Silicon Valley's disappearing middle class

Silicon Valley is losing the engine that has long fueled its boom: an upwardly mobile middle class.

It might not seem like a big deal that Silicon Valley is losing its middle class - defined as those who make between $30,000 and $80,000 per year. That is, unless you want to create a company that employs normal people who make normal wages, which is just about every company on the planet.

By most accounts, Silicon Valley is doing very well, adding jobs faster than the US national average. But this lack of reasonably paid employees is worrisome:

The consequence of the shift may undercut some of the basic mechanisms of the Valley economy, according to the authors of the report, by making upward mobility more difficult. "If you lose the middle, it's harder to support the top," said Doug Henton, an economist at Collaborative Economics, a research and consulting firm in Mountain View, Calif., that helps prepare the annual report.

It's also hard to support some of the basic mechanics of open-source companies (inside sales, technical support, etc.). I suppose this is why MySQL "near-shores" its lead generation and inside sales to Boise, Idaho, and other companies do the same in Austin, Salt Lake City, etc.

One thing you can't near shore is diversity. While Silicon Valley boasts an exceptional 48 percent of households speaking a language other than English, the lack of income diversity somewhat moots this point. I loved living in the Valley except for this part. I didn't want my kids growing up to think that money was a given. It's not healthy. I didn't want them at the Menlo School or Palo Alto High School. The sense of entitlement was palpable in the youth. (We should know - we struggled to find babysitters while at Stanford because no one needed to earn any money.)

Silicon Valley is a great place. I'll concur with Fabrizio that it's one of the best places to start a company. It's only unfortunate that it's apparently reserved for the most wealthy. That isn't good for its long-term health.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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