A look at the impact of the Valley economy on its residents.

Working Partnerships USA's annual look at the state of the economy in Silicon Valley, Life in the Valley Economy (LIVE), measures key benchmarks in the health of the Silicon Valley economy, and provides insight into the impact on local families and broader implications for the American middle class.

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LIVE 2008 report: Download full report

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2007 LIVE report: Full report | August 2007 update

EXECUTIVE SUMMARY

Life in the Valley Economy 2008 examines the state of Silicon Valley's economy through the lens of middle-class and working-class house- holds trying to make ends meet and secure their family's future. As the second annual LIVE report, this publication updates the data and analysis provided in LIVE 2007, highlights trends that have emerged over the past year and discusses implications for the state and nation. Finally, LIVE 2008 adds a special "Solutions" section profiling ten regional initiatives each of which aims to provide a new model to tackle the economic challenges facing working families and communities.

CHAPTER 1: MAKING A LIVING

The large majority of Santa Clara County families depend on work as their primary source of income; more than any other factor, the strength of the job market and of wage levels is central to determining households' financial well-being. Although the strong presence of Silicon Valley companies in international markets has helped cushion the local impacts of the current U.S. recession, the Valley is far from immune to the slowdown, as evidenced by the upward climb in unemployment over the past year. Silicon Valley and the United States will recover from the recession. Yet analysis of the just-completed recovery reveals a disturbing trend: While the region's economy continued to expand, unlike previous economic cycles, this expansion was largely decoupled from job growth. This decade marks the first economic cycle for more than fifty years in which the region suffered a net job loss over the entire cycle.

The decline in job opportunities coupled with an increase in the proportiEXECUTIVE SUMMARY Life in the Valley Economy 2008examines the state of Silicon Valley's economy through the lens of middle-class and working-class house- holds trying to make ends meet and secure their family's future. As the second annual LIVE report, this publication updates the data and analysis provided in LIVE 2007, highlights trends that have emerged over the past year and discusses implications for the state and nation. Finally, LIVE 2008 adds a special "Solutions" section profiling ten regional initiatives each of which aims to provide a new model to tackle the economic challenges facing working families and communities.

The decline in job opportunities coupled with an increase in the proportion of low-wage jobs has placed increasing strain on household budgets. Further pressure is provided by the high cost of living, with inflation driving up prices at rates not seen for 17 years. Together, these three factors - scarcity of jobs, lack of real wage growth, and soaring consumer prices - are lowering living standards for a broad swath of Silicon Valley's households, from the poorest all the way through highly educated professionals. This triple threat is at the root of the "middle-class squeeze."

KEY FINDINGS

Jobs: From Jan. 2004 through June 2008, Silicon Valley added jobs at just a 1.7% annual rate - the region's lowest employment growth of any recovery in the last fifty years.
Wages: Industries that added jobs between 2001 and 2008 had an average weekly wage of $1,194, 41% lower than in industries that lost jobs.
Low-Wage Work: An estimated 32% of all employed workers are paid $15/hr or less, putting them below the minimum earnings needed to meet the basic standard for self-sufficiency.
Income: Real median household income in Santa Clara County remained steady in 2006 at $80,838, showing no significant change from 2005 or 2004.
Inflation: The already high cost of living has soared in Silicon Valley with estimated cost increases since 2000 of 139% for gasoline, 119% for health care, 64% for child care and 50% in electric rates. Over the same period, the average weekly wage grew only 32%.
Cost of Living: The 2008 Self-Sufficiency Standard shows that for two working parents with two kids, it costs a minimum of $62,100 per year to raise a family in Santa Clara County.
Elder Economic Security: For a single retiree living in rental housing, the minimum income needed to make ends meet is $25,391. Among seniors living alone, 51% have incomes too low to adequately meet their basic needs.
Hardships: 93,000 Silicon Valley adults experienced food insecurity during 2005; the majority of food-insecure adults were employed. In 2007, 18,000 Silicon Valley residents experienced homelessness.

CHAPTER 2: SEEKING SECURITY

Over the past three decades, a transformation of the nature of work in the United States, coupled with changes in public policy, has result- ed in a dramatic shift of risk: away from corporations and other large-scale institutions, and onto individual families. Today, the middle class walks a tightrope of insecure jobs, unreliable incomes, inaccessible health insurance, and increasing debt, with worrisome prospects for the immediate future, let alone for retirement.

Middle class financial and asset instability have been brought to the forefront of national attention in the past year with the advent of the mortgage meltdown. Homeownership is a hallmark of the American Dream, and owning one's own home has long been viewed as key to ensuring family stability and financial security. But in the past two years, more than a million American families have seen that dream disappear as their homes have been lost to foreclosure.

KEY FINDINGS

Foreclosures: Foreclosure activity in Santa Clara County has grown by 513% since 2006. In the past two years, one out of every forty homeowners received a notice of default on their mortgage.
Debt: With 26.2% of homeowners holding a home equity loan or second mortgage, San Jose's rate of borrowing against equity is 15th highest in the nation. In 2007-08, the number of personal bankruptcies in northern California rose by 60%.
Union Membership: In 2007, Bay Area union membership rose to 12.1% of private sector workers, the highest rate this decade. Union membership increases average job tenure by 60%.
Unemployment: In the first quarter of 2008, 45% percent of unemployed workers in California ran out of unemployment benefits without finding a new job. The recently passed federal extension of benefits will provide some relief to the long-term unemployed.
Public Assistance: As of April 2008, more than one out of every eight Santa Clara County residents receives some form of public assistance; more than two thirds of these are Medi-Cal enrollees.

CHAPTER 3: STAYING HEALTHY

In Santa Clara County, trends in children's health coverage have been encouraging in recent years, as local policy has helped expand access to quality public health insurance programs. Although the proportion of children covered by a parent's job-based health insur- ance has declined, public programs and outreach efforts have thus far succeeded in countering this trend, with the result that the pro- portion of children with health coverage continues to grow. However, funding limitations and cutbacks at the federal, state, and local lev- els pose a major challenge to reaching the county's goal of 100% health coverage and access for all children.

For Santa Clara County's adult residents, while the most recent data show the overall health insurance rate holding steady, declining trends in employer-sponsored coverage are cause for alarm. Public programs like Medi-Cal have compensated in part by picking up cov- erage for some of the workers who have lost their job-based health benefits, but the large majority of working adults are ineligible for Medi-Cal.

The challenge of accessing needed health care services has grown for many in Santa Clara County - both insured and uninsured - over the past four years. The closure of San Jose Medical Center in December 2004, the termination of Medi-Cal contracts at Regional Medical Center and other hospitals, and the potential closing of Los Gatos Community Hospital in 2009 have left residents with limit- ed health care options and put even more pressure on the county's public health safety net system.

KEY FINDINGS

Children's Health Coverage: Through the efforts of the Santa Clara County Children's Health Initiative to insure 100% of kids, in just seven years the number of children with public health coverage has more than doubled.
Adult Health Coverage: Nationwide, the share of non-elderly adults who are underinsured increased to 20% of those with health insurance in 2007, up from 12% in 2003.
Health Care Costs: The average annual cost to workers in California for job-based family health premiums continued to rise, jump- ing 9.9% in the past year from $2,883 in 2006 to $3,103 in 2007.
Access to Care: In 2007, the total hours that Valley Medical Center's emergency room was forced to divert ambulances to other hos- pitals increased 32%, from 489 hours to 646 hours.
Geriatric Care: Nine out of ten nursing home facilities surveyed in the Bay Area are failing to meet the minimum staffing standard for California.
Health Risk Factors: Overweight and obesity rates have climbed steadily among adults in Santa Clara County. Nearly 54% of resi- dents aged 18 and older are now considered overweight or obese.

CHAPTER 4: BUILDING A COMMUNITY

In Santa Clara County, the lack of affordable housing continues to be one of the major challenges facing families today, threatening not only quality of life but also the region's economic vitality. The shortage of affordable homes forces residents to budget uncomfortably large shares of their income for housing and can make it harder for businesses to attract and retain employees.

The nationwide foreclosure crisis and housing market crash have hit home in Silicon Valley, with ripple effects spreading well beyond the foreclosed-upon properties. Families who have lost their homes - both locally and in the Central Valley - are returning to an increas- ingly expensive rental market. The result is an increase in overcrowded living conditions, increasing stress for displaced children and families and straining neighborhood cohesiveness.

Transportation infrastructure and access is also integral to community livability. Soaring gasoline prices, breaking $4/gallon for the first time on record, have forced families to spend an increasing share of their income on transportation costs. As driving becomes costlier, public transit ridership in Santa Clara County has grown, but increases remain modest; decades of urban planning for automobiles and underinvestment in transit have left Silicon Valley without the necessary transit infrastructure to accommodate and encourage a major shift in commuter behavior.

Public safety is also a growing community concern. In 2007 the county's largest city, San Jose, lost its designation as the "Safest Big City in America," a title held for six straight years. Coinciding with its drop in ranking, the region has seen a rise in both homicides and prop- erty crime, although the crime rate remains low relative to other urban areas in the United States.

KEY FINDINGS

Housing Market: Home sales in Santa Clara County dropped 21% from 2006 to 2007. In January 2008, sales fell to a 20-year low.
Housing Affordability: In 2007, fewer than one out of four potential first-time homebuyers could afford the average entry-level home, as the first-time-homebuyer affordability index dropped to 23%.
Rental Market: Average rents for large apartment complexes in Santa Clara County climbed from $1,425 in first quarter 2006 to $1,660 in first quarter 2008, an increase of 16.5%. In 2008, the San Jose metro area overtook L.A. to become the most expensive rental market in the state.
Transportation: Freeway traffic grew for the third consecutive year, climbing 10% in 2007 up to 28,300 vehicle hours of delay. More residents turned to public transit, with light rail ridership growing 25% in 2007 to an all-time high of 32,567 average weekday riders.
Crime: Property crime in Santa Clara County increased for the sixth consecutive year in 2006, climbing 10.5% to 1,524 crimes per 100,000 residents, up from 1,379 crimes in 2005. San Jose's homicide count reached a ten-year high in 2007, at 33 reported murders.

CHAPTER 5: PURSUING THE DREAM

Taking as its foundation the "American Dream" of a society where every child has the opportunity to reach the middle class, this chap- ter scrutinizes whether our community is effectively providing pathways to opportunity for youth and adults of all backgrounds.

Education is one of the most important predictors of economic success for workers and their families. As the state's economy grows and changes, demand has grown for not just a highly educated workforce, but a workforce with very specific and rapidly changing skills.

Although Silicon Valley is home to a number of innovative K-12 school districts, a strong network of community colleges, and several world-class universities, overall the state and local educational systems lack adequate resources to serve all students and make higher education accessible.

While education will help prepare today's youth for the future, as important as preparation is the kind of future we are now building for them to inhabit. Perhaps the greatest challenge for the next generation - not just in Silicon Valley or the United States, but worldwide - is climate change. From rising food costs as drought threatens California's agriculture, to increased illness and death resulting from greater incidences of extreme-heat days and wildfires, global climate change is expected to have profound local impacts. Under a busi- ness-as-usual scenario, working families and low-income households stand to bear the greatest share of the burdens imposed by a chang- ing climate. But this crisis carries in it the seeds of opportunity: as the United States makes the shift to a low-carbon, clean energy econ- omy, we can and should focus on creating new green jobs that will enable millions of people to climb out of poverty and restore the mid- dle class.

KEY FINDINGS

Post-Secondary Education: The college-going rate for Santa Clara County's high school seniors edged upward in 2006-07; 53% of graduating seniors went directly to college, up from 49% the previous year. Latino students - currently the least likely to go to college - achieved the largest gains, increasing their college-going rate from 28% in 2005-06 to 34% in 2006-07.
Educational Attainment: Silicon Valley residents are more highly educated than the state or national average; nevertheless, the majority of adults (age 25+) do not have a four-year college degree.
Career Opportunities: For 2004-2014, 62% of projected annual job openings in Santa Clara County require no formal education beyond high school. However, approximately half these lower-skilled job openings pay less than a living wage.
Climate Change Impacts: If climate change continues on its current course, projections indicate that by 2100 significant portions of Silicon Valley will lie underwater, including all of Alviso and areas of Mountain View and North San Jose.
Greenhouse Gas Emissions: Since 2000, the greater Silicon Valley region has held the line on CO2emissions from energy consump- tion; emissions dropped from 35.5 million tons in 2005 to 34.0 million tons in 2006. Reaching the state's 2050 emissions target will require cutting carbon by more than 80%.
Green-Collar Jobs: A national greenhouse gas emissions cap-and-invest system would generate a minimum of $50 billion per year, which could be invested over the next ten years to build America's clean energy economy and create five million high-quality green jobs.

SOLUTIONS: TEN TRANSFORMATIVE IDEAS

This special section of LIVE 2008 profiles ten promising regional initiatives, each of which aims to provide a new model for dealing with one or more of the economic challenges facing working families.

1) Green Jobs for Green Homes: This first-of-its kind initiative would open the door for tens of thousands of Silicon Valley residents to green their homes through improved energy efficiency and save some green on their energy bills -all while creating jobs for a new generation of green-focused construction workers.

2) A Secure Airport that Puts Passengers First: The City of San Jose is poised to launch a cutting-edge Living Wage Ordinance at San Jose Airport that would train airport staff to improve both security and customer service, increase the airport's competitiveness and lift more than 500 minimum-wage workers out of poverty.

3) Disaster-Proof Hospital Services: Hurricane Katrina hammered home the need for emergency preparedness. Yet many of our nation's hospitals would be decimated by a major disaster -leaving communities without emergency services just when they are most needed. To move beyond this dangerous status quo, Valley Medical Center is planning critical upgrades to remain open in an earthquake's aftermath.

4) Confronting the Housing Challenge: With the foreclosure crisis driving home the need to prevent the lack of housing from forc- ing working families out of Silicon Valley, San Jose proposes to expand its successful Inclusionary Housing policy to create afford- able housing options throughout the city.

5) Health Coverage to Help Small Business Grow: Small business employees have the highest uninsurance rate of any working adults, putting small companies at a competitive disadvantage. The voluntary Healthy Workers program will provide a full, no-deductible health coverage plan affordable to small businesses and their employees.

6) Stopping Sickness Before It Starts: Under the newly conceived Universal Prevention plan, every county resident would have guar- anteed access to basic preventative health care; early screenings and treatments will reduce the load on hospital emergency rooms and help all residents lead healthier lives.

7) Public Scrutiny of Subsidized Development: In San Jose, the Sunshine Reform Task Force has created a model ordinance that brings public accountability to the millions of dollars in development subsidies given away each year. Applying open government principles to public subsides will help citizens ensure that taxpayer money is spent responsibly in ways that create good jobs and meet neighborhood needs.

8) Planning for Livable Neighborhoods and Good Jobs: The planning framework proposed by the City of Santa Clara for "big box" retail would be a pioneering step toward integrating neighborhood preservation, low-carbon land use planning and local econom- ic competitiveness, while encouraging good jobs and blocking poverty-level wages.

9) Building Careers to Build California: The California Construction College aims to provide a pathway for California's youth to gain both a skill and a college degree in a field with a looming workforce shortage: construction. At the same time it opens up opportu- nities for longtime construction workers to advance their careers.

10) Developing Skills for Tomorrow's Transit Systems: Through the Transportation Career Ladders Project, community colleges and incumbent employees will train the next generation of workers for careers in public transit: a workforce urgently needed as our nation shifts to a clean energy economy.