Priceonomics

Image: Google shuttle bus protest. Source: Flickr, cjmartin.

An influx of engineers and money associated with the tech boom is ruining San Francisco -- or at least that is the picture painted by many media accounts over the past year. The rent is too damn high, there are monolithic corporate buses everywhere, and the economic and cultural diversity of the city left for Oakland. Yet The Economist summarizes the current state of the city:

Most cities would love San Francisco’s problems. Last year it grew quicker than any comparable area in the United States, and not only because of technology: every employment sector outpaced the national average. This boom appears to have substance. “We need to keep a careful eye on things,” says Ted Egan, the city’s chief economist. “But there are plenty of companies here that could survive a crash.”

So what was the economy like before the concentration of tech jobs in San Francisco? 

Answering that question doesn't require going very far back in time. In 2007, most tech companies were in the South Bay. Back in those days, Sand Hill Road venture capitalists joked that portfolio companies located in San Francisco were “international investments." 

The article makes an interesting point: In 2007, no industry in San Francisco reliably produced new jobs, especially for young people who flocked to the city:

Almost every job sector in San Francisco, from law to retail to insurance, has hardly grown at all, or shrunk in the past 15 years, according to data from the state of California. One of the few bright spots has been the hospitality sector, which added 4,000 jobs since 2004. Ted Egan, San Francisco's chief economist, says that nearly half of all 140,000 San Francisco jobs held by 22-34 year-olds are in either hospitality or financial and professional services.

The result: many college graduates wind up waiting tables or making lattes.

San Francisco is a dream city for young people. But the reality often disappointed:

But now, two of his roommates are planning to leave town, and Mr. Colin, who's 25, is considering it. "It's a little bit bleaker than we thought it would be as far as job prospects," he says.

...

"So many of the people I know just work in restaurants and coffee shops who are brilliant people, and came here with the hopes that they could find meaningful work," says Mr. Colin's roommate Jean Klasovsky. The 25-year-old looked for a full-time position at a nonprofit for a year while working two part-time jobs, six days a week, at a bookstore and an after-school tutoring center. 

Beth Lisc of the SF Chronicle comments in the 2007 article on the phenomenon of young people being attracted to one of the most expensive places on earth only to find there are no jobs:

"Young creative people have been moving to San Francisco since the '60s because it's known as a place where you can experiment, both artistically and personally,"

....

 "there's not the pressure to be 'a success.' Of course this is totally ironic because San Francisco is an extremely expensive place to live and if you're not succeeding at least somewhat financially then you've got to figure out somewhere else to go."

The article is good reminder that San Francisco has always been an expensive place to live. But in the past, fast-growing companies that produced new jobs were rare.

So, in 2014, has the tech sector provided the city with an industry that can reliably supply employment? Not yet. As of today, only 6% of the city's jobs are in the tech sector. However, the average income of those jobs is $160,000 per year.

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