Disparities of America's 'information economy'

With high-tech firms at one end and taquerias at the other, a streetthat spans two Silicon Valley towns illustrates a growing gap inopportunity.

Palo Alto's University Avenue, the central artery of a community regarded by many as the intellectual capital of Silicon Valley, is only about four miles long. But that brief span tells a story of vast social distances and makes a powerful, and some would say disturbing, statement about the limits of America's so-called "new" economy at the turn of a new century. At one end of the avenue, amid the cyber-cafes and power restaurants that border the eucalyptus groves of Stanford University, reside the know-how, money, and opportunity that make Silicon Valley the envy of the world. At the other end though, bordered by the muddy marshes of San Francisco Bay, are dilapidated buildings, taquerias with hand-painted signs, and low-income neighborhoods that bespeak diminished choices. Taken as a whole, the avenue suggests that America's rising new economy, increasingly driven by information and technology rather than smokestacks and assembly lines, isn't a tide that automatically lifts all boats. Priya Haji, who runs the Free at Last drug treatment center at the poor end of University Avenue, says the community she serves feels untouched and disconnected from the surrounding prosperity. "How to create a sustainable working-class community? The information-technology economy hasn't provided a model for that," she says. Indeed, in the broader Silicon Valley, which stretches 20 miles north and south of Palo Alto, certain trends indicate the Information Age is widening some social and economic gaps and has characteristics that could accelerate those divisions in the years ahead, not only here but across the country. One of the most disturbing trends is that Latinos, who will become the nation's largest minority over the next decade, are not well-equipped to participate in the emerging economy. An influential local think tank, Joint Venture: Silicon Valley Network, has developed an index of indicators to measure this region's social and economic health. It is one of the most comprehensive efforts in the nation to chronicle the real-world effects of the new economy. While many of the indices are dazzling, a just-published report also raises a red flag for those that would emulate California's Silicon Valley. The problem, put succinctly, is that "the new economics and the new demographics are out of sync," says Ruben Barrales, a former county supervisor and now president of Joint Venture. His point is that, more than any other economic era, the Information Age demands well-educated workers. Yet education levels here and nationally are way below average for some minorities, particularly Latinos and African-Americans. The cry for better schools was a common mantra through the 1998 election season, and those elected on that platform, like California Gov. Gray Davis (D), now get an opportunity to implement change. Yet reversing the education patterns of some minorities will require efforts that extend well beyond the schools, say a number of experts. IN Silicon Valley, the high school graduation rate for all groups declined from 1993 to 1998, according to Joint Venture. The rate is lowest among Latinos, with just 56 percent actually graduating in four years. Latinos also rank lowest in the number who take math classes beyond Algebra I, a necessary ticket for higher education in California's public university systems and technology jobs. The nation's technology sector, claiming a skilled-worker shortage, won a contentious battle in Congress last year to have the number of immigrants it can hire for technology jobs expanded from 65,000 to 115,000 this year. While a number of education initiatives are under way to help fill more of those jobs with locals in the years ahead, the trend lines for Latinos suggest they could be largely left out of the benefits of the new economy for some time. While education is often cited as the vital link between minorities and the high-paying jobs of the technology sector, some see other roadblocks rooted in the new kind of workplace the information economy is creating. "It's not just about education," says Amy Dean, executive officer of the South Bay AFL-CIO Labor Council, which focuses on Silicon Valley. "It's a very different era, this new economy. What's happening is there is very little mobility from the low end of the labor market to the high end of the labor market." In her view, the new economy is creating more companies that are less vertical in nature than were their Industrial Age predecessors, where it was more possible for a laborer to go from the assembly line to management over the course of a career with one company. Also, job tenure today is shorter. What is needed, says Ms. Dean, are new social "intermediaries," or mechanisms for providing job mobility now that the companies themselves are less likely to provide it. Whatever the cause, the divergence of wage trends in Silicon Valley is stunning. Average household income here is 50 percent higher than nationally. High-wage pay grew in real terms by 20 percent from 1991 to 1997. Yet amid that extraordinary prosperity, those in the bottom 20 percent of income distribution here saw incomes actually fall, in real terms, by 8 percent. As Joint Venture notes starkly: "The best available data suggest widening income inequality during the 1990s and an absolute decline in standard of living for the poorest households." That kind of discrepancy is readily apparent in East Palo Alto, the town at the poor end of University Avenue. There, despite a recent program of ambitious redevelopment, the high school dropout rate is estimated at between 60 and 70 percent. Once predominantly African-American, East Palo Alto is now 45 percent Latino, many drawn here because rents are unaffordable everywhere else. It's a community of laborers, service workers, and the chronically unemployed who "don't perceive what's happening in Silicon Valley as in any way impacting their own reality," says Ms. Haji. In fact, the techno-wealth just down the road is "more a source of frustration than anything else."