Ted Egan, the chief economist at the Office of the Controller for the city of San Francisco, discusses the complications and effects of wage-level job growth.
Demystifying Data is a recurring series examining the numbers and statistics that buzz around the Bay Area. The Bay City News Foundation brings context and expert input to the data in our everyday lives. We will bring your questions to those who know best to understand the big picture behind complex figures. Check back weekly for new numbers, broken down by the experts.
High-wage jobs in the Bay Area have grown more than low- and middle-wage jobs combined in the region between 1990 and 2020.
The Bay Area Equity Atlas reported that high-wage jobs have increased by 41% between 1990 and 2020, with middle-wage jobs only increasing by 19% and low-wage jobs by 17%.
The data organization also reported that while low-wage jobs had been growing much more, the pandemic set growth back significantly with related lay-offs.
This week, the Bay City News Foundation hosted Tim Egan, the chief economist with the San Francisco Office of the Controller, which is charged with accounting and auditing services for the city. Egan broke down what the numbers mean (and what they don’t mean), as well as how the effects of the Bay Area’s economy can be felt by residents.
Egan’s answers have been edited for brevity and clarity.
Q: The data that the Bay Area Equity Atlas reported said that high-wage jobs are vastly outgrowing low- and middle-wage jobs in the Bay Area. Have you seen that?
A: A lot of this depends on how you’re talking about industries over time. You know, how are you defining industries in the 1990s as high, low and middle? Do those cut-offs change? So there’s a little bit of details and sort of subjectivity in how you do this. But I think it wouldn’t surprise anyone who looked at it to say, certainly the high-wage jobs grew faster than low and middle. One thing we’ve seen in San Francisco is that low-wage jobs have grown faster than middle-wage jobs. But I don’t know if that’s true in the Bay Area as a whole, and, again, it depends how you define low and middle and high.
Q: In turning to high-wage job growth, you said it wouldn’t surprise anyone to see how much that’s shot up. A lot of people think about the tech boom in the area, but what do you see from the controller’s office about those numbers about high-wage job growth in the area?
A: Well, I mean, it’s very clear that if you just look at individual industries that the tech industry has grown a lot faster than the rest of the Bay Area economy, and its wages are higher than the rest of the Bay Area economy. You can have a debate about what’s high, middle and low. But certainly that fact is true. And that’s clearly driving the growth of high-wage jobs. Other high wage industries, like financial services or law, are not really seeing that level of job growth. And there are other low-wage industries like restaurants that have grown faster. But certainly tech has grown a lot, especially in the last 30 years.
Q: Low-wage jobs were reported to also have been growing significantly, until taking a major hit during the pandemic, the Bay Area Equity Atlas reported. Have you noticed those trends?
A: Yeah, that makes a lot of sense. We have been looking at the numbers specifically in San Francisco and San Mateo County. But, it’s also true in the South Bay and perhaps to the East Bay to a similar extent.
We’ve seen since the start of the pandemic a lot of job growth in high-wage offices industries, tech, financial services, some professional services, but those people are not coming into the office. So even though the companies have been hiring, the workers are remote, and maybe on a given day, only a third of the people are in the office. And what we’re not seeing is a lot of activity downtown, where a lot of the low-wage, private sector jobs are concentrated. So our tourism is down and our foot traffic downtown is down because of a lack of people commuting. So low-wage industries like retail and restaurants are concentrated in downtown San Francisco, but they just don’t have any customers.
Another thing that inhibits low-wage job growth is a lot of people in the leisure and hospitality industries were laid off in 2020, when tourism stopped and restaurants couldn’t operate at full capacity. Those industries laid off like 60% or 70% of their staff. And it looks like in San Francisco, at least a lot of them moved out of the Bay Area. So now there’s a labor shortage. And even though they’re trying to wait and raise wages to get people back, it’s hard to get people to move back to San Francisco to work a restaurant job. And so those businesses that are the main employers of low-wage folks in the city, are both suffering from a lack of customers and a lack of available workers.
Q: Turning to middle wage jobs, I know that you had mentioned that, especially prior to the pandemic, both low-wage jobs and high-wage jobs had seen a lot of growth, but it seems like middle wage jobs have been the last of those three in terms of growth. Why might something like that be the case?
A: Well, middle-wage jobs depend a lot on what you’re talking about. High-wage jobs generally are a set of private sector, office-using occupations. And low-wage jobs generally fall into industries like home health care aides, restaurant workers, some manufacturing workers, and some retail workers. Four or five industries would cover the vast majority of low-wage workers.
For middle-wage workers it’s not the same. There’s some middle-wage workers in virtually every occupation and in virtually every industry as a whole. Really, I think it’s probably industries like government jobs, which has been a source of growth, and construction, that sees some growth. But you’ve also seen a lot of decline in 30 years, particularly in the South Bay, in industries like manufacturing, which are a classic middle-wage industry.
Transportation, wholesale trade, those industries have either declined or not kept up with the overall growth of the Bay Area economy. So a lot depends on what exactly is in their bucket of middle wage industries. But other than government jobs, there haven’t been a lot of middle-wage industries that have seen growth in 30 years.
Q: How does this lagging of middle-wage job growth, while low-wage and high-wage jobs are growing significantly, affect the San Francisco area?
A: If you want to talk about the economy as a whole, we still have those functions like manufacturing and light manufacturing and warehousing and stuff, but they’ve generally grown faster in the Central Valley and serve the Bay Area, rather than in being in the Bay Area. So San Joaquin County, Sacramento County, Stanislaus County, they’ve seen growth in those industries faster than the Bay Area. I believe that’s correct.
And from the standpoint of individuals, the weakening diversity of the Bay Area economy, which is what we’re talking about, limits the job opportunities for people who move here or who live here or who grew up here. If you’re looking at a world in which the kinds of job opportunities that would be open to you are either requiring very high levels of education or will never pay very much, then that affects people’s economic opportunities. That affects their decisions around investing in an education and for many low- and middle-income people, it makes them choose to live somewhere else.
That’s certainly something we’ve seen in San Francisco, where low-income people in particular are nearly twice as likely to move out of the city, all other things equal than upper-income people. And I think that part of the reason for that is the weakening of the array of job opportunities that are available to low-income people and what their earnings potential is in those industries compared to what they could do in other parts of the country.
Q: It seems like if high-wage jobs are growing faster than any other sector, then it contributes to the general gentrification of the city. How does one even start to handle such a massive issue?
A: For a long time, there’s been kind of a disconnect between the growth trajectory of the Bay Area economy and the kind of economy that we were planning for. Since the mid-1990s, city and regional planners in the Bay Area have been planning for slower growth. But the economy has been growing very rapidly. And so there’s been a disconnect between the demand for housing, the demand for commercial space, the demand for transportation, and what we’ve been supplying. And that kind of excess demand is making prices of everything go up. And that’s harming affordability, particularly for the people who feel it the hardest.
So it’s a long-term trend; it’s good to take a 30-year look at it. But it’s a very entrenched trend now. And it is definitely having to do with the affordability of housing, particularly for low-income workers, which makes their wages high, which makes a lot of industries unable to operate in the Bay Area and contributes to the weakening diversity of the region’s economy.