Silicon Valley: Top salaries for many, greater inequality for all

Bidding wars for in-demand talent reap high pay packages for some, like Twitter VP Fry -- while hiding gaping disparities

News this week that Twitter's senior vice president of engineering, Christopher Fry, raked in $10.3 million last year confirmed what many already knew: Silicon Valley is an economic bubble where the competition to hire in-demand engineers is greatly inflating some pay packages. However, the high salaries awarded to many in the tech industry comes at the price of worsening inequality in the Bay Area.

In its first public financial statement in preparation for an IPO, Twitter revealed that Fry's package consisted of a $145,513 salary and $100,000 bonus, with the bulk of compensation coming from stock awards. His payday ranked just behind that of Twitter CEO Dick Costolo, at $11.5 million.

Silicon Valley -- home to tech giants Apple, Twitter, Google, and Facebook, as well as venture-capital-funded tech startups -- is awash with cash. A recent report from the Bureau of Labor Statistics confirmed that Silicon Valley employees are among the highest paid in the country, with the average worker in San Mateo County earning $3,240 per week -- more than three times the national average, and $1,100 more per week than the average employee in Manhattan. By comparison, the average salary for all professions in the Bay Area is $66,070, according to the Bureau of Labor Statistics.

Reuters this week quoted Iain Grant, a recruiter at Riviera Partners, which specializes in placing engineers at venture-capital backed startups, as saying that more than three-quarters of candidates who took VP of engineering roles at his client companies over the past two years received total cash compensation in excess of $250,000. Many also received stock grants totaling 1 to 2 percent of the company.

Some, like PandoDaily's Farhad Manjoo, argue that Silicon Valley's engineering salaries are finally getting fair, thanks to the high-stakes bidding wars between companies like Google, Facebook, and Twitter. While many react with envy at anecdotes of Silicon Valley perks -- the free cafeterias, laundry services, haircuts, employee shuttles, and even leases on Teslas designed to lure new hires -- Manjoo offers a warning:

As the industry's biggest start-ups all go public, their stock options will lose their appeal... and that's going to hurt employees' bottom lines. If you're in the trenches at one of these companies, you'd be wise to realize that your bosses are nothing without you. Ask for more money. Sure, the perks sound fun. But I've had those free lunches. They're not as nice as a better paycheck.

Menlo Park, Calif.-based Robert Half agrees, saying that even in the current job market, Silicon Valley companies cannot skimp on pay. The staffing firm warns that "top salaries are just as important now as in a hotter economy. This is particularly true since each worker is being asked to do more, making every position critical. And, with tighter staffs, the impact of someone leaving is magnified."

But the attention focused on highly compensated engineers like Twitter's Fry and others obscures the fact that Silicon Valley also mirrors the national trend of widening inequality. In an in-depth article, Hamish McKenzie paints an uncomfortable picture of Silicon Valley's ugly rich-poor gap. McKenzie quotes a study by Working Partnerships USA:

Silicon Valley hasn't added any net new jobs in 16 years; that about 31 percent of jobs in Silicon Valley pay $16 an hour or less; and that from 2000 to 2010, the portion of middle class households in Silicon Valley dropped from 62 percent to 55 percent. In the same period, the number of households making less than $10,000 more than doubled, and the cost of every major household expense category increased faster than wages.

Chris Benner, associate professor in Human and Community Development at the University of California, Davis, confirms that "the Bay Area is 'one of the worst in the country' for the gap between the rich and poor." With their high salaries, tech workers are driving up housing costs in the area, making it difficult for low-income families to get by. "[But] most tech people don't think about it," Benner says of the inequality problem.

This article, "Silicon Valley: Top salaries for many, greater inequality for all," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest business technology news, follow InfoWorld.com on Twitter.

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