The tech boom is bringing some undeniable benefits to San Francisco: The city's unemployment rate has dropped to just 4.4 percent, employment jumped to an all-time high, and the region has some of the fastest-growing wages in the country. But now one economist is predicting that the high salaries techies command could spur inflation.
Total employee compensation (wages, salary, and benefits) in the Bay Area has increased 4.6 percent in the past 12 months, the Oakland Tribune reports. This compares to just 2 percent nationwide. But as salaries increase, the cost of goods could go up with them.
The upswing in Bay Area labor costs is strong enough to start triggering inflation, warned Scott Anderson, chief economist with San Francisco-based Bank of the West.
San Franciscans have already seen some of the inflationary effects. Office rents have soared 81 percent in four years, and housing costs have been aggressively climbing across the Bay Area. Now inflationary pressures could spread to beyond the city's housing and offices:
"You start to worry about a feedback loop between higher wages and rising prices in general," Anderson said. Already rising wages have pushed up prices for Bay Area homes, economists say.
"One reason why home prices are going through the roof is because of these strong wages," Thornberg said. "If you are one of the tech employees, home prices are not too expensive. But for everyone else, housing is too expensive."
Yelp's CEO Jeremy Stoppelman recently expressed concern over how expensive San Francisco has become. In an interview with the Associated Press, Stoppelman disclosed that "the vast majority" of his employees earn between "$40,000 [and] $100,000" per year, and that rising costs in the Bay Area "hurts people" working for Yelp.
It's even worse for people outside tech. Despite overall rising wages in the Bay Area, the city's low-wage employees have actually seen incomes decrease. A recent report by San Francisco's Human Services Agency indicates that the city's level of income inequality has grown to be "about on par with Rwanda."