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The economic divide in Silicon Valley

Steve Henn Dec 26, 2011

Jeremy Hobson: When you hear the term “Silicon Valley,” what do you think of? A really futuristic oasis where geniuses ride down the streets on their Segway scooters? A place where every other storefront is an Internet startup with the potential to change the way we live?

Well in fact, what we think of as Silicon Valley isn’t really a valley at all. The tech community extends from San Francisco south toward San Jose. There are wealthy venture capitalists living in the hills, families living in garden spots like Palo Alto — and, of course, some people are getting left behind.

Marketplace’s Steve Henn takes us on an economic tour of the landscape.

Steve Henn: Early this fall, Sean Parker threw a party.

You may remember Parker. As a kid, he helped create Napster. He was the bad boy in the movie “The Social Network.” His stake in Facebook made him a billionaire.

The party was for Spotify, a streaming music company he has a piece of. And it was pretty fabulous. There were whole roast pigs turning on spits. The indie band The Killers played, and Parker chartered jets from L.A. and New York to bring in the beautiful people. By the middle of the night, Snoop Dogg was hanging with Facebook founder and boy billionaire, Mark Zuckerberg.

The wealth being created in Silicon Valley these days can be mind-blowing. And for the programmers and engineers who keep the money machine running, the recovery is well underway.

Gary Swart: Just from here to San Francisco, there are four billboards that say ‘We are hiring.’ So Groupon, Twitter, Facebook, Zynga — everybody’s fighting for talent.

Gary Swart is the CEO of oDesk. He helps tech firms hire employees from all over the world. They work remotely. It’s one way to avoid the bidding wars for software programmers.

Rotem Perelmuter runs a recruiting website called Top Prospect. He says the market for tech talent is tight.

Rotem Perelmuter: I think it’s never been tighter. I was here in the late ’90s, and it was had ro find people then and I’d say it is at least as hard today.

His site will pay a finder’s fee of up to $20,000 if you recommend a Facebook friend who lands a job Perelmuter trying to fill. In just two days this fall, he cut five checks and sent out tens of thousands of dollars.

So for the objects of the tech industry’s affection, life on the leafy streets of Palo Alto has never been better. But for non-techies, not so much.

Claudia Warren: My name is Claudia Warren. I’m a mom of two girls that are college age.

Claudia and her family live in a little town called Millbrea. Like many small towns here, it’s expensive — nice homes, good schools. Claudia and her husband stretched to afford it. Now they’re in trouble.

Warren: I’ve been unemployed for a year and a month. The business that I worked in prior, I was there for 15 and a half years. Fifteen and a half year, that’s a long time to be somewhere.

Claudia was buyer at a baby store that went under. Her husband has a good job, but her paycheck mattered. And with no college degree, she can’t find work.

Warren: Ahh scary. Money run out. It’s tough.

Warren’s daughter quit her traveling softball team to save money and she’s joining the army reserves to pay for college.

There are lots of families like the Warrens here — people living in the shadow of a job boom they’re not part of. The unemployment rate in the heart of Silicon Valley is still higher than the national average for most of this recession.

Even in the wealthiest enclaves some families are quietly struggling. I know middle-aged engineers in Palo Alto — guys with impressive degrees — who have been looking for work for two years. But young companies like engineers with the latest skills.

And just across a little bridge from Palo Alto, on the other side of Highway 101, things are much worse. The border of East Palo Alto is probably less than a mile from Mark Zuckerberg’s new house, but it is a different world. There are fewer trees, empty lots are strung with razor wire. Officially the unemployment rate is 20 percent.

Carlos Romero is the mayor.

Carlos Romero: We do provide a lot of service sector workers to Silicon Valley. Whether it’s in the hotels, whether it’s domestics, whether it’s folks working in the restaurants, whether it’s the construction industry. And all of those areas took a downturn.

Romero says when the recession hit, his city was still reeling from the last downturn, which destroyed thousands of good blue-collar jobs. The city built big-box stores and a fancy hotel for tech executives to try and fill the gap. It helped, but it wasn’t enough.

Romero: A lot of the manufacturing has moved out. So folks who were from East Palo Alto who might have had the educational qualifications for those manufacturing jobs no longer have the ability to get into those jobs because they don’t exist.

The jobs being created in Silicon Valley — thousands of them — are in high-tech. But many guys from here, like Marque Solomon, can’t get them.

Marque Solomon: The people who actually end up in those types of jobs — wow, I’ve never seen them walking the streets. The people that you see are unemployed.

Solomon been out of work for four years. He lives in a depressed section of east Menlo Park just around the corner from where Facebook’s building its new headquarters. But that probably won’t help him.

Romero: This is a knowledge-based society at this point and really a big part of our problem is dealing with folks — you know we have a 30, possibly a 35 percent dropout rate in high schools.

Here’s the thing: Some of the best public schools in California — some of the most lavishly funded public schools in the nation — are located just a few miles from here.

Peter Fortenbaugh: I don’t know anywhere in the country where there is this stark of a change between the haves and the have nots.

Peter Fortenbaugh is the president of the local Boys and Girls Club.

Fortenbaugh: Basically, the kids the need the most get the least resources. And it just continues to get more extreme in our community.

Fortenbaugh says most of these kids simply are not being prepared for the kinds of jobs Silicon Valley is creating. And in a globally competitive market, unless something changes, he says they probably don’t stand a chance.

In Silicon Valley, I’m Steve Henn for Marketplace.

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