Bloomberg News

San Francisco’s Income Gap Captures Wall Street Spotlight: Tech

January 28, 2014

Twitter

Protesters hold signs while demonstrating in front of the Twitter Inc. headquarters in San Francisco. Photographer: David Paul Morris/Bloomberg via Getty Images

The epicenter of the income inequality debate has shifted 2,600 miles west, from Wall Street to Market Street.

Whether it’s protesters targeting Twitter Inc. (TWTR:US)’s new San Francisco headquarters and Google Inc. (GOOG:US)’s buses or the criticism against these agitators by former venture capitalist Tom Perkins, the Bay Area’s technology industry is attracting the kind of attention often reserved for New York’s moneyed elite.

Concern about the growing gap between the wealthiest and poorest Americans is erupting across San Francisco, where an influx of newly minted dot-com millionaires is boosting rents and property prices, putting affordable housing that much further out of reach. Rage over inequality has spilled into the streets, where demonstrators have blocked buses transporting Google employees, breaking the window in one in Oakland.

“All booms have their winners and losers,” said John Elberling, executive vice president of Todco, a San Francisco-based builder of affordable housing. “Even if you have a good job, it’s very likely you can’t afford to buy a place in the city.”

Related:

  • Opinion: Tom Perkins’s Unhinged Nazi Rant
  • Obama to Raise Minimum Wage for Contractors to $10.10

Calling income inequality “the defining challenge of our time,” U.S. President Barack Obama will make it the main theme of tonight’s State of the Union Address.

From a jobs perspective, San Francisco is excelling. While New York City’s unemployment rate is stuck near 8 percent, adding to scrutiny about Wall Street’s lavish bonuses two years after the Occupy movement, the San Francisco area’s jobless rate fell to a record low 4.6 percent last month from 6.1 percent a year earlier, according to preliminary data from California’s Employment Development Department.

‘Willy-Nilly’

All jobs aren’t created equal, and some residents see the city’s progressive history threatened as those not in the technology industry get priced out. Trulia, a real estate listings site, said only 14 percent of homes up for sale in San Francisco were affordable for the middle class. Prices rose 13 percent last month to a median $813,000, DataQuick said Jan. 15. About 6,400 residents are homeless, the city’s Human Services Agency said in a biennial report released in June.

“San Francisco is a liberal, community-caring city and we’ve gotten a little bit away from ourselves,” said Steve Humphreys, chief executive officer of Flywheel Software Inc., a mobile application for hailing taxis. With too many of his peers living in a bubble and not paying attention to the city’s economic issues, “things went a little willy-nilly,” he said.

Resented Wealth

That’s left an opening for technology companies to become the targets of criticism.

Even as they hire aggressively and create innovative products, the initial public offerings of Facebook Inc. (FB:US) and Twitter resulted in new Silicon Valley millionaires, and in some cases billionaires. Among the newest: Facebook Chief Operating Officer Sheryl Sandberg, 44, who last week became one of the youngest female billionaires in the world, according to the Bloomberg Billionaires Index. Twitter co-founder Evan Williams is worth about $3.3 billion, according the index.

On Nov. 7, the day of Twitter’s stock market debut, protesters gathered at its San Francisco headquarters, with signs like “We are the public, what are you offering?”

In 2011, Twitter considered leaving San Francisco, telling Mayor Edwin Lee that a city tax based on the size of the company’s payroll would erode its growth. Lee exempted Twitter and other companies from the payroll tax if they would move to Central Market, an area plagued by crime and drugs near City Hall. The microblogging site is now worth $32.8 billion (TWTR:US).

Financial Crisis

Still, comparisons to Wall Street have their limits. While technology companies are seeing some backlash to their spending and the wealth they’ve created, many of New York’s investment banks and financial firms contributed to the biggest financial crisis since the Great Depression.

“Those criticisms leveled at the financial industry for its role in the crash -- much of that is justified,” said Mike Lehmann, emeritus professor of economics at the University of San Francisco. “We have no such issues with technology. I understand the housing crisis and something should be done to make real estate and apartments more available, but that doesn’t mean you should stop the tech industry.”

Google, Apple Inc. (AAPL:US) and Facebook are among companies that have come under fire for busing employees from San Francisco to their Silicon Valley campuses, with residents claiming they congest city streets and use public transportation stops. A group of technology companies agreed in December to pay the city a daily fee to use existing stops.

Buses Blocked

Some buses have been blocked by protests, and in Oakland demonstrators shattered the window of a Google bus last month. News site Berkeleyside.com wrote last week about a protest that took place outside the home of a Google engineer in Berkeley.

The backlash has drawn the ire of members of the technology community, including Bryan Goldberg, founder of sports news service Bleacher Report, who wrote a satirical blog post this month defending tech workers, and former venture capitalist Perkins, who wrote a letter in the Jan. 25 Wall Street Journal comparing the treatment of the richest Americans to the persecution of Jews in Nazi Germany.

Perkins’s comments led his former venture firm, Kleiner Perkins Caufield & Byers, to disavow its co-founder, and venture capitalists including Marc Andreessen to openly criticize him. In a Bloomberg Television interview, the venture-capital pioneer yesterday apologized for using the word Kristallnacht, a night in 1938 when Nazis coordinated attacks against Jews, in his letter.

Unintended Consequences

“It was a terrible misjudgment,” he said. Even so, “I do not regret the message at all. Any time the majority starts to demonize any minority, no matter what it is, it is wrong and dangerous.”

Hans Johnson, a research fellow at the nonprofit Public Policy Institute of California in San Francisco, said the city’s success in boosting employment had the unintended consequence of deepening its housing issues.

“Demand has increased dramatically, because the economy has come back strongly and that’s led by increases in tech,” Johnson said. “When people get frustrated and they look around for a scapegoat, they see tech workers and the tech industry.”

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Dan Levy in San Francisco at dlevy13@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • TWTR
    (Twitter Inc)
    • $53.0 USD
    • 2.12
    • 4.0%
  • GOOG
    (Google Inc)
    • $596.08 USD
    • 6.81
    • 1.14%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus