feeling left out and irrelevant.”
But the critics miss a key point: While the average worker might never be employed by Google or a high-tech startup, our jobs are increasingly supported by the wealth created by innovators.
The reason is that high-tech companies generate a growing number of jobs outside high tech in the communities where they are situated. My research shows that attracting a scientist or a software engineer to a city triggers a multiplier effect, increasing employment and salaries for those who provide local services.
For example, for each software designer hired at Twitter or Yelp in San Francisco, there are new job openings for baristas, personal trainers, hairdressers, taxi drivers, teachers, doctors, real estate agents and therapists.
My estimates, based on data of 8 million workers in 320 metropolitan areas, indicate that for each new high-tech job in a city, five more jobs are created in local services. These five additional jobs benefit a diverse group of workers: two are for workers with a college education in professional occupations, and three are for workers with less education in nonprofessional occupations.
Thus, the dynamism of the Bay Area’s high-tech companies matters not just to scientists, software engineers and stockholders but to the community at large. Consider this: Apple employs 13,000 workers in Cupertino, but through the multiplier effect, it supports more than 65,000 additional service jobs in the area. Thus, the most important impact of Apple on the Bay Area labor market is outside high tech.
Most sectors of our economy have a multiplier effect, but the innovation sector has the largest. My analysis indicates that attracting one job in traditional manufacturing generates 1.6 additional local service jobs — less than a third of the corresponding figure for high tech.
Thus, the best way for a city to generate jobs for its less educated residents is to attract innovative companies — such as technology firms — that employ the highly educated. This is why San Francisco Mayor Ed Lee’s initiatives to attract and retain hightech companies to the Mid-Market area make solid economic sense. It is not just about high-tech jobs. It is about jobs for the majority of us who will never work in high tech.
The benefits of the tech boom are not limited to private-sector employment but extend to the nonprofit sector. My research suggests that each new headquarters in a city results in $10 million in additional contributions to local nonprofits each year.
The current debate about the American economy is often framed in terms of an inherent tension between the interests of one group and the interests of another: the two Americas of the rich and the poor, the haves and the have-nots. But for job creation, there is no inherent contradiction between the interests of nonprofessional and professional workers.
The key lesson of the multiplier effect is that what is good for one group tends to be good for another. This is a case where the rising tide does lift all boats — at least those boats that are in the same city.