Bay Area Income Gap Now More Than $250,000 Between Top and Bottom

There is now more than a quarter-million-dollar income gap between top and bottom Bay Area households, a first-time comprehensive study finds. That’s 50 percent higher than the national average.

Key reasons include high-tech earners in Silicon Valley and the growing decline of middle-income households throughout the Bay Area.

The research brief titled “Income Inequality in the San Francisco Bay Area,” found that the average income in the top 20 percent of Bay Area households is $263,000 greater than the bottom 20 percent.

“That’s 50 percent higher than the gap nationwide,” said Jon Haveman, author of the study and a principal at Marin Economic Consulting. The gap nationwide is $178,000.

The study was done by the Joint Venture Silicon Valley’s Institute for Regional Studies. It looked beyond wage disparity to differences in income, which include stock options, real estate and capital gains, in addition to wages. Based on the 2013 U.S. Census and American Community Survey data, it also compares the Bay Area against national numbers.

Not surprisingly, the Bay Area data are dominated by the tech economy.

“The high-tech earners in Silicon Valley are really swaying the variance in overall Bay Area incomes,” said Rachel Massaro, vice president and senior research associate at Joint Venture Silicon Valley. In the Bay Area, the top 5 percent of households earn on average $473,000 more than the bottom 20 percent.

Russell Hancock, president and CEO of Joint Venture Silicon Valley, said the tech economy is creating more jobs at this very high end.

“It’s proliferating opportunities for coders and computer architects and software engineers and designers. Companies are getting into bidding wars for their talent, and they can almost always name their salary.”

The national growth in high-income households has been widening the gap between the wealthiest and the poorest for several decades, with the Bay Area’s situation particularly egregious. But the study notes that the number of Bay Area households in the middle-income range is declining as well and contributing to the overall inequality crisis.

In the Bay Area, the number of middle-income households is falling 20 percent faster than in any region in California.

“The Bay Area has the greatest loss of households in the middle-income ranges, which is $35,000 to $150,000,” said Massaro.

Haveman said the number of middle-income households may be shrinking because “people are getting forced out of the Bay Area because of the cost of living or a decline in middle-income jobs.”

Contributing to the loss of middle-income jobs are globalization and new workplace technologies, said Hancock.

“Our corporations are no longer adding jobs locally,” he said. “They are putting them on every continent serving global markets. It is a high-cost region to do business here and house a workforce.”

Hancock said technologies invented in the Bay Area have eliminated whole classes of middle-income support jobs. “Technology has made it where companies no longer need a secretary or administrative assistant or clerk.  Many of the support positions are gone.”