Tech Reaganomics: On Those “Rising Paychecks” of Workers in San Mateo County

A technology writer for the Wall Street Journal Farhad Manjoo has a defense of California’s tech industry in the current issue San Francisco Magazine. Manjoo’s core claim is that while northern California’s tech boom might be a source of problems like rising rental prices, and what he euphemistically calls a loss of “cultural diversity” (read: Black and Latino displacement), it’s still good for everyone in the Bay Area. It’s a trickle down economics argument, basically. To support his tech and wealth-friendly perspective Manjoo offers us what he says is a key economic stat, the “rising paychecks of workers in San Mateo County.”

Since Manjoo chose the words “paycheck” and “workers,” you’d think we can safely assume he’s trying to tell us something about the real incomes of the majority of the labor force in San Mateo County, the Bay Area’s tech epicenter. He’s not.

Perhaps because Manjoo is trying to portray the tech industry as a great economic engine creating jobs and wealth that trickle down to everyone he chose the Bureau of Labor Statistics’ County Employment and Wages Summary as the source for his “rising paychecks” stat. Here’s what he reported:

“At the end of 2011, according to the Bureau of Labor Statistics, people in the county just south of San Francisco earned about $81,000 a year on average. That’s a respectable figure—despite being a small, mainly suburban area, San Mateo had workers who were among the best paid in the nation. Then something extraordinary happened: Over the course of a single year, the county’s average pay shot up 107 percent. In the last quarter of 2012, San Mateo wage earners averaged about $168,480 a year. That made San Mateo by far the top-earning county in the nation[…]”

This is misleading and it undermines anything further Manjoo might have to say about economic inequality in Silicon Valley. Not that he tries to say anything substantively about it anyway. His article shrugs off growing inequality while offering up anecdotes and de-contextualized factoids he says show how tech wealth is being spread around.

To be fair, Manjoo does point out that the dramatic spike in wages in 2012 was due to the Facebook IPO which minted more than a few millionaires. That event skewed the county’s average upward.

But while the BLS wages statistic helps Manjoo talk about the princely incomes of the tech elite, it leaves his argument devoid of any accurate information about how income is actually distributed in San Mateo and the wider Bay Area. He ponders the lives of nomadic twenty-somethings who live out of their cars and spend their days trying to build startup companies in hackerspaces. He doesn’t spend any time thinking about half of the region’s workforce employed in low wage service sector jobs, amassing debt, afflicted by housing insecurity, with little promise of advancing. Without finding a stat to actually measure workers incomes he can say nothing of substance about the overall equity of the tech boom.

Given this fact you’d think Manjoo would ditch his unreliable “rising paycheck” statistic for something that actually measures the real earnings of the majority of workers, not wages as they’re defined by the BLS.

He doesn’t.

Instead Manjoo let’s these astonishingly high paycheck estimates stand with that little caveat about Facebook’s public offering. He then proceeds to claim that this skewed wealth creation over three months helped San Mateo rake in more tax dollars to fund local services, thereby lifting all boats. Then he rattles off that the county’s unemployment rate is at a seemingly healthy 5 percent. Finally he makes the following amazing claim for the entire Bay Area: “Every other local economic indicator—including per-capita income and employment in sectors outside the tech industry, as well as the aforementioned rental and real estate prices—is at or approaching an all-time high.”

That sentence is also very misleading and says nothing about human welfare. It’s like saying, because asset prices are high, and because lots of people are technically employed (forget their actual earnings or well-being) then the society is fine. It’s not.

But let’s just focus on income, the metric Manjoo never actually measured.

When he didn’t actually measure it he couldn’t say anything substantive about the situation of most workers in San Mateo, or the Bay Area today. Instead chose to make a Reaganomics argument about how enrichment at the top of society trickles down and benefits those at the bottom. Of course this isn’t true nationally, and every economic and social statistic, from real incomes to health outcomes demonstrates the suffering that growing inequality causes. The trickle down ideology holds no truer for the Bay Area if you actually look at people’s real incomes compared to the cost of living.

If Manjoo wanted to actually measure the paycheck of the average worker in San Mateo he couldn’t have picked a more misleading source. The BLS data he used to claim that the average worker earned $81,000 in 2011 is calculated as the mean average of all wages paid to every employee in San Mateo County covered by unemployment insurance. But in the BLS’s survey, wages are defined not just as cash in the form of wages or salary. The BLS includes “non-wage cash payments [including] employer contributions to certain deferred compensation plans such as 401(k) plans and stock options.” That’s the 2012 Facebook distortion right there. Manjoo recognizes this in his article, but he misses the significance of this technical note.

What Manjoo fails to see is that 2012 was only an anomaly in absolute scale. Otherwise every year in San Mateo the income figure reported by the BLS survey is greatly inflated by the over-sized compensation packages (that include yearly infusions of stock options) of the thousands of corporate executives who live there. Not only was the 2012 estimate of $168,480 skewed upward, the 2011 average of $81,000 which Manjoo calls a “respectable figure,” and which he assumes is normal, is also already skewed upward.

$81,000 would be respectable if it were a remotely accurate estimate of what workers actually earn in San Mateo on average, but it’s not. To understand what workers actually earn today in San Mateo a better source of information is the U.S. Census Bureau’s American Community Survey, 1-Year Estimate for 2012. For half of San Mateo’s labor force, wages fell below $41,274 in 2012.

What Manjoo avoids recognizing in his ode to the tech sector is that Silicon Valley is an extremely unequal place, and that this inequality is ripping apart the social fabric. Almost half of San Mateo’s households have incomes under $75,000 a year. Half of the county’s households —which average in size at 2.8 persons— subsist on an annual income that is well below Manjoo’s fictional average paycheck for a single worker.

Income distribution in the tech epicenter of San Mateo County is highly unequal. Black and Latino households are over-represented at the bottom the county’s income range.

There may very well be 40,000 households (15 percent) in San Mateo County whose income is above $200,000 a year and who are living very well. These are the tech executives, the private equity investors, and the lawyers and banker who work in San Jose, San Francisco, and the suburbs in between. Just the same there’s another 40,000 households that earn less than $30,000 a year. Many of these Silicon Valley denizens at the bottom of the hierarchy are Black and Latino families who live in the shadows of the region’s wealth and glory. Their struggles to survive are rarely reported. Instead “tech journalists” these days run around the Bay Area telling cute stories about killer apps and occasionally lamenting how the hyper-gentrification of San Francisco is paradoxically destroying opportunities for artistic and cultural consumption for the privileged techies. The real big story, however, is the massive redistribution of wealth and power to the top 5 or 1 percent, the shrinking of the middle class, and the immiseration of the bottom half of society.

Per capita incomes in San Mateo by race show us that the tech boom hasn’t been good for Black and Latino workers. While white workers make $63,000 per capita, Blacks make only $30,000 and Latinos even less with $20,000. Let that sink in. The per capita income for white San Mateo residents is double that of Blacks and triple that of Latinos. It’s well known that the tech sector is a white and Asian space, that the average software programmer or engineer is a young white or Asian male, and that the upper-most executive posts in tech and along Sand Hill Road (the finance capital for Silicon Valley) are filled with white men.

We also know that the tech boom is unequal in terms of gender. To jump right to the point, inequality in Silicon Valley follows a pretty typical pattern of racial and gender hierarchy in which white men rake in the biggest rewards by far, followed by white women and Asian men. At the very bottom of the income earnings distribution are Latinas and Black men. The median earnings for white men in San Mateo County are 200 percent higher than for Latinas. Half of all Black men in San Mateo earn less than $22,000 a year.

Of course only focusing on the socioeconomic statistics of San Mateo creates a skewed picture that itself doesn’t accurately reflect the changes being wrought on the Bay Area by the latest tech boom. The San Francisco Bay region is an integrated and inter-dependent economic unit of nine counties and dozens of cities. The tech sector is geographically concentrated in Santa Clara, San Mateo, and San Francisco Counties. These three counties also are home to the most affluent households in the Bay Area, so any income averages that don’t drill down to particular cities and neighborhoods will be biased upward and the growing poverty beneath the surface will be obscured. Any exclusion of Alameda and Contra Costa Counties —the East Bay where polluting industries are concentrated alongside hyper-segregated Black and immigrant communities— also creates a distorted picture of the Bay Area’s economic transformation.

A Political Economy of Policing and Law Enforcement

“Keep out of our fucking way, liberal pussies” – A flyer posted in OPD’s headquarters building.

It’s been almost ten years since a federal judge ordered the Oakland Police Department to make sweeping changes intended to address the department’s many failings, including a pattern and practice of violating the civil rights of Oakland residents. For every step forward that OPD has taken, it seems they have taken two steps back. What’s the deal?

Intent on understanding why OPD seems immune to reform, Ali Winston and I have begun researching a series of articles to delve into the deeply ingrained institutional and structural issues at the root of Oakland’s police problem. (You can read a piece about OPD’s costly legal settlements here, and our latest piece addressing OPD recruitment and residency patterns here). Talking with community members as well as policy experts, one of the most striking problems with OPD we’ve identified concerns the composition of the department’s street cops. It’s a well known fact among Oaklanders that the city’s police mostly don’t live in the city. Using this as a point of departure to analyze police-community relations we have gathered some data that deserves a wider analysis than our own. We’re inviting comments on this blog.

What follows here is a presentation of some data that we hope leads to a broader discussion about the political-economy of police and law enforcement in the Bay Area.

What do we mean by a political-economy of police and law enforcement? Over the last decade there have been numerous excellent studies of the prison-industrial complex, especially here in California where prisons have rapidly grown in their budgets, employment, and numbers of persons incarcerated. With the growth of prisons into a major branch of the state, an entire industry of small and large corporations that profit from contracting with prisons has been created, replete with trade associations, lobbyists, and powerful employee unions. Finally, a pro-prisons political constituency comprised of the local, mostly rural, cities and counties where carceral facilities have become major employers, and local tax revenue generators, has completed the complex. It’s a powerful political machine, now a significant sector of California’s economy that through its redistribution of resources to lock up hundreds of thousands of mostly men of color produces obvious winners and losers.

Surprisingly, police departments have been subject to much less study along these lines, even though  policing consumes more public revenues than prisons, and in spite of the ubiquitous presence of police in every city.

Oakland’s position within the Bay Area’s police and law enforcement economy is characterized by extraction. Because of decades of white flight, capital flight, and the devastating impact of state tax cuts and disinvestment in public schools, Oakland today is wracked by unemployment, poverty, and suffers from a lack of meaningful social and economic mobility for its flatlands residents, conditions that are synonymous with crime within these same communities.

Due to Oakland’s unique history and current political dynamics, harsh law-and-order approaches are most often advocated as the solution to the city’s crime problem. Parsing out the different constituencies that advocate the ‘more cops’ approach is a task that awaits much further study, but we can generally sketch out a picture of who wins and who loses because of Oakland’s unusually large allocation of city tax dollars to policing.

The short answer is that the surrounding majority white and middle class suburban cities of the East Bay benefit from Oakland’s massive spending on cops via the redistribution of tax dollars from Oakland to other municipalities.

Oakland spends roughly 40 percent of its general fund budget on cops. Police services is the single largest expenditure for the city. Compared to other cities of similar size in California, Oakland’s spending on police is much, much higher. For example, Sacramento spent about 23% of its general fund on cops in the 2011-2012 Fiscal year, this in spite of the fact that Sacramento and Oakland actually have comparable crime rates (Oakland has outpaced Sacramento in violent crime, while Sacramento has had more property crimes than Oakland in recent years, according to the most recent FBI crime statistics).

Oakland’s FY 2012-2013 budget appropriates 40% of the general fund for police services, far and away the largest focus of city government. Few other cities, even those with comparable rates of crime, spend proportionally as much on their police. (Source: “Oakland FY2011-13 Adopted Policy Budget”, p. vii.)

What Oakland obtains from its large commitment of tax dollars to policing is debatable. As the department’s budget has fluctuated over the years crime rates have also fluctuated, but not necessarily in a pattern suggesting a causal link. Oakland does, however, lose considerable tax dollars to surrounding suburban cities in the form of officer salaries. Most of Oakland’s cops don’t live in the city, meaning that their salaries and other compensation are spent on mortgages, consumer purchases, healthcare, and other forms of taxed consumption where they live. Thus, by our rough calculations, based on data provided by OPD and assembled from a database of public employee pay for 2010, at least $126 million left the city in 2010 in the form of officer compensation.

OPD’s highest paid staff, nearly all sworn officers, live outside the city, while the department’s lowest paid staff, including administrative workers, are far more likely to live in Oakland. None of OPD’s command staff live in Oakland. In a sense this means that the local jobs sustained by OPD, which recycle Oakland tax dollars into the city’s economy, are the lowest paid positions, giving the city very little bang for its police bucks.

Most of OPD’s sworn officers live outside the city of Oakland. Civilian staff, whose average pay is much lower, are more evenly split, with about 46 percent residing in Oakland.

We’ve mapped the zip codes and salary figures for Oakland’s current officers so you can browse this geography of extraction – http://batchgeo.com/map/d8366c37bee1c93a831bde353442eca1

Oakland’s retired police officers covered under the Police and Fire Retirement System are another means by which the wealth of the city is extracted to surrounding suburban cities, and distant retirement communities. Last year the PFRS pension paid out about $64 million to its 1,085 beneficiaries. Because only 7 percent of these retired city employees live in Oakland, the city exported almost $60 million in funds originated in property taxes or employee compensation.

The PFRS system is especially important in any analysis of how the Bay Area’s political economy of policing affects Oakland’s communities of color because of its history. PFRS was closed to new employees in 1976. The hiring policies of the Oakland Police Department (and Fire Department) in the two previous decades were explicitly racist, excluding non-whites, a fact that produced a pool of PFRS-eligible retirees who are virtually all white men or their spouses. Oakland’s current residents, who have been indebted by expensive pension obligations bonds used to keep the PFRS pension funded, are mostly non-white, relatively young, and majority women. Most PFRS beneficiaries live in majority white and middle class suburbs of the East Bay, but some live as far away as Arizona and Hawaii. Thus not only is PFRS a transfer of wealth between different municipalities, it is also literally a transfer of wealth along racial and generational lines.

OPD procures goods from a national set of vendors including small businesses and large corporations.

There is also the issue of purchasing. The Oakland Police buy millions of dollars worth of goods and services each year, everything from weapons and gear to computer systems and consultants. Policing Oakland’s communities is a big business for a small pool of specialized vendors. About three-quarters of OPD’s procurement is through companies located outside of Oakland. This means that most of OPD’s purchases generate sales tax revenues in other cities and states. While the single largest share of OPD spending is done with companies located in Oakland, the big non-Oakland winners are Berkeley, New York, San Francisco, Dover (New Hampshire), Hayward, Santa Clara, Culver City, and Pleasant Hill. Click here to view a map of where OPD purchased goods and services in the 2010-2011 fiscal year.

We’ll be writing more about OPD procurement in the near future, among other topics.