Industry/ Tech Growth

Silicon Valley comes in dead last in a comparison of eight U.S. tech centers based on the cost of doing business, cost of living and employee quality of life. The Research Triangle in Raleigh-Durham-Chapel Hill, N.C., came in number one.

Who did THAT study?

The Silicon Valley Leadership Group, which represents 190 of the valley’s most prestigious companies, did. The report will be discussed at the Leadership Group’s Projections 2006 conference Sept. 21 at West Valley College in Saratoga.

“We all know that Silicon Valley is the top tech region of the world,” says Carl Guardino, the president and CEO of the Leadership Group. “The message is that we are not the only tech region of the world.”

The study finds that among the major tech centers:

Only San Diego has a higher cost of housing;
Only Austin, Texas, has a greater percentage of its population without health insurance;
And only Portland, Ore., has a higher unemployment rate.
Silicon Valley had the worst traffic congestion, the lowest eighth-grade math scores, and came in second only to Boston for the dubious honor of having the highest taxes.

The Research Triangle, by contrast, had the most affordable housing, the least traffic congestion, next to best unemployment rate and came in second only to Boston for eighth-grade match scores. The Triangle is often on lists of the top technology communities but usually trails Boston, says Charles Hayes, chief ????utive of Research Triangle Regional Partnership, a regional non-profit that promotes the Research Triangle park area.

“It does surprise me that we are number one,” he says.

Rankings, like opinion polls, are determined by the questions asked.

“Any given community can come out as one of the best or worst places based on what is measured, when it is measured, and who is behind the study,” says Kim Walesh, assistant director of the San Jose’s Office of Economic Development. She was not involved in undertaking the study which was scheduled to be released Sept. 16.

Nevertheless, Ms. Walesh says, “If this ranking was done by a local group and truly reflects what our business community wants, then it clearly deserves our attention.”

That’s what the Leadership Group is hoping.

The report appears to strengthen the leadership group’s claim that the valley needs more money from the state for transportation and more attention from the Legislature on tax issues. It also bolsters its efforts to raise money for affordable housing. The Leadership Group members are strong supporters of a 16-mile extension of BART from Fremont to San Jose and Santa Clara, which is now seeking funding from the state and federal transportation budgets (although the project’s main source of funds is a local sales tax). The organization also has raised more than $5 million — $3 million from public sources; $2 million from private ones — for affordable housing since spring.

The Leadership Group found that only 7 percent of homes in San Diego could be purchased by someone making the median income. In San Jose, that percentage was 19.5 percent. In the Triangle 71.2 percent of homes were affordable for someone earning the median wage.

The numbers that may best describe current conditions — the jobs numbers — are not in the rankings but elsewhere in the 42-page report.

Last year, when the Leadership Group projected job creation, it forecast a return to the employment levels of 2000 by 2010.

This year, it says we won’t return to those employment levels until 2016.

Economist Scott Anderson, senior economist of Wells Fargo and Co., and a consultant for the report, says it isn’t just reluctance to hire or productivity gains that are delaying job creation. It is also competition for those jobs from the other tech centers in the United States and overseas.

“Reality has sunk in that our competitive challenges aren’t going to be easily solved,” Mr. Anderson says. “The competition has grown even stronger. It’s going to take more innovation and more investment — perhaps new products that we don’t even see on the horizon.”

He notes that Yahoo Inc. and Google Inc. are hiring now, but he doesn’t see many other drivers of employment that might push the job numbers to the levels of the late 1990s.

“I think 2000 is an unfair benchmark,” Mr. Anderson says. “That was a once-in-a-50-year or 100-year event. It’s hard to match those levels of employment.”

Another factor that is suppressing job numbers is the new model of business in the valley. Companies now have to focus more on revenue than growth, which was the mantra of the ’90s, says John Ambroseo, president and CEO of Coherent Inc., a Santa Clara-based photonics manufacturer, and a member of the Leadership Group who was involved in the Projections survey.

As a result, the high cost of doing business in the valley has forced companies to take a hard look at which jobs to maintain in the valley and which ones to move to less expensive places, including locations outside the country.

“In the end, I would guess that half of the jobs lost from the 2000 peak to the most recent trough are not coming back,” Mr. Ambroseo says.

“Expert”
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