Academic journal article Monthly Labor Review

Crash and Reboot: Silicon Valley High-Tech Employment and Wages, 2000-08

Academic journal article Monthly Labor Review

Crash and Reboot: Silicon Valley High-Tech Employment and Wages, 2000-08

Article excerpt

Silicon Valley is the largest and most influential high-tech center in the world and leads all other metropolitan regions in the United States in the breadth and scope of economic activity it creates through technological innovation. (1) Since the 1960s, when technology firms that were engaged in semiconductor manufacturing, computer design, and computer programming and services began to symbiotically cluster in the southern portion of the San Francisco Bay Area, Silicon Valley has become the most famous high-tech industrial cluster in the world. The network of people, firms, universities and research institutions, and government agencies has provided an ideal habitat for high-tech firms to be born and to grow; the products of these high-tech firms have improved business processes and models, generated economic growth, and improved standards of living around the globe. (2)

This article examines trends in Silicon Valley high-tech employment and wages during the 2000-to-2008 period, which encompasses the peak of the dot-com era, the ensuing dot-com bust, and a resurgence of high tech. It also discusses the factors affecting the decline and growth of specific Silicon Valley high-tech industries, such as increased global and domestic competition and higher demand from health-care industries. Next, the analysis examines trends in high-tech wage distribution and generation. The performance of high-tech industries in Silicon Valley is compared with the performance of those in the rest of the Nation. Finally, the analysis assesses the extent to which the clustering or geographic concentration of Silicon Valley high-tech industries has increased or decreased over the 8 years since the peak of high-tech industry performance.

The word "silicon" in the term "Silicon Valley" refers to the key ingredient of semiconductors, which formed the technical basis for the computer-based high-technology economic climate that appeared and grew in strength in and around San Jose, California, in Santa Clara Count. This area attracted venture capitalists, computer technologists, and entrepreneurs, resulting in a regional agglomeration of high-tech industries that spread into neighboring Bay Area counties (specifically, Alameda, Contra Costa, San Francisco, San Mateo, and Santa Cruz). These industries have made Silicon Valley synonymous with dynamic, technology-driven growth and created a large and diverse base of high-paying jobs across the region. (See map 1.) Silicon Valley continues to be at the cutting edge of innovation. According to the U.S. Patent and Trademark Office, in 2008, 11 of the 20 U.S. cities with the most registered patents were in Silicon Valley. (3)

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From the mid-1990s to 2000, Silicon Valley's new Internet sector, along with its related high-tech industries, rapidly grew, due in large part to widely available venture capital. The amount of venture capital pumped into Silicon Valley between 1995 and 2000 was about $65 billion, nearly one-third of total national venture capital investment during the period. The capital that came into Silicon Valley created a new wave of growth there. (4) Approximately 172,000 high-tech jobs were created during this 5-year period. The infusion of venture capital and speculation in stocks led to huge runups in individual stock prices and in entire stock markets, such as the NASDAQ, on which many high-tech corporations are listed, and created the "dot-com bubble." (5) On March 10, 2000, the NASDAQ reached a peak of 5,132.52. As the enormous gap between valuation and performance became apparent, Internet stocks collapsed, with Silicon Valley at ground zero of the crash. (6) By December 2000, the NASDAQ had dropped by more than 50 percent and stood below 2,500. After the dot-com bubble burst, Silicon Valley underwent a transformation. Reeling from massive hits to market capitalizations, many high-tech firms trimmed jobs or went out of business entirely. …

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