Oakland Techonomy Has Major Pluses
With social media stocks looking riskier, is Oakland’s economic boom endangered?
Illustration by Heather Hardison
The financial class is waiting anxiously for the next quarterly earnings reports from Bay Area social media giants, which are due at the end of July. Last quarter, Twitter’s stock was “battered” after a “nightmare earnings scenario.” Soon thereafter, LinkedIn’s stock “plunged,” Yelp shares “tumbled,” and Zynga announced massive layoffs.
Sometimes it feels like the high end of Oakland’s economy is largely dependent on the influx of highly paid technology workers. If tech stocks tank, will Oaktown face a zombie apocalypse? Is this whole crazy edifice of artisanal pickles, designer mac ’n’ cheese, and million-dollar bungalows about to come tumbling down?
The image of unemployed Twitter engineers shambling through Uptown cadging quarters for their next pour-over coffee might give some haters a shot of schadenfreude—but it shouldn’t. The tech industry is fond of quoting the aphorism popularized by President John F. Kennedy, “A rising tide lifts all boats.” But it’s true, according to UC Berkeley economics professor Enrico Moretti. In his book The New Geography of Jobs, Moretti calculates that each high-tech job in software, technology, or life sciences creates an additional five jobs outside the sector. That’s not only pickle makers and yoga teachers, but also everyone from health-care professionals and lawyers to auto mechanics and plumbers. In fact, Moretti says that three out of those five ancillary jobs go to people without college degrees. And, while salaries for everyone are higher in innovation hubs like the Bay Area, lower-skilled workers benefit more from those higher wages than do those with the highest wages.
That’s cold comfort to someone struggling to pay for a $2,500-a-month, one-bedroom apartment on a barista’s income, but Moretti says we shouldn’t blame the better paid. “Sure, the cost of living is high here, but that reflects not only the economic vitality of the area, but also misguided housing policies in part of local government,” he says. OK, fine. But if Twitter twitches, will all those ancillary jobs flit away? Even if tech stocks suffer again this quarter, $15 hamburgers should be fine. Stock prices have only a tangential relationship to a company’s financial performance. For instance, Twitter’s annual revenue is now expected to be “only” $2.17 billion. LinkedIn may “only” earn $670 million this quarter, with Yelp on tap for a measly $574 million in Q2. That’s still a hella lotta micro-brew.
Oakland’s economy is somewhat insulated from any tech-sector meltdown for a few reasons. First, its economic base is actually quite diverse. “While Oakland holds some of the labor force that supports those technology companies, I don’t think it’s in nearly as volatile a position as San Francisco,” says Amber Schiada, director of research at Jones Lang LaSalle, a commercial real estate services company. “It has a solid base in traditional industries including health-care and professional services.” She notes that Kaiser Permanente and Clorox are large, well-established employers, while Del Monte recently announced a move to the East Bay. Another factor is the smaller nature of Oakland’s tech businesses. While much has been made of brokers’ failure to lure funding-heavy companies like Lyft to Oaktown, the city has a thriving ecosystem of bootstrapped startups. “Holding out for these giant, savior-type companies is not something that Oakland needs to do,” says Mike Ghielmetti, president of Signature Development Group. While he said he’d be thrilled if a tech giant did move here, “Typically, we are better off having a small company come here or building our own small-to-mid-sized companies.”
A case in point is The Hive, Signature’s mixed-use development with office space that’s close to fully leased-out by seven mostly minority-owned, socially responsible companies including Numi Tea. Such smaller-scale office complexes are more resilient because they don’t depend on one anchor tenant.
Finally, Moretti points out that the regional economy is “thick.” That is, there’s such a concentration of high-tech employers and such a deep pool of tech talent that it should be easy for employees of failed startups to find a new gig—quickly enough to keep all of Oakland’s bartenders, plumbers, and pickle-makers gainfully employed.