State of the Valley: Signs of trouble

February 22, 2008 12:00:00 AM PST
Silicon Valley turned high-tech into a huge industry. It demonstrated resiliency after the dot-com bust and it's one of the few bright spots experiencing job growth in a period of economic turbulence. But it's also showing signs of new troubles ahead. ABC7's MONEYScope reporter David Louie shows us why Silicon Valley's leaders must address some new challenges.

For many, Silicon Valley is built around engineers and high-tech ventures. They get all the attention. But this year, as valley leaders take stock of themselves, they're discovering they've been ignoring signs of trouble. A double-digit high school dropout rate and difficulty filling lower-paying jobs could drag down the valley's economy.

Silicon Valley added 28,000 jobs last year. It's the top city in the country for registered patents. Growth in median household income outpaces the nation. However, the latest Joint Venture Silicon Valley Network study reveals significant problems too.

"This is panic. This is a horrible thing. Our dropout rates have gone from five percent in 2001 to 13 percent today. Five to 13 percent. If that continues, nobody's going to go to high school," says Tim Draper, Silicon Valley venture capitalist.

Nineteen percent of Silicon Valley residents enter the work force with a high school diploma. The figure is 30 percent nationally, but they're competing for fewer jobs. Mid-wage jobs paying $30,000 to $80,000 dollars a year have fallen six percent from 2002 to 2006.

"To run an economy, to run a region, you need a lot more than entrepreneurs and high-tech workers and venture capitalists. You need a whole infrastructure," says Jagdeep Singh, Infinera President and CEO.

The valley needs electricians, plumbers, medical assistants and biological technicians, according to the study. Emerging technologies, such as solar, need workers too.

"We can train somebody to put solar up on a roof within a few weeks, so what we need is someone with the right attitude and aptitude to get involved in solar and help us out. We're going to need hundreds and hundreds of people in the Bay Area to deploy solar at the scale that we're looking to do," says Julie Blunden, SunPower Public Policy VP.

Economists point out, though, that the significant job growth is in replacing retiring baby boomers.

"The person from PG&E said half the linemen are going to retire. The people at the waste treatment center in Sunnyvale and San Jose, most of them are over 55. So we have an incredible challenge in filling those mid-level foundational jobs," says Stephen Levy, PhD. of the Center for the Study of the CA Economy.

An estimated 300,000 baby boomers will retire in the next decade. Layoffs, such as the ones underway at Yahoo, remain a fact of life in Silicon Valley.

The director of NOVA, the valley's job re-training program, says it can take a year for a displaced worker to find a new job.

"We've probably had a doubling over the last two years and our largest month for worker dislocation in the last five years was January of 2008," says Michael Curran, of the NOVA job training program.

Even with high demand for job retraining, federal funding for Nova and similar agencies is being cut $300 million dollars this year. That's just one more problem Silicon Valley will have to solve.