How has income inequality changed in the Bay Area over the last decade?
The San Francisco Bay Area is widely known for its burgeoning economy and highly skilled workforce, a result of the region’s prosperous tech sector and entrepreneurial environment. These factors contribute to the region’s $113,200 median household income – which is $33,000 higher than the median in California and $47,000 above the median in the U.S. as of 2019.
This analysis explores the dichotomous relationship between the highest and lowest income households in the nine-county Bay Area over the last decade, examines how income inequality in the region may be impacted by the COVID-19 economic crisis, and considers how equity focused economic recovery strategies could safeguard against income inequities in the Bay Area deepening as a result of the pandemic.
Key Findings:
Impact of the COVID-19 economic crisis on income inequality
While the long-term impact of the COVID-19 economic crisis on income inequality in the region remains unknown, data points on job loss by industry and changing housing costs over the past year provide insight into how the pandemic may impact top and bottom earning households in the region.
Industry job loss – Many households that fall into the bottom 10% rely on employment in industries that have experienced sizable job losses over the past year in the Bay Area. For example, Accommodation and Food Services saw the biggest loss of employment out of any industry in the Bay Area, with net loss of 125,000 jobs between December 2019 and December 2020. Among the bottom 10% of households, 10% had a head of household employed in Accommodation and Food Services in 2019. In contrast, 32% of the top 10% of households had the head of household employed in the professional Scientific and Technical Services industry, which was one of the few industries to see job growth in 2020, gaining 8,800 jobs between December 2019 and December 2020.
While the industry make-up among bottom and top earning households coming out of the pandemic is still unknown, pre-pandemic industry employment among top and bottom earning households indicates that job losses stemming from the COVID-19 recessions were likely felt by the bottom 10% more than the top 10%. This in turn suggests that the current economic crisis could put at risk the income of the region’s most vulnerable households.
Cost of housing – In the past year, rents have fallen significantly as a result of the pandemic in the regions urban areas but rent in the regions three largest cities are still among the most expensive in the nation. San Francisco remains the most expensive rental market in the U.S. – with average one-bedroom rent costing $2,700 per month as of December 2020 (a 23% decrease year-over-year). San Jose remains the fourth most expensive in the country in terms of one-bedroom rental costs ($2,090/month; -14% year-over-year) and Oakland the fifth ($2,000/month; -19% year-over-year). Rents in the region were so high prior to the pandemic, that despite the drastic percentage drops in rent in Bay Area cities over the last year, housing costs are still unaffordable for many households. While the decline in rent has the potential to decrease the rent burden felt by low-income households, overall affordability of the region for low-income households is a factor of both rental costs and income, making wage growth for low-income households an important factor to prioritize in the wake of the pandemic.
Recovery tactics that focus on workforce development can protect low-income households in the region post-pandemic
While COVID-19 has accelerated many of the workforce challenges that were expected to play out over the next several decades, changing technology was disrupting labor force needs even prior to the pandemic. Investing in apprenticeships and earn-and-learn models that reskill and upskill lower income earners with resilient and in-demand skills is a strategy that could help the regional economy recover from the current economic crisis. This strategy could also protect low-income earners against future economic and technological disruptions to labor force needs. Upskilling low-wage workers who may have experienced job loss as a result of the pandemic is an opportunity for both business and public leaders to invest in the future workforce. This approach will also help ensure the bottom earners in the region continue to experience wage growth coming out of the pandemic, as they have over the past decade.
Advocating for additional public investment in apprenticeships and earn-and-learn models to upskill and retrain the regional workforce, while incentivizing business to play a central role in adopting workforce strategies focused in the Bay Area is a key step to ensuring the region remains competitive against peer metros post-COVID. The Bay Area has delivered faster wage growth for both bottom earners and top earners over the last decade, and ensuring the region continues to see growing wages for residents across the income spectrum is tied to the presence of the region’s prosperous businesses. Therefore, ensuring that businesses continue to locate in the Bay Area and continue to have a vested interest in the development of the regional workforce directly impacts the economic health of households across the income spectrum.