San Jose, Calif.: Tech Workers Are Nervous

Even in the economic engine of Silicon Valley, layoffs are a concern.

FE_DA_080211bizecon01.jpg

Silicon Valley engineer Will Lumpkins and his family prayed for him to get a new job after he was laid off last year during a tech merger. He recently got one.

By + More

Median household income: $80,638
Unemployment rate: 5.1 percent
Median home price: $852,500

No one is going to mistake Silicon Valley, America's high-tech heart, for depressed rust belt regions in Michigan and Ohio. Unemployment is near the national average, and the national housing slump has largely skipped over San Jose, Sunnyvale, and Santa Clara, where pricey homes got even pricier last year. Economists predict the region will remain largely insulated from any nationwide slowing. "The economic base remains pretty strong because we sell to foreign markets," says Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

And it's doubtful that too many anxious Americans will feel sorry for a guy like Will Lumpkins, 39, an electrical engineer in San Jose and father of four children who was laid off during a tech merger last year. Granted, losing a job is one of the most traumatic events that can happen to a person. "My children would say, 'Papa, do you have a job yet?' And then at night we prayed, 'Dear Lord, please let Papa get a job.' It just twists the heart," Lumpkins says.

Then again, Lumpkins quickly got the new gig the family prayed for. He started last month as director of engineering at mobile developer Ecrio, netting $140,000 annually, which would be extremely comfortable in most parts of the country. Yet Lumpkins is far from sanguine. Not only is Silicon Valley a pricey place to live, but the perceived job churn in the tech sector—whether from automation or overseas outsourcing—has left many techies like Lumpkins as permanently nervous as assembly-line workers. "It's almost as if employees have become contract workers," Lumpkins says. "Corporations in the Bay Area have come to the decision that instead of retraining employees, it's better to lay them off and bring in new talent."

To a great degree, tech workers are victims of their own success. Established tech giants are constantly being challenged by hungry upstarts. "It's a cyclical industry that goes through hiring booms and layoffs," says Philip Martin, chair of the University of California's Comparative Immigration and Integration Program. "You get hired in the boom, the field advances, you get old and your expectations may rise, and the company wants people with the newer skills who are going to be cheaper anyway."

Watching the rupee. And those cheaper folks are often from overseas. While many Americans fret about outsourcing more than the hard data would imply is needed, the practice has had a real impact here. Yet the rapid outsourcing earlier this decade of technology jobs to India and other areas with low-cost, highly educated workers has largely stabilized as the Indian rupee gains against the U.S. dollar and wages rise for skilled Indians. "You're not reducing your costs quite as much as you would have two or four years ago," says John Shoven, director of the Stanford Institute for Economic Policy Research.

Silicon Valley companies have lobbied Congress to increase the number of H-1B visas granted to foreign high-tech professionals, often from India and other Asian countries. "I'm an immigrant myself, and here on the West Coast the supply of good technical people is not there," says Metin Ozen, 49, of Sunnyvale, a native of Turkey and president of Ozen Engineering.

But unemployed or underemployed tech workers contend there are enough talented American workers ready to fill those slots. Americans may also be unwilling to accept low wages in an area with a high cost of living. Over half of H-1B jobs are classified by employers as entry level, which means $50,000 in pay.

That's good coin in many parts of the United States but not here, where the median household brings in $80,000 a year versus $48,451 nationally. Yet even high incomes and low unemployment haven't made people in the place that birthed the new economy immune to worries about America's future.