Official Report Highlights Wage Woes For Silicon Valley

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The decline of Silicon Valley as a high tech powerhouse has been starkly illustrated by economists, as pharmaceutical and biomedical companies now dominate the region

A new report from the Bureau of Labor Statistics’ San Francisco office (PDF) has starkly highlighted the decline of Silicon Valley over an eight-year period between 2000 and 2008. The heady days of big returns from venture capital investments, has now given way to diminished IT wages and job losses.

Adjusted for inflation, wages and stock-related pay have been seriously hurt by two bubble economies, companies leaving the area, and a shift from a large high-tech manufacturing base led by semiconductor engineering into one dominated by medical research, bio- and nanotechnologies, and pharmaceutical products, said the report.


“The loss in employment and real wages in Silicon Valley, however, was not the result of a continuous decline,” BLS economists Amar Mann and Tian Luo wrote. “The 2000-to-2008 period is marked by two distinct phases. During the first phase – 2000 to 2004, a period during which the crash of dot-com stocks occurred – real wages and high-tech employment declined precipitously.”

The second phase saw a bit of a recovery, or what the report calls a “reboot,” but venture capital investment has been way down. Only $17.7 billion (£11.2 billion) was invested in the entire nation in 2009 and Silicon Valley saw nearly $7 billion (£4.4 billion) of those dollars, according to the National Venture Capital Association. The next closest region in dollar investment was New England, at just over $2 billion (£1.3 billion).

Mann and Luo wrote, “During the next phase, 2004 to 2008, most of Silicon Valley’s high-tech industries ‘rebooted’ and experienced a modest expansion in employment and wages. Manufacturing industries, which had been decimated following the dot-com crash, saw employment levels finally stabilise; however, Silicon Valley high-tech employment did not recover to the peak level reached in 2000.”

Real annual wages for high-tech workers peaked in 2000 at $120,064 (£75,704) but have since declined; in 2008, real annual wages were $103,850 (£65,480) – a decrease of roughly $17,000 (£10,720). Yet, take a look at how some high-technology workers were affected in their specific sectors (from the same BLS report):

“The largest 2000–04 decline occurred in computer manufacturing, in which average wages fell 43.6 percent from about $223,000 (£140,609) per year to about $126,000 (£70,447) per year. Two other industry groups experienced wage declines exceeding the average decline for all high-tech industries during the 4-year span: software publishers (a decline of 20.0 percent) and communications equipment manufacturing (a decline of 17.1 percent).”

What does the future hold for the region?

Expectations are that medical and biotechnology research will continue to expand, as will web-based innovators. The New York Times put it this way in a blog post about the BLS report and 1 February press conference with Mann.

“Pharmaceutical companies have expanded their workforce by almost 40 percent. And job seekers in biotechnology, Mr. Mann said, have glittering prospects in the coming years.

‘There’s a huge demographic that’s aging, the baby boomers who need medical services,’ he said. ‘The biomedical engineering workforce alone will grow by 75 percent by 2018.’

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