Area’s wealthy households rise as middle wanes
The dividing line is a staggeringly high salary of $150,000, a new study suggests
In today’s Bay Area, what’s the dividing line between those who can make it and those who can’t? A new study suggests it’s a salary level that elsewhere might seem staggeringly high: $150,000 a year.
Silicon Valley and the East Bay are gaining upper-crust households, while middle- and low-income households are
dwindling — indicating the region’s income gap is growing wider.
“The Bay Area is becoming like Manhattan West,” said Russell Hancock, chief executive officer of Joint Venture Silicon Valley, which on Monday released the report from its Institute for Regional Studies. “We are seeing many more wealthy people, highly compensated people, living in the Bay Area, and a disappearance of the middleclass segment.”
In 2015, the number of households with median annual income and benefits totaling $150,000 or more grew by 36,000 in Silicon Valley, defined as Santa Clara and San Mateo counties. At the same time, the number of households with median incomes below that level shrank by 17,400.
Threat to economy
In the East Bay, the number of households with $150,000 or more in median income increased by 37,700, while those households with incomes below that threshold dwindled by 16,500. Joint Venture Silicon Valley derived the figures from a recently released nationwide set of statistics by the U.S. Census Bureau.
San Francisco showed similar trends, the report stated. Households in the $150,000-and-above range increased by 18,900, while those below that benchmark decreased by 17,000, the study found.
The economic divide in the Bay Area could imperil the region’s economic health, experts warned.
“Our community is not sustainable if we don’t have a healthy middle class and a healthy economy for middleand low-income people,” said Emmett Carson, founding chief executive of Silicon Valley Community Foundation.
The shifts appear to be a combination of middle- and low-income residents leaving the region — and being displaced by upper-income households in some cases — and middle-income earners jumping into the upperincome bracket.
“If there are more highincome households in Silicon Valley, there is no way that is completely bad,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “This has a lot of good contained in it if people moved out of the middle and into the higher income groups.”
Rachel Massaro, vice president and senior research associate with Joint Venture Silicon Valley, agrees that middle-income families have enjoyed upward mobility. But she maintained that an even bigger factor is that people in middle-income groups became priced out of the expensive Bay Area and migrated to counties that border the region or to outlying areas such as Solano County or eastern Contra Costa County.
“There are people moving farther away from the Bay Area because they can’t afford to live here,” Massaro said. “People may be keeping their jobs and commuting in. That makes traffic a bigger problem.”
The shrinking middle class has comprised an array of ordinary jobs that Hancock calls community infrastructure employment.
“Teachers, police, chefs, retail clerks, firefighters, health care workers, nurses, office workers — those are all being displaced,” Hancock said.
Paying for top talent
The tech boom and the quest by Silicon Valley companies to pay whatever is necessary for top digital talent is believed by experts to be part of the upper pressure on incomes and the skyrocketing cost of living. And some believe that this new economy of higher incomes and expensive housing is here to stay, at least for the time being.
“These transformations in the Bay Area are real, and they might be irreversible,” Hancock said. “The Bay Area is minting all sorts of affluent people. But there’s more to this. People are self-selecting themselves to move into a high-priced region. They are replacing people who can’t self-select.”