In Silicon Valley, an economic rebound

Rising living standards for high-skilled workers in India and China are also improving American worker competitiveness.

“High-tech manufacturing can be done as cost effectively in San Jose as in Shanghai or New Delhi – it’s all based on skilled labor. The skilled people now cost about the same in either place. The gap has shrunk very rapidly,” says Roscheisen.

The concentration of top talent here remains unparalleled, thanks in part to the region’s welcoming of skilled immigrants. San Jose has the most diverse ethnic population of any US city, with only 39 percent of residents born in the US. Roughly two-thirds of innovative companies in San Jose have at least one foreign-born member of management, says Krutko.

Attracting innovators
The entrepreneurial ethos also draws talent. “It’s great minds accepting failure as a part of the journey,” says Saeed Amidi, president of the Plug and Play Tech Center in Sunnyvale. The center serves as a hotel for start-up companies, offering low-cost office space as well as introductions to Valley players.

“I was interviewing some startups yesterday. This guy says, ‘I’ve been in 10 start-ups: two of them were semisuccessful, eight of them failed, and I’m starting my 11th one myself.’ I personally think that is what allows Silicon Valley to come back,” says Mr. Amidi.

Silicon Valley competes with other “brainwave economies” in the US, particularly Boston; Austin, Texas; and Raleigh, N.C. The latter two are currently growing at a faster clip, says Richard Carlson, chairman of Spectrum Economics, and they both offer a lower cost of living and nimbler governments. Roscheisen of Nanosolar says the Valley also suffers competitively from state taxes on manufacturing property – which not every state, and few countries, tax.

And not everyone here is doing well. A recent Silicon Valley Network report says there has been significant job loss in the mid-wage category, or those earning between $30,000 to $480,000. As a percentage of total jobs, this shrunk from 52 percent to 46 percent between 2002 and 2006.

“We are becoming a Manhattan – this place where only the people on the very high end can afford to live,” says Mr. Hancock, adding that “we need to figure out how every sector of the community can thrive.”

How government can help
City governments here are trying to address some of the infrastructural weaknesses. San Jose has changed zoning regulations to quadruple the density of commercial development in order to free up land for housing. The changes have cleared the way for 32,000 housing units next to mass transit and job centers.

“Those housing decisions have allowed companies to continue to think they can expand here. It was getting to this point that you had to ask these highly paid people to either pay millions of dollars for a house or a long commute,” says Steven Levy, an economist with the Center for the Continuing Study of the California Economy.

The new housing is a good start, says Mr. Carlson, but more is needed. “The mayor of San Jose could put 5,000 more people to work in six months by changing some housing rules,” he says.

San Jose’s mayor, Chuck Reed, says development always faces resistance, so new housing must be done in a “politically palatable” fashion. He’s met with more than 90 CEOs and listens carefully for ways the city can help – or just stand back.

“We are in a unique place in the world in Silicon Valley where a lot of times we just need to get out of the way and facilitate the growth that will happen,” he says.

Previous

1 | 2