Silicon Valley leaders love to talk about meritocracy. But while the region’s top 10% of earners continue to enjoy outsized earnings, wages for the other 90% of income earners are lower—in some cases much lower—than they were 20 years ago.
According to a new, deeply detailed report, middle-class workers in Silicon Valley have seen wages drop as much as 14% in the past two decades, and lower-income households have seen wages sag about 1% lower. Meanwhile, the tech sector’s highest paid workers have seen their wages increase as much as 38%.
That’s a pattern of income inequality even worse than the national average. Nationally, between 2000 and 2016, median-household incomes remained largely unchanged, and lower-income households saw a 5% gain, according to a Pew Research study of middle-income households from September 2018. Only the incomes of upper-income households increased during that period.
The Silicon Valley report, published by University of California, Santa Cruz professor of environmental studies and sociology Dr. Chris Benner, takes a hard look at some of the reasons for such income disparity in such a seemingly prosperous region. For example, Benner says, companies that enjoy a near-monopoly, such as Google and Amazon, use that market dominance to squeeze prices and push down costs, as well as wages.
In some sense, of course, this is a case of market dominance—which has its benefits, Benner tells Fortune. “You wouldn’t want thousands of interstate highways,” he says, explaining how social media services such as Facebook and Twitter work best when they attract a majority of users, instead of fragmenting attention and ad revenue across numerous platforms.
Meanwhile, services like Uber and Lyft also operate optimally due to their market dominance. If there were dozens of ride-hailing services with vehicles on the road, imagine how much worse the traffic would be.
“But we have to figure out how to regulate in a better way so that benefits and revenues get distributed to a greater number of communities in region,” Benner explains. That could help correct some of the income disparity highlighted in his study.
Another major reason for Silicon Valley’s income inequality is that large tech firms have outsourced jobs such as security, food, and janitorial services. “That leads to lower wages,” Benner notes.
The report isn’t all doom and gloom, though—and neither is Benner. He’s been studying economics and income inequality, including in Silicon Valley, for the better part of three decades. He says he’s encouraged that many tech executives are forward-thinking about issues such as immigration, and even about housing and transit—at least when those issues impact their workers, which they increasingly do.
Plus, Benner adds, the problems that come with growth and wealth creation are certainly better to have than a period of deep economic decline. But in a region to seemingly committed to innovative problem-solving, it could be a point of pride if Silicon Valley’s biggest companies could improve the economic reality of all employees. Imagine how all workers’ lives might improve if tech firms could set this type of national standard, rather than fall behind it.
