2009 July 11 Saturday
Has Silicon Valley Peaked?

In a Forbes article about the best cities for tech jobs by Joel Kotkin in Forbes an interesting pair of numbers jumped out: Silicon Valley peaked in its number of tech jobs in 1997.

Equally critical, it seems clear that simply being a high-tech magnet does not make a region a prodigious job creator. The San Jose metropolitan area, better known as the heart of Silicon Valley, boasted over 960,000 jobs in 1997. Last year, even after the ballyhooed Version 2.0 of the dot-com boom, that number had actually declined--to barely 900,000. According to figures from economic-strategy firm Praxis Strategy Group, other traditionally tech-heavy areas, including San Francisco and Boston, also did poorly in terms of growth through the balance of this decade.

The article provides a list of cities which have experienced high percentage growth in tech jobs since 2000. Most of the high percentage growth cities have low absolute numbers of tech jobs. But a few (e.g. Seattle, Orlando Florida) stand out as having a lot in total terms, though still far smaller than Silicon Valley.

My impression is that the internet is reducing the value for a firm to co-location near other firms in the related lines of business. Also, companies increasingly use labor in lower cost areas (e.g. India) to do many projects or parts of projects. So a company can be headquartered in Silicon Valley while having a larger percentage of its work force elsewhere.

Granted, there are still advantages to a place like Silicon Valley, most notably in the form of a labor pool that has lots of specialists when the need arises. But while the advantages of the place are substantial they aren't as big as they used to be. At the same time, California's problems are weighing on the Valley.

Share |      By Randall Parker at 2009 July 11 11:56 PM  Economics Labor

James Bowery said at July 12, 2009 11:14 AM:

Its interesting that so many people who are willing to hypothesize a causal relationship between NAM immigration and the decline of California are unwilling to hypothesize a causal relationship between AM immigration and the decline of Silicon Valley.

averros said at July 13, 2009 4:02 AM:

India is not lower-cost, if you figure in the productivity and quality. It's lower price, certainly, - but that lower price buys shitty product, and you have to hire 2-3 times more people to get it delivered than you'd have in US. The MBA clowns who outsource to India simply have no clue about software development and cannot make any rational decisions based on such "immaterial" considerations as code quality and maintainability - and so choose the cheaper option, for which their companies then keep paying and paying.

As for the fortunes of Silicon Valley, well, mid-to-late 90s were the period of rapid money creation by the Fed. This caused bubble, which simply happened in the then-novel field of Internet commerce - the investment banks flush with cheap money needed to shove it someplace, quick. The enthusiasm about Internet offered a perfect cover for what amounts to money laundering by the big banks.

Well, the next bubble was in the real estate, for exactly the same reason.

Immigration of technical specialists is simply a sympthom, not the cause of economic ups and downs.

James Bowery said at July 14, 2009 5:12 AM:

As with all causal hypotheses in the social sciences, the universal practice of slavery renders them untestable.

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