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What Is Wrong with the Bay Area?
I had no idea the coastal elite cities were this bad. I’ve lived in the San Francisco Bay Area for only a short time (since June), and I’ve already decided to leave early next year for greener pastures. I grew up only a hundred miles east of here near Sacramento, yet the Bay Area is more alien to me than Amsterdam was (where I worked one summer).
I was shocked the other day to read a Brookings Institute report that claims the wages of poor working-class Bay Area residents have fallen $4,000 since 2007:
There are many ways of looking at inequality statistically; one useful way to measure it across places is by using the “95/20 ratio.” This figure represents the income at which a household earns more than 95 percent of all other households, divided by the income at which a household earns more than only 20 percent of all other households. In other words, it represents the distance between a household that just cracks the top 5 percent by income, and one that just falls into the bottom 20 percent. Over the past 35 years, members of the former group have generally experienced rising incomes, while those in the latter group have seen their incomes stagnate…
Growing debate about urban inequality suggests that the problem has gotten worse in recent years. But while inequality in cities is somewhat worse today than before the Great Recession, the trend is neither profound nor uniform. Overall, the 95/20 ratio across the 50 largest cities rose from 10.0 in 2007 to 10.8 in 2012. Not surprisingly, San Francisco experienced the largest increase in its ratio from 2007 to 2012. Income for its typical 20th-percentile household dropped $4,000 during that period, while income for its typical 95th-percentile household soared by $28,000. No other city saw nearly as large an increase in its rich households’ incomes.
I’ve not looked at the data directly, but I have a hard time believing this is due to anything other than deliberately-induced regional inflation.
To put it another way, the people here have used the power of government (state and local) to crush the wages of the poor people in this region. They’ve done this by making housing and energy astronomically expensive (especially housing), while blocking as much investment in those two areas as they possibly can.
What is wrong with these people? How can they believe one thing, but do the complete opposite?
Image Credit: Flickr user David Yu.
Published in General
My first thought, Joseph, is that there is likely a great deal of unreported cash income for poorish workers in the area.
NIMBY-ism?
How does that compare to equivalent wages across the country?
They obviously don’t want a bunch of scruffy poor people cluttering up their city.
Low wages are alien.? Isn’t your problem the bizarre culture of predators, danger, crime and brutal perverts packed in like sardines?
Hardly atypical for the West Coast, I do believe Oregon and Washington are moving along a similar path.
If you are surprised then I am afraid you have hardly touched the surface. Local ordinances in these municipalities have many purposes and absolutely none of those intended results have the middle class let alone the struggling poor wishing to advance themselves in mind.
If the delta smelt is at risk, well then suck it up peasants.
Not to be overly dramatic but look, the West Coast is the land of Sacramento, L.A. and Silicon Valley if you do not have an in with any of these then you are in the wrong neighborhood. You do not belong here.
I’m not sure they’re crushing lower class wages directly, but perhaps the lowering of the 20th percentile figure is explained by lower and middle class people moving out of SF because it’s too expensive.
What is wrong with these people?
For starters: They do not understand basic economics. They do not understand the unintended consequences of “social justice” legislation. And the Bay Area is importing poverty from the 3rd World at a pretty alarming rate.
“What is wrong with these people? How can they believe one thing, but do the complete opposite?”
Who says that they believe it? They say it so that they can feel noble about themselves and maybe assuage their consciences a bit. Hypocrisy is in their DNA.
Writing tongue in cheek about the South, Florence King once observed:
It’s hard for most people–not just Southerners, but also bay area liberals–to think systematically. The advantage a newcomer (like you, Joseph) has is that he sees things that the local people habitually overlook. This is partly why many of the best sociological books come from outsiders, like Tocqueville’s Democracy in America or Custine’s Russia in 1839 (or even a lesbian, like Florence King in Southern Ladies and Gentlemen).
The nation as a whole has taken a major hit not just to income, but also to household wealth, which might be more important. The Russell Sage Foundation (warning, link PDF) documented the decline of median household wealth from $87,992 in 2003 to $56,335 in 2013. The trouble in some cities is that the poor have moved away. Many of the poor in San Francisco have probably decamped to cheaper locales, and your neighbors no longer see them: out of sight, out of mind. Similarly, I live in DC, and our poor are steadily leaving town and heading to Baltimore. Our 2010 mayoral election pitted an opponent of gentrification (Vincent Gray) against the gentrification candidate (Adrian Fenty), but this year’s features three gentrification candidates and nobody seriously is opposing their policies.
I don’t think that these bay area liberals genuinely want to hurt the poor, but they do want to line their own pockets. Consider San Francisco’s urban farming: the city is known for its high rents, but the city is giving tax breaks to property owners to start small farms in vacant lots. In their minds, they’re simultaneously doing good and doing well. I’m pretty sure the property owners know darn well that putting an apartment complex on a vacant lot would help ease the rental shortage, but they’d rather have a scenic view and a vegetable garden–and if they can get a tax break to do so, so much the better.
Tl;dr: Self-interest trumps systematic thinking about backing policies that would help the poor.
I suspect their answer would be ever greater subsidies to the poor and middle class–which won’t happen only because of the obstruction of greedy, heartless conservatives like you.
As long as the elites out here–those with advanced degrees or 99th percentile coding skills–can access global markets for their intellectual output, we will continue to have magical thinking of the enviro-leftist sort dominating Bay Area politics.
Consider a typical scenario: You earn $200K coding at a San Francisco startup and have stock options that you reckon will soon be worth millions. You work long hours…in an air conditioned office, but feel guilty about the plight of the poor, the unemployed–all those benighted souls who never got the hang of Objective C and Java. So you vote for Democrats and feel good about yourself. They promise to stick it to the man and help the poor. And save the planet.
Meanwhile, the two-year permitting process to build a factory, sky-high renewable energy prices and endless environmental regulations force your company to expand in China or some other country. And as your company grows, profits pile up overseas, trapped there by California’s highest-in-the-world corporate income tax. So any demand for non-Stanford-PhD labor is satisfied over there, where the money is.
Consequently, the gardeners at your house never get to aspire to anything more, since nothing is available. Nothing will ever be available.
Not everyone can learn Objective C.
I’m not sure it’s a regional problem. My area of Texas is growing by leaps and bounds, but most new housing and apartments seem to be upscale.
Perhaps it is simply because all across the country government (both national and local) is friendlier to big corporations than to small businesses, so the majority of expansion is among higher-salary employees and the prestige products they buy.
Is the 20% on the bottom distorted?
I believe that a certain fraction of those on public assistance of one form or another conclude the benefits a better option then climbing out of the bottom fifth. Is the value of food stamps and public housing included in the income measurement? A $4k drop in W2 dollars may be offset by $10k in food/housing assistance and obamacare subsidies.
It’s not just inequality that SF excels at. It’s also driving away minorities. The black population in SF has been steadily shrinking over the years. It’s currently 4% and dropping. The most liberal city in the country, the most ready to claim the mantle of open hearted champion of the poor and disenfranchised, the quickest to accuse the rest of the country of racism and bigotry, is driving out minorities and the poor at a rate that would make any landed gentry segregationist in Mississippi 80 years ago proud.
Zoning in the Bay Area works to minimize housing, driving the value of existing homes up. That works to minimize who can afford to buy a house. Some acquaintances of mine would acquire renters for bedrooms so that they could afford to make the house payments.
Aaron Miller: #13 “My area of Texas is growing by leaps and bounds, but most new housing and apartments seem to be upscale.”
One suspects that a company offering to build cardboard housing would get short shrift at the County. Housing, like automobiles, change as time goes on. The modern automobile has a AM/FM/CD player and may be Blue Tooth compatible. Air conditioning is standard as well.
We’ve come a long way from when you’d invert the vent windows in an attempt to get the wind to cool off the occupants of the car by moving air (however warm), and your AM radio would play the Shadow or the Lone Ranger if you were within reach of a local AM radio transmitter.
One might see housing as going in that direction. Heating and air conditioning. Access to 500+ channels on the tv. More than one bathroom. Competing amenities with others in the neighborhood. The new norm.
Or objective thinking. (Even if they can learn Objective C.)
Seawriter
Right. I’m well aware that that decline was necessary, too, to avoid a future balance of payments crisis (i.e. Greece). What bothers me is that the decline in wages here doesn’t seem to be driven by market forces or the need to avoid a financial crisis.
Donald, are you asserting that a natural, inflation-like creep in quality is more to blame than zoning which restricts available housing? I would have a hard time buying that (so to speak).
And then “they” figure out they are “the man” and vote for conservatives. . . and then I woke up.
I don’t think that is the case, since corporations are far more productive than small businesses (due to scale). There’s a reason “small businesses” do not open large factories.
Right. Liberals have paid off the poor. They want poor people to sit at home in their slums, send their kids to their crappy schools, and not complain about their living conditions. The Europeans call this “social exclusion.” I wish Americans were that honest.
Please forgive me for quoting him, but Paul Krugman explained what’s going on:
(Krugman often explains a problem well, it’s just that his solutions are usually off.)
There’s still a lot of slack in the labor market in general and in the unskilled labor market in particular. Hence so many college graduates are steaming milk at Starbucks—being a barista would be a great job for some poor folk, but the desperate college grads are squeezing out the high school diploma only crowd. Repeat this effect in dozens of other industries, and you get the poor getting poorer across the board.
Ball Diamond Ball: #19 “Donald, are you asserting that a natural, inflation-like creep in quality is more to blame than zoning which restricts available housing? I would have a hard time buying that (so to speak).”
Actually, depending on the area (and the Bay Area is a very good example), zoning prohibiting building was enacted in several municipalities. No new houses. No sewers, no roads, no street lights, no trenching for carriers of various services, no unwelcome people to the neighborhood which does not exist.
When I was growing up, a house generally had only one bathroom, which meant that if you had to go badly, and your sister was curling her hair, tough…. The single bathroom no longer seems a staple of home building art, which is great if your sister is curling her hair at a difficult time in your life.
Having said that, a dollar worth less than in the past seems to deliver more goods than it did back in the day. Efficiencies are abounding in ways we did not expect when I was much younger. I don’t know if the stuff lasts as long, but it certainly seems to do more in many cases.
When I was in software I spent a lot of time in SV. The lifestyle really is great, almost small-town USA (if you look past the bums).
I have a slightly different take than George. Tons of my ex-colleagues are well-paid, but weren’t around for early equity rounds. Unless you have a >$5MM liquidity event, you’re living like you’re in Manhattan. Even a two tech exec family — two companies anyone in tech would’ve heard of — struggles to buy more than 1000 square feet in a duplex in a SV town.
This phenomenon drives the typically conservative well-off burgher class to either leave — to get better bang for the buck — or to go along with the rent seekers to get some of their own.
This isn’t about the size of houses. My parents are renting a 2300 square foot house (with a three-car garage) in an upper-middle-class suburb of Sacramento for less than I’m paying for my measly half-bedroom apartment.
My oldest son transferred from Los Angeles, CA to McKinney, TX when he discovered his younger brother was renting a house in a nice neighborhood on the west side of Houston for less than oldest brother was paying for an efficiency appartment in a scrungy neighborhood on Supulveda Blvd. in L.A.
(Throw in no state income tax in Texas, and being tired of been considered e-e-evil for being conservative . . .)
The problem in California is the Coastal Commission, which refuses to allow more housing to be built in coastal regions. It is basic supply and demand. When demand outstrips supply prices go up.
(In Texas newer houses cost more than older ones because the new ones are typically larger. There is no shortage premium, however.)
Seawriter
Thanks to whichever enterprising editor found that feature image for me.
Apartments are being built in SF like crazy. There have to be 8 or 9 high rises either just finished or in progress right as the bay bridge meets the city. But they are VERY high end. I used to work right next door to one of the shmancier new ones and word on the street was few if any locals actually live there. Mostly weeknight places for CEOs from Hillsborough or Sheiks from the Middle East.
The tech folks have to skew the higher end something fierce. I’m in a state of constant hiring of Software Engineers and the prices they are commanding — even those of mediocre talent — are mind blowing.
Obviously that doesn’t address why the lower end has seen a reduction.
I’m sorry you moved here. Let this be a warning.
This state is currently run by Liberals/democrats/progressives. It’s the home of the enhanced Pelosi, the midget Boxer and the brainless Feinstein. The drones can’t help themselves. I’ve had many a conversation with them and they actually hate Pelosi. But the stupids won’t vote her out. They keep pulling for “D”. They get what they deserve. They have no idea why their lives suck. Hello?!?
Please read the many writings of Thomas Sowell. Had you read his commentaries, you would have never moved here.
Good luck.
Isn’t this the usual pattern? Upscale folks move into plusher new digs and everyone below moves up. Zoning restrictions and rent control block this dynamic, leading to housing shortages and futile mandates for “affordable housing”.