THE BLOG
04/15/2014 03:12 pm ET | Updated Jun 15, 2014

Rebuilding Silicon Valley's Middle Class in a Time of Fiscal Constraint

We live in one world -- but two Valleys.

While much has been written and Hollywood movies made about the digital gold rush taking place in Silicon Valley, comparatively little has been said about the burgeoning number of people here who are living on the margins.

The unemployment rate for the San José metro area -- which includes cities like Sunnyvale and Santa Clara -- dropped to 5.8 percent in December of 2013, and local tech companies can't find enough engineers to fill their cubicles. But among adults in San José lacking a college degree -- the great majority of our adult residents -- unemployment exceeds 9 percent. In many Central San José and the East Side neighborhoods, double-digit unemployment rates (and even higher under-employment rates) prevail.

So why this bifurcation of opportunity, and what can we do about it? To broaden prosperity in San José, I've written a plan that focuses on the industries and businesses that best create opportunities for those who currently lack the skills coveted by the Valley's tech industry.

I understand that we are operating in a context of fiscal scarcity. We no longer have a pot of Redevelopment Agency funds to spur job development, and our General Fund caries the burden of a $3.7 billion unfunded liability in pension and retiree healthcare. Any dollars spent on an economic development strategy must return more dollars to the General Fund, or we'll merely be hastening the layoffs of police and closing of libraries.

So how do we move forward in a time of fiscal constraint? A familiar solution for Silicon Valley: innovation. We need to do things differently. To execute on this strategy, we need to rise above our ideological rifts and focus on getting things done. Here are the seven principles I believe should guide our efforts to make economic opportunity a reality for all of our residents:

1. Small is Beautiful

It has become an adage for every politician with a stained tie and seersucker suit to describe small business as the "backbone of our economy." But even the worst-dressed politicians are mostly right about this. Although we all appreciate the fact that Adobe, Brocade and Cisco employ thousands of employees, cities generally have very little influence over the location, distribution, and scale of job growth in a large multinational corporation. More importantly, in the recovery from the Great Recession, job growth appears focused in small businesses; U.S. job growth since 2008 in firms with fewer than 50 employees exceeded that of large companies by a multiple of ten in one study, and by several times in another.

Why else should City Hall focus on small businesses? Because it can. Reeling in the "big fish" of large corporate headquarters into a city makes for big headlines, but it's exceedingly rare. Silicon Valley derives 95 percent of its local job growth from companies scaling in place, not from an influx of new firms. So, we best promote job growth by focusing on helping small companies fledge and flourish.

2. Confronting the Bureaucratic Leviathan: Permitting

The most frequent complaint that I hear from business owners and managers relates to the challenges of getting permits or development approvals from our labyrinthine city departments. One retailer, who I'll call "John," told me his horror story: his building and occupancy permits took six months longer than projected, during which time the city lost his architect's plans, he received conflicting mandates from two inspectors from different city departments about the same problem, and his application was "handed off" to three different building officials, so he never knew who to call to try to hasten the process. This routine would seem comical, if it weren't for the fact that several prospective employees couldn't begin receiving paychecks until John could open his doors.

How do we "fix" this? I'm a firm believer that you can't fix what you can't measure. In July of 2013, I proposed an initiative, and joined by my colleague, Councilmember Johnny Khamis, we proposed to take two important steps toward a solution: employing tracking software and an "open data" platform. Allowing applicants to track their application through the system will improve accountability and make clear where kinks in the operation exist.

3. Revitalizing Manufacturing in San José

Manufacturing has long provided a pathway to the middle class for millions of Americans lacking advanced education. Electronic technicians and machinists can earn $100,000 annually with a high school diploma, far more than similarly-skilled workers could earn in the faster-growing service sector. And surprisingly, San José still has a more manufacturing-intensive economy than nearly any other major American city, with more than 17 percent of our job base in manufacturing, a rate twice that of the rest of California.

How can San José ride this wave to even more tech manufacturing jobs? By focusing on three essentials: having the sites available and ready, modernizing our older industrial buildings so they're ready for 21st century companies, and better matching the skills of our workforce to the demands of the market by leveraging existing partnerships (like Work2Future) and through our community colleges.

4. Making our Airport a Jobs Engine: Dynamic Pricing

Passenger counts have a direct impact on the living standards of employees in moderate-skill jobs in San José, since many hotel workers, waiters, cooks, taxi-drivers and airport employees depend on air traffic at SJC for their livelihoods. For these reasons, a single major international route, such as SJC to Tokyo -- can have economic impacts on San José running in the tens of millions of dollars.

So how do we increase the number of flights and passengers through SJC? The answer is Dynamic Pricing. If the price of an airline's use of an airport changes based on congestion levels, we can encourage carriers to provide service to less congested airports by increasing fees at SFO as congestion peaks, and lowering fees at San José.

Why would San Francisco agree to such an arrangement, which would impose higher fees on their airline carriers? Simply because they could collect all of the fees generated from the charge. They could also shed many of their shorter domestic routes to SJC and Oakland, making room for more lucrative international flights.

This would help boost to the employment prospects and wages of thousands of workers in San José taxis, restaurants, hotels and entertainment venues. Driving innovative change in seemingly obscure regulations -- such as flight fee structures -- can have widespread benefits for local workers who depend on growing flight traffic. This approach would require a mayor who would take regional leadership among our peer cities.

5. Our Toughest-to-Employ: From Homeless to Hopeful

I'm launching an effort to beautify San José with what I call the "San José Gateways" initiative. Organizations with missions to give a "second chance" to hard-to-hire residents like parolees and the homeless -- like Goodwill and Downtown Streets Team -- can provide the means to cleaning, scrubbing and planting in long-blighted corners of our city, while enabling participants to rebuild their work history and self-confidence. "San José Gateways" will operate around several freeway off-ramps that welcome thousands of San José's visitors, workers and residents each day with trash and blight. Cleaning trash, planting trees, shrubs and flowers, and even painting murals will welcome residents in a way that can transform how we view our community each day.

So where will we find the money? I've reached out to several companies interested in leasing a 4' x 4' sign at each freeway off-ramp, offering a simple message: "Welcome to San José -- brought to you by Acme Co." For approximately $5,000 annually we can fund a single crew to monthly clean, paint, weed and beautify each site for a year. Businesses paying those fees benefit from the exposure to thousands of captive eyeballs entering the city via any freeway off-ramp each day, at a fraction of whatever they'd pay for a larger billboard. So far, two local businesses have agreed to sign on, and we expect more to join as we launch this effort publicly.

6. Leveraging our Libraries and Community Centers as Employment Centers

I believe that we can do much more for our unemployed and underemployed residents by leveraging our libraries and library personnel. With a relatively low-cost investment in software, a few computers and staff training, we could easily recast our libraries and community centers as active centers of job skills acquisition.

As Salman Khan (the creator of Khan Academy) made famous, sophisticated educational software can provide a low-cost means for residents to learn everything from accounting, to English-as-a-second-language, to software programming, to Mandarin Chinese. Indeed, the City of San José already has access to over 1,500 free licenses to on-line training software by Metrix, an expansive learning management system developed in New York City. With over 7,000 classes to choose from, ranging from a project management certification to word processing, this software could enable hundreds of residents to learn critical job skills in multiple languages.

This geographically distributed approach for delivering services for job training and search could vastly improve the career prospects for thousands of our residents, all at relatively little cost. And by cross-training library employees to meaningfully assist job seekers, we could also provide a pathway for promotion, better earnings and improved career skills for many of our librarians and their assistants. Most importantly, by distributing these services throughout the community -- particularly in the needier parts of our city, we can better ensure that the information reaches the people who need it.

7. The Larger Economic Vision: The War for Talent

In an upcoming piece, I'll discuss the critical battle for San José's -- and indeed all of Silicon Valley's -- economic future: winning the "War for Talent." Our next mayor must be focused on cultivating, attracting and retaining the most innovative, creative, skilled private sector workforce. Silicon Valley's success over the last half century has depended on its workforce, but troubling signs have emerged as young tech workers increasingly flock to vibrant urban communities like San Francisco, Austin and Manhattan over the predominantly suburban Santa Clara Valley. Our collective fate will be determined by two factors: our success in creating an "urban option" in Silicon Valley, and our ability to support the growth of talent in our own children, the majority of whom do not achieve the educational outcomes they need to benefit from the Valley's growing prosperity.

Read my full plan on how we can make economic opportunity a reality for everyone in San José here.