Falling Behind

The Bay Area is home to one of the planet's greatest concentrations of private wealth, which is expanding as the market races to new highs. Yet there are significant numbers of people who not only have not participated in the boom but are also falling behind.

The Silicon Valley is adding jobs faster than it has in more than a decade as the tech industry roars back. Stocks are soaring and fortunes are once again on the rise.

But a bleaker record is also being set this year: Food stamp participation just hit a 10-year high, homelessness rose 20 percent in two years, and the average income for Hispanics, who make up one in four Silicon Valley residents, fell to a new low of about $19,000 a year— capping a steady 14 percent drop over the past five years [snip]

Simply put, while the ultra-rich are getting even richer, record numbers of Silicon Valley residents are slipping into poverty.

Other reports echo the bifurcation [bold added]:

New census data shows that 15.9 percent of Silicon Valley residents rank in the richest 5 percent of the country - bringing home at least $191,469. That makes the region No. 2 nationwide for wealth concentration.

Median income in Silicon Valley hit an 11-year low during 2011, falling to $84,724, according to a report released last week by local economic think tank Joint Venture Silicon Valley.

An income of $84,724 may seem like a lot of money to many Americans, but it barely allows a family to purchase a home at the Bay Area's median price of $550,000. Of course, the median measure means that some families receive less--in some cases considerably less--income than the median. With shelter so expensive it's no surprise that homelessness is the most visible manifestation of poverty.

Your humble observer, for what it's worth, has opinions on why the local wealthy do not donate (no, it's not because they're greedy). Their possible thoughts, based on anecdotal observation:

The government is handling the problem. Many who are in a position to donate assume, mistakenly, that because their taxes are so high that government is taking care of basic human needs. Because they do not personally deal with government at the social-services ground level, they do not see how inefficient and wasteful government can be. That experience can truly be shocking to those who are used to functioning at Internet speed.

I want to save the world. Solar energy, Third World communicable disease, climate change, etc. are causes more important than collecting clothes or referring a family of four to a free clinic.

I can't find a smaller local charity that I trust. Most are too busy for due diligence, e.g., to make sure that dollars aren't being wasted on directors' salaries, marketing, political lobbying, or non-essential activities. It's far safer to write a check to big-name charities with a national or even international mission; the downside is that few of the funds are recycled back to the Bay Area. © 2013 Stephen Yuen

At Least It Went Up

A Blackbaud survey of 3,144 non-profits found that charitable giving was up a modest 1.7% in 2012. Overall, the sluggish economy takes the blame; however, subdividing the picture suggests a more complex story:

Faith-based and small charities showed the greatest growth, while international affairs had the greatest decline. One explanation is proximity:

donors increasingly want to give locally—say to a park or an arts council or a hospital. With causes like that, the need for giving and the impact of giving can be more visible than at large, national organizations.

About half of our family's regular annual donations go to the neighborhood church, which in turn participates in several local social-services programs where we can see the results.

International relief organizations have difficulty overcoming the obstacle of distance and the notion that their bureaucracies take too much off the top. Monies spent in the Third World do go a lot further than in the First World if the funds can just get to the right people, but another set of the "right people" have to be running the aid organizations. It is possible to find some worthy candidates, but few of us have the time to do the research.

At least overall giving went up. A negative result would not have been surprising. © 2013 Stephen Yuen

What Does It Mean to be Poor?

Business writer Megan McArdle reflects on the question by examining whether poverty is measured by consumption or by income [bold added].

When you look at what people are consuming, you don't see the gross material deprivation that really used to characterize being poor, like lack of hot water, regularly having no food in the house, shivering yourself to sleep in the cold, or wearing patched (or worse, unpatched) clothes. Younger poor people quite frequently have things that older non-poor people consider nonessential luxuries, like cable or satellite television, expensive sneakers, and high-end cellular phones.

Every middle-class person knows someone who is technically "poor" as measured by income, but who drives a better car, wears nicer clothes, or has a more exciting night life than one's own. It's tempting to subscribe to the viewpoint that success or failure in life is their own fault:

...poor people are not so much lacking in money, as lacking in the self-discipline to spend their money wisely. This view is reinforced by the fact that a lot of immigrants do arrive here with even less than the native poor, often don't qualify for supplemental benefits that cushion the deprivation of the native poor, and nonetheless after a generation or two end up quite prosperous.

And yet we also know hard-working individuals of character who have fallen on hard times through no "fault" of their own. The catalyst that began the descent could be a divorce, the loss of a job, caring for a sick parent, the death of a breadwinner, or poor health. It seems impossible to craft a wise poverty program that will address each of the "eight million stories in the naked city".

Megan McArdle thinks that people often remain poor because they are trapped in bad neighborhoods:

People with impulse control problems, mental illness, drug and alcohol addictions, are very, very disproportionately likely to end up poor.....So even though these people remain a minority in poor neighborhoods, poor neighborhoods nonetheless have a lot more of them than more affluent communities...

More importantly, poor people have to put up with it, because they have a limited number of other neighborhoods to choose from, most of which have the same constellation of problems. If a gang moves into a middle class neighborhood and starts terrorizing the residents, either the cops take care of it, or the middle class people move. If it happens in a poor neighborhood, well, where are you going to go?

It's hard to see how we will ever have enough resources to make most bad neighborhoods safe, especially given local government budget constraints.

One more thought: poverty is more about the future than the present. When I was going to graduate school, debts exceeded my assets, and I had no income. Yet no one then would have thought to call me poor. Roll that same financial profile forward 40 years however, when productive years are largely in the past, and that would be a snapshot of an impoverished person by anyone's definition.

So here's what we're left with. Poverty is more about personal behavior, secure neighborhoods, values, and probable futures. If those all are aligned, money will take care of itself. © 2012 Stephen Yuen