You may have been surprised by the news this week, announced by the U.S. Bureau of Labor Statistics ("After the Dot-Com Bubble: Silicon Valley High-Tech Employment and Wages in 2001 and 2008"), that wages have continued to climb in Silicon Valley right through this recession.
Indeed, the BLS statistics suggest that, in real terms, wages have jumped an average of $35,000 per year since 2001 for the average Valley technology worker, and that, in the words of reporter Scott McGrew of KNTV-NBC, "the greater pay means technology firms have the largest payrolls ever, pumping $60 billion into the economy -- far more than in the height of the Internet boom of 2000-2001."
This may seem like great news, at least for folks working for those technology companies. After all, where else in our crippled national economy can you find a similar oasis of prosperity and rising wages -- well, that is, outside of Washington, D.C.? Hey, everybody, let's move to San Jose, they've got jobs!
But if you look closer at these statistics, they aren't as wonderful as they seem at first glance. And, for this Valley veteran, I find these figures -- counterintuitively to the outside observer -- deeply disturbing. Let me explain why.
Let's look at the rest of the BLS numbers. First of all, keep in mind that the stats run from 2001 to 2008. Both dates are very important.
For one thing, 2001 wasn't 2000. I was running a business -- Forbes ASAP magazine -- both years. For most of 2000, with the dot.com bubble at the point of bursting, I couldn't pay enough salary to hang on to a lot of my employees. They were getting phone calls every day from my competitors and being offered -- even the youngest, least experienced kids -- huge salaries and impressive job titles. Just to stay in the game, I (or, more accurately, the Forbes family) was paying 25 year olds up to $70,000 per year for what in normal times would have been $30,000 per year jobs. And my competitors were offering more.
In comparison, by early 2001, it was becoming apparent that the Internet economy was going off the rails, and that the world really didn't need 16 online pet food stores. By mid-year, we had not only stopped hiring, but, as our advertising from the dot.commers dried up, we actually suffered an across-the-board salary cut. To save money, I even fired myself, taking a contributing editor position and promoting my executive editor to my old job with much less salary. It wasn't enough. Within months, Forbes ASAP, like most of its competitors, was gone.
In other words, to measure Silicon Valley wages with a baseline of 2001 is to already start with a depressed figure.
Meanwhile, by comparison, the Valley's 2008 figures represent a very different distortion. The years from 2001 to 2008 were very good to Silicon Valley, at least for established companies. For one thing, they grew up: That is, instead of being whipsawed by the usual four-year, boom-bust cycle, frenetically hiring during good times and flinging people into the street during bad times, this time the more mature Valley companies -- Intel, Cisco, Apple, HP, Oracle, etc. -- for the first time, played the game conservatively. They hoarded their cash, were more judicious in their hiring, and grew as much through acquisitions of proven companies than expensive new market development.