April 26, 2009

Blue Collar, White Collar, Silicon Valley

A while back, Burbed reader DreamT made this comment:

Can you park a space shuttle, a fire truck, or a blimp in this Fremont house? | SF Bay Area Home Price and Mortgage Insanity Blog – Burbed.com
DreamT Says:
April 16th, 2009 at 11:46 pm

Ask a $25k earner his social strata and he’ll say he’s middle class. Ask a $250k earner and he’ll also say he’s middle class. In fact, the $250k earner points out he cannot afford a house “in the Silicon Valley”
The differences are where you want to see them. They’re in the eye of the beholder, and speak about who you are rather than what you see. The concept of “blue” versus “white” collar, originally meaningful when you had full segregation of management vs floor workers, closed door offices, different clothing, different “villages” – it never applied as little as in recent times’ Silicon Valley. You say so yourself by pointing out they are only divided by a street that’s not even an Expressway. What segregates people in the bay area is their nationality or ethnicity, and the timing of their arrival in the bay area, rather than their income, education or even job. The parents of fellow Engineers I worked with, grew up and still live in Palo Alto. They were what you’ll call blue collar and they still live in your neighbors.
As anon asks, what makes you a white collar? Your job? No, if you live in a dirt cheap place littered with pickup trucks, right? So, your education? Same thing. Your lifestyle and house location? No, since you could have a traditional blue collar job since the 70s and live comfortably in Saratoga. So, moving up to Palo Alto and buying a Porsche makes you a white collar family, suddenly? Is that what you’re reduced to assert?

Which brings up some interesting questions. What does it mean to be blue collar or white collar in Silicon Valley? Does it even apply?

Similarly, what is working class in Silicon Valley? What is middle class? What is professional class?

Here’s what the Mayor of San Jose had to say:

Wealth-Less Effect: Earning Well, Feeling Otherwise
Proposed Tax Increases on Six-Figure Earners Highlight Mounting Costs of Living — and the Relativity of Prosperity

San Jose, Calif., Mayor Chuck Reed calls a family living in Silicon Valley earning $250,000 “upper working class.” That is about what two engineers working at a technology firm can expect to make, but “a family earning $250,000 a year can’t buy a home in Silicon Valley,” he said.

James Duran owns a human-resources company in Silicon Valley and is president of the Hispanic Chamber of Commerce in California. He supported Mr. Obama, but is worried about the tax proposals. He has laid off some employees in recent months and has been wondering how he can fund an extension of those workers’ health-care benefits.

Mr. Duran said he and his wife earn about $400,000 annually, but “I’m barely getting by.” They have high property and state taxes, as well as college tuition and savings to cover. “I’m an Obama man, but this side of him is a difficult pill for me,” he said.

Is $400,000 for a 4 person family middle class in Silicon Valley? Is that white collar?

It sort of makes sense… after all, we’re a very very very special place with an mix of smart people that’s impossible to find anywhere else.

What class are you?

Comments (107) -- Posted by: burbed @ 5:27 am

107 Responses to “Blue Collar, White Collar, Silicon Valley”

  1. BobbyS Says:

    I’d say 400,000 a year is poverty. Therefore, I am in the super poverty class. I am essentially the scum of scum fermented for a month.

  2. Sprezzatura Says:

    Not to raise the specter of NYC but there was a piece in the Times recently explaining how people who make a million a year on Wall Street still have a hard time getting by…. it’s the monster cost of homes, and the private school tuition for the kids, and a couple of high-end cars, and the club membership, and the nice wardrobes, and eating out a lot, and a couple of vacations to nice spots, and the weekend home ….. all the things your peer group has that you also think you need in order to keep up / fit in.

    These people are not lying, they really do have trouble making ends meet on a salary most of us will never make in our entire lives. It’s pretty pathetic when you think about it, but it’s true.

  3. Joe Says:

    Mr. Duran and his wife making $400k/yr and “barely getting by” obviously do not know how to manage expenses. And I’ll surmise that they bought an oversized home at or near the bubble-top pricing in a wannabe RBA location, have a couple of Mercedes-Benz in the driveway, and took out a HELOC to add that new subzero, granite counter-tops, and kitchen cabinetry to impress all their other friends who are “barely getting by”.

    Ridiculous. Be humble and content. Live within your means.

  4. Real Estater Says:

    >>Is $400,000 for a 4 person family middle class in Silicon Valley? Is that white collar?

    People who don’t make that kind of income just can’t relate to the tax burden in that range. It’s difficult enough getting folks here to understand AMT. People are complaining about high mortgage payments. That’s nothing compared to my tax payments.

  5. nomadic Says:

    That’s completely immaterial. I can aspire to pay $1M a year in taxes – that still means my income would be in the very top range for the nation. Hardly difficult to “make ends meet” for someone living within their means.

    So fool, what happened to your “perfectly sheltered income?” Switching lies again?

  6. Real Estater Says:

    nomadic,

    Why do you ask the same question that has already been answered, and pretend like you’ve never heard it?

  7. anon Says:

    Because you do not actually answer questions.

  8. DreamT Says:

    #4 would only make sense if after-tax income of say a $300k family is MORE than after-tax income of a $400k family. That’s obviously not the case, so as nomadic said, RE’s comment is immaterial and off-topic (in addition to being whiny), but that surprises no one.
    On the other hand, there are circumstances where you get penalized as you work hourly – for ex. you would earn more after tax if you work 17 hours than if you work 20 hours.

  9. Real Estater Says:

    DreamT,

    It’s not as simple as that. After taxes the extra reward for the higher income is minimized. Who is going to go the extra mile and take risks without sufficient reward? We are heading down the road to socialism, which discourages investments, entrepreneurship, and hard work in general, and caters to people on welfare. A person who achieved a $400K+ income deserves to feel rich and should be rich. The fact that he doesn’t feel so rich says there’s something wrong with the system.

  10. anon Says:

    No shit. And he doesn’t because home prices are grossly inflated.

  11. Real Estater Says:

    If the tax system isn’t the way it is, even a person making $250K should be able to live quite comfortably in the Bay Area.

  12. Mr. B Says:

    There’s only two classes in this area. The political (ruling) class and the taxpaying class. “Class” distinction within the mass of taxpayers is a construct employed by the pols to rationalize the machine, or the mechanism that keeps the ruling class elected by sucking funds from those who make more than the average wage and addicting those that don’t with government programs and jobs.

  13. Real Estater Says:

    anon,

    The point I’m trying to make is that housing prices is not the issue. The issue is high taxes.

  14. anon Says:

    Both are contributing factors. Do you think that someone should get a tax break for living in the bay area?

  15. DreamT Says:

    #9 – “The fact that he doesn’t feel so rich says there’s something wrong with the system.”

    I disagree. First, the system’s purpose is NOT to make people “feel rich”, rather it’s designed to induce consumption i.e. make people not feel rich enough. So to say something’s wrong with it because it does not meet that person’s purpose is preposterous.
    Second, and most importantly. the fact that the person does not feel rich is either a symptom that the person’s lifestyle is out of touch with his income (overreach), that the person’s expectations are through the roof (generally due to TV), that the person’s neighbors and coworkers are comparatively richer, or is mostly symptomatic of the person’s general inability to be content with his lot.
    After all you can be the 50th fortune on the planet and still feel unhappy because 49 people are richer than you.
    As for taxes,since I don’t feel like writing forever, I’ll just address one point: taxes don’t cater to people on welfare. They merely fund government obligations and incentives. You could collect more taxes and reduce incentives to be on welfare, and vice-versa. These are two separate topics – how much you collect, and what it’s used for.

  16. DreamT Says:

    In general, entrepreneurship and hard work exist because people don’t feel rich enough and strive to earn more. If you somehow changed the system so that people earning $250k all feel rich enough, you’ll probably witness a collapse of the country and huge unemployment. You can’t support both the former (entrepreneurship and hard work) and the latter ($250k people feeling rich enough) except if you’re trolling, which is likely, or if you forgot to hook up your brain this morning.

  17. nomadic Says:

    Thank you for spelling things out, DreamT. Nice summary.

    .
    Why do you ask the same question that has already been answered, and pretend like you’ve never heard it?

    Because sometimes you give a different answer, being incapable of accurately remembering your complaints & fabrications.

  18. CB Says:

    “overreach”

    Quite succinctly sums up a 400k earner who feels middle class.

  19. anon Says:

    Like this dbag?

    http://poorbuthappy.com/yourthing/post/from-hedge-funds-to-pizza-delivery/

  20. nomadic Says:

    Reminds me of some of the sad luck stories you read in the paper about the folks who lost their jobs. One that comes to mind is the woman who had a fondness for Chanel, Louis Vuitton, etc. She always had the latest designer fashions until she lost her “good paying” job of $80k/year.

    WTF? Do people who make $80k really spend $300 on one pair of shoes or a purse?

  21. nomadic Says:

    Exactly anon. This quote practically made my head spin:

    The Karpmans are now on food stamps and a tight budget that doesn’t nearly cover their children’s $30,000 private school tuition. But thanks to an anonymous donor, the Karpmans children’s tuition has been covered through next year and they are deeply appreciative.

  22. wavenger Says:

    DreamT,

    That’s a false dilemma.

    The problem is not feeling like you don’t have enough. The problem is that young people don’t feel like they are being compensated justly. All other things – education, intelligence, work ethic – being equal, baby boomers are more affluent than their younger peers just by virtue of when they entered the game.

    That’s why I, a young professional, can only afford a house in a neighborhood where yesterday’s working class lived, and they cannot afford houses at all. And nevermind a pension or retirement.

    The reasons for this are many and varied, but clearly the solution is not simply lower taxes. We’ve been trying that for thirty years, remember?

  23. anon Says:

    Oh, and with respect to today’s question – White collar or blue collar doesn’t distinguish classes, income, or wealth. It distinguishes the type of work. The way I use it is as follows: A “blue collar worker” would be one that uses their body to perform labor. A “white collar worker” would engage in the toils of the mind.

  24. DreamT Says:

    “All other things – education, intelligence, work ethic – being equal, baby boomers are more affluent than their younger peers just by virtue of when they entered the game.”

    All things being equal, except 30 years went by. Consumption exploded. Immigration brought in a lot of educated folks. Access to knowledge is very much democratized, increasing the bar for competitive advantage. The world changed.
    But even if it did not, heard about first-mover advantage? It’s real and can be be beat, but is still an advantage. Houses are cheaper when there are orange and prune fields in all directions.

    I’m a somewhat young professional as well and also can only afford what was previously considered working class neighborhood. Why should I complain about it or find it’s unjust? Would I be ready to trade up to Palo Alto in exchange of being 30 years older? No way, so it would be hypocritical (of me at least) to complain that the world is unfair.

    Compensated justly? I have been on both ends of the spectrum (arguing for a raise, and having directors and above ask me for a raise). Compensation is not a social issue, it’s an individual issue. You’re not owed a certain compensation just because you need the money or because your dad earned more or because your friend with same job title earns more. You negotiate your compensation, you increase your skills, you become more valuable, you work for a company that values you more highly, you form a union, or you become your own boss. You do want to leave your sense of entitlement behind, in any case, because it won’t be the solution to your dissatisfaction.
    As for taxes, I fail to see how they’ve got anything to do with people’s sense that they’re fairly compensated.
    I’ll tell you this though: the more highly paid a person is, esp. the more raises a person gets, the more unhappy the person is about his/her compensation. It’s perverse but very true. When we put down the brakes on extravagant company-wide raises and bonuses, we observed increased employee morale, increased employee efficiency and lower turnover after only two years (based on yearly employee surveys). I’m taking about medium skilled to highly skilled office jobs – sales, client and professional services, engineering and management.

  25. Mole Man Says:

    On the positive side, it is nice that not being able to afford something has become an issue. Sanity could be just around the corner, at least in relative terms.

  26. DreamT Says:

    #23 – That’s the most accurate description I’ve read so far. Indeed, a professional football player is blue collar whereas a call center guy in New Mexico is white collar. And there are exactly zero things we can deduce from this definition, which was my original point – after all the professional football player uses his brain quite a bit and the whitest of all white collar jobs still have to drag their bodies to their keyboard or to the airport.

  27. Real Estater Says:

    anon says,

    >>Both are contributing factors. Do you think that someone should get a tax break for living in the bay area?

    Well, if you’re a “blue collar” person (or a guy on welfare), you’re likely to spend a great percentage of your income on subsistence needs, such as grocery, gas, and rent. If you’re a white collar person living in the RBA, chances are your biggest expenses would be taxes, children’s expenses, and misc expenses charged to your visa, in that order. Mortgage expense would be 4th on the list. I’d love to hear about other people’s experiences. My experience has been pretty consistent.

  28. DreamT Says:

    #27 – You consider taxes your expense. I consider it money that was never mine in the first place, i.e. does not qualify as an expense.

  29. anon Says:

    “Well, if you’re a “blue collar” person (or a guy on welfare),”

    Did you not read the above? A welfare recipient, by definition, does not perform manual labor. Therefore, they are not a blue collar worker.

  30. anon Says:

    I think its pretty to safe to say that a welfare recipient isn’t any sort of worker. At least, that’s the idea as far as I know…

    Bravo, excreter. I think this is the dumbest thing you’ve ever said.

  31. austindweller Says:

    Guys,

    I am coming here more often since last week. This is a great thread. I would have to take a more central position here on the point of taxation. Taxes do play a role.

    I remember a personal situation when I was asking my wife to resign when in CA. The reasons were simple. Her whole salary was getting taxed in the highest bracket 33% federal + 10% CA etc. So she used to collect 57cents on a dollar. If you apply this factor to her salary and subtract the “additional” expenses such as daily commute, extra daycare hours for kids, eating out everyday etc. the remaining sum was not worth the effort it took to earn. Moreover at the end of the day both of us would be tired and that reduced the quality of our overall life. Then, was it really worth toiling towards the pittance that we could finally collect from her job ? From the other side, if she had resigned, the overall quality of living would have been much better without affecting the net saving a lot.

    But of course, you would argue that we were worker bees and may be not sombody like an enterprenuer who employed others. So she quitting the job may not really affect the economy. But all I was trying to say is that I have personally went through the situation where taxes played a role in affecting the motivation to work.

  32. A. Lewis Says:

    #31 – perfectly good example. The taxes are relevant.

    But so it the cost of the commute, the cost of daycare, the cost of eating out, and the salary your wife was paid. If she was earning $400k/yr, at 57 cents on the dollar, you would still take home plenty after the daycare and commute were paid for.

    If she was earning $40k/yr, maybe not?

    So I don’t want to single out the taxes as the only thing ‘standing in your way’. If we had better met your needs with subsidized childcar & mass transit with those same tax dollars, perhaps the equation comes out better.

    The other key thing to discuss was that it’s not necessarily ‘bad’ that your wife was faced with this trade-off.

    Things will be different when your kids are older. People with your two jobs but not kids, or who lived in a different city with different commutes would calculate differently.

    Different trade-offs. How much should we subsidize your exact situation? Probably some…but I don’t think we can personalize the tax code to YOU. Or to me. Especially since what you want will be different in 5 years.

    For reference, my spouse stopped working when we had kids, and we regularly discuss it, and do the math like you did, and are faced with similar tradeoffs.

    For a while, she did part-time work, which after taxes and childcare was essentially worth $0, but she thought it was worth it for resume/staying active purposes.

    I didn’t feel like the tax code should be changed to favor us more than it already does. Which is a lot.

  33. A. Lewis Says:

    And the number 1 reason people in NYC and the RBA ‘are just getting by’ on $400k or $1M of income is the SUPER-HIGH PRICE OF HOUSING.

    DUH.

    Point of this blog, thank you very much.

    That’s what needs fixing, not the moderate tax rates we pay.

    Sorry I had to yell, but come on. The tax-thing I want to make big changes to, in order to help ‘fix’ what I see as the problems for working families is Prop. 13. But we’ve devoted other threads to that.

    If you lower income taxes by any sane amount, it won’t be enough to fix the housing affordability problem, and you’ll just exacerbate a host of social ills.

    If you wipe out income taxes, you’ll destroy America, though before the collapse, a certain amount of the top 40% or earners will certainly have a lot more take-home pay to spend on housing. The lower 60% didn’t pay so much in taxes that they’d start shopping in better neighborhoods. (You know, before those neighborhoods were overrun with barbarians hunting for food).

    Socialism isn’t the big long-term worry. Sweden is a fairly happy place. Riots and violence in the streets when 80% of the population is hungry, jobless, and can’t pay a doctor bill for their child is the worry.

    Oops, I may have gotten a bit far…

  34. A. Lewis Says:

    #11 If the tax system isn’t the way it is, even a person making $250K should be able to live quite comfortably in the Bay Area.

    They can and do – they’re called renters! They rent gorgeous SFH in good neighborhoods that they can afford, and aren’t on the hook when an earthquake or a housing bust comes. They can also move quickly to cheaper housing if they lose a job and aren’t saddled with debt!

    Now if housing prices come down enough, they can live well as homeowners, too, if they buy something they can afford.

  35. DreamT Says:

    “And the number 1 reason people in NYC and the RBA ‘are just getting by’ on $400k or $1M of income is the SUPER-HIGH PRICE OF HOUSING.”

    The reason this is a ridiculous statement, A., is that lots of people in the RBA are also just getting by on $200k. And on $100k. And on $50k. And on $1M.

    Therefore price of housing has nothing to do with it. #15 lists the actual reasons.

  36. anon Says:

    If you ask me, excess consumption is the #1 culprit.

  37. nomadic Says:

    #36, anon, you’re right. That goes for over-consumption on houses as well as any other thing a consumer thinks they can’t live without.

    .
    A, I’m glad you went on to clarify (and effectively refute) this statement:

    If we had better met your needs with subsidized childcar & mass transit with those same tax dollars, perhaps the equation comes out better.

    Otherwise I would not have bothered to read any of your future posts. ;-)

  38. nomadic Says:

    #34 – they can (and do) as homeowners too. Example – at my last job there was a guy making less than $150k who bought a house in 2004, had two kids and his wife didn’t work. They got along fine. The difference? They didn’t think they had to have every single “toy” that came along. They could still take vacations and go out sometimes. I’d say they were comfortable.

  39. sv_newbie Says:

    DreamT,

    The issue of taxes is so important to me that I cannot help but reply :-)

    I cannot talk for others, but, my motivation for hard work is killed by high taxes.

    I still work “normal” tech job earn 6-figure, but, I don’t want to work 12 hours a day everyday and get 20% bonus and see 75% (yes it’s that high if you account for mediacare to sales taxes) of that gone to taxes (to fund war in Iraq or whatever).

    I’ll rather go home early and enjoy more time with my family and be happy. No Obama tax on that so far.

    And, I bet you have never been an entrepreneur when you make this comment – “If people .. feel rich enough, you’ll probably witness a collapse of the country”.

    Truth is exact opposite of that. Country will see (and is seeing) collapse when thugs and scums (like Bush and Obama) rob people of high talent to fund their pet agenda.

    Another example – I am interested in this bullsh!t of house buying only because of tax reasons.

    Remove 100 ways of skimming my skin in taxes, and, I will be working on something productive rather than wasting my time here.

  40. sv_newbie Says:

    #33 A Lewis, part of the reason we have super priced houses is because of taxes.
    1. of course the tax advantage of mortgage payment
    2. taxes are result of same policies that produce high govt spending. high govt spending causes inflation. House protects you from inflation.

  41. DreamT Says:

    sv_newbie

    1. “I’ll rather go home early and enjoy more time with my family and be happy.”

    What’s wrong with that? Are you saying you’d rather work harder, spend less time with your family and be less happy, if lower taxes incentivized you to??

    2. “And, I bet you have never been an entrepreneur when you make this comment”

    I am currently an entrepreneur.

    3. I can’t comment much on your extrapolation of country collapse from your personal experience, except to say that not everybody’s entrepreneur-minded, and a society functions only as well as its weak links. So it does not make sense to tailor the tax system to favor only the entrepreneurs, there has to be a middle ground.

    4. That said, 75% of your bonus going to taxes? Possibly when you get the check, but blame your own W4 rather than the taxman. At year end, it’s certainly not 75% that is taking out.

  42. DreamT Says:

    I do agree with #40. But disagree that people _have_ to buy houses, overstretching themselves, and then whine they can barely get by on a high salary (and ask for lower taxes as a resolution). You’d think that high earners would know to assume their life choices, take responsibility for them.

  43. A. Lewis Says:

    Oh, we have quite a thread going here. Thanks for all the thoughtful and interested posts, though I don’t agree with you all.

    #35 – We partly agree, partly disagree. If I take at face value that someone earning $400k feels like they’re just getting by (instead of delving into their psychological problems), I am just saying the #1 expense they are ‘struggling with’ is the house-buying at bubble prices. The other things contribute, but are smaller items. I wasn’t even trying to address how pathetic they are to feel that way. Rich losers are so annoying. I think we’re on the same page there, but I was making a different point.

    I know many people who are house-poor. Bought in 2004-2007, and in late 2007 were convinced they were wise, b/c of the future appreciation in their good neighborhood, but were eating peanut-butter and jelly, and for darned sure keeping their kids in public school, b/c their monthly costs were so high. Now they’re REALLY screwed since they’re underwater.

    #40 – yes, kind of. The tax break for mortgage interest contributes partially to higher prices.

    As a hedge against inflation – well – probably some people spent more on a house thinking along those lines, but I think it’s a small effect.

    And saying ‘high govt spending causes inflation’ is just too simple a view of the world. There are times I want higher and lower govt spending, and it isn’t b/c I want to control inflation. I want inflation between 2-4% for stability and general growth, and I prefer to use Fed rates to control it than monetary policy, but in the current environment, trapped against the lower bound there is no choice. And I believe it will be effective stimulus.

    But you could do deficit spending with lower taxes and achieve your same inflation results – it just happens that Obama is talking about a SMALL tax increase on a SMALL % of people while he talks about increased govt spending.

    So it’s not that high taxes = high govt spending in so simple a way as you say. We COULD use it to pay down debt one of these years…

    You are free to say you want less taxes and less govt spending, but I think you could have a housing bubble in that environment anyways for other reasons.

    It’d still be a bubble, and then you couldn’t argue (as I think you imply) that lowering taxes will help the situation.

    And finally, #40, the 2 ‘tax’ policies you name are the same all across the country, but the RBA has the #1 highest prices (We’re #1, baby!), so obviously, you’ve left a lot out of the why-we-are-super-priced story.

  44. DreamT Says:

    Uh oh, A. is now crusading against oversimplification. My head’s spinning ;)

  45. wavenger Says:

    24 – That’s all true. What I apparently didn’t make clear was that politics has shaped the distribution of wealth over the past 30 years. Deficit spending, trade agreements, over-leveraging, tax cuts, and education cutbacks were the result of political action. They were not natural phenomena. And each of these seems to me to be a short-sighted decision which borrowed the prosperity of future generations.

    If nothing else, you can’t deny that there’s something screwed up about getting a free UC/CSU education, then turning around and denying that opportunity to the next generation, gross generalization or not.

    And now we are being asked to keep the housing bubble inflated to save the pensions of older folks, again, as a result of politics. Were it not for that – other negative externalities aside – I might be able to afford a home, and older folks, like me, wouldn’t have a pension! I can’t imagine anything more fair.

  46. austindweller Says:

    “But so it the cost of the commute, the cost of daycare, the cost of eating out, and the salary your wife was paid. If she was earning $400k/yr, at 57 cents on the dollar, you would still take home plenty after the daycare and commute were paid for.”

    A Lewis,
    Yeah, so many enginners make $400k. Tell you the truth, I won’t be coming to this site, if my wife was making 400k. I mean give me a break, let’s talk about median SV engineer salary, $80k (correct me if I am wrong here). That salary come on the borderline of deciding whether to give it up or not. In retrospection, I think it’s not worth it.

    As sv_newbie says, housing would not be as costly if the mortage tax break was not there and personal income taxes were not so high. To each his own. You stay there in CA. I preferred to move out to a no state income tax state. What I figure is that $90k salary in TX buys as much as $150k salary in BA with less stress and better quality of life. Fortunately, I make my CA salary in TX.

  47. DreamT Says:

    wavenger – we’re probably of the same mind here. I’ve argued times and again that change comes through politics esp. legislation, so that people who complain should either instead lobby their legislators or become legislators themselves.
    However I don’t believe there’s anything inherently wrong with short-term deficit spending, open trade agreements or wise tax cuts. They can all be broadly beneficial mid-term. On the other hand, over-leveraging and education cutbacks are lame political choices.

  48. DreamT Says:

    “let’s talk about median SV engineer salary, $80k”

    I believe the figure is for programmers, not actual software architects. There’s title inflation at play when you hear about ‘technical support engineer’ and ‘quality assurance engineer’. Historically, an engineer is broadly educated, well versed in design and in leading teams, often being the highest ranking person onsite (ex: railroad construction).
    Also I don’t believe the figure includes bonuses and stock options.

  49. austindweller Says:

    #48 And yeah everybody in SV is an architect. Cut me a break here. The reason it is called median is because 50% make more than that.

  50. DreamT Says:

    #49 – Just pointing out that the $ figure and the corresponding title don’t necessarily match. Throw in some admin assistants and the figure will be lower still. So what does it prove?

  51. austindweller Says:

    Why to throw admins in it. I am talking about those who carry engineer in their tile. Be them brilliant architects or average joes. again for a team of 8 engineers (or programmers as you choose tosay), there is one architect. You may call it tile inflation or whtever you may like. But the facts about the ratios of remain the same.

  52. austindweller Says:

    tile = title

  53. austindweller Says:

    My point is simple in tech field, the average joe in SV makes around $80 to $90k. If you your wife is that average Jenny, then the $400k logic A points out does not apply. And then the salary of $80 is not worth the efforts especially if you have kids.

  54. hr-ster Says:

    “My point is simple in tech field, the average joe in SV makes around $80 to $90k. ”

    Not even close. The starting salary for a EE/CS student at a major firm (Google/Yahoo/Apple/etc) is $80k to $90k – closer to $90k. And that’s before bonus, stock, and other incentives.

    After 5 years, an average joe in in tech in SV makes min $100k.

    If you don’t believe me, and you should, you can go to glassdoor.com to verify.

    You may know people who make less than those numbers, but remember I’m quoting large tech firms. Start ups pay less, but have more equity. And foosball.

  55. hr-ster Says:

    Sorry. I goofed. I meant to say:
    “The starting salary for a EE/CS student joining as a dev at a major firm…”

  56. DreamT Says:

    austindweller – I read A.’s posts again but I don’t see “the $400k logic A points out”. Hope you (and A.) won’t be offended if I ask you to restate it in your non-A. words before replying to your post… :)

  57. austindweller Says:

    #54 And what percentage of SV engineers work for Google/Yahoo/Apple or equivalently sized large corporation which pays equivalently ? I am not disputing your claims, just trying to understand the truth. May be your are right, the median salary of SV engineers is $100k + stock, bonus etc. I myself earn something much more than what you quote but I thought my wife was making about the average salary of $80k.

  58. DreamT Says:

    it’s really a pointless endeavor to figure out a median sv engineer salary since depending on what positions the category covers and whether stocks+bonuses are included, the median can vary by several 10ks. kinda like trying to define white and blue collar. ;P

  59. austindweller Says:

    #32, A said this:
    “But so it the cost of the commute, the cost of daycare, the cost of eating out, and the salary your wife was paid. If she was earning $400k/yr, at 57 cents on the dollar, you would still take home plenty after the daycare and commute were paid for.”

    All I was trying to say is what A pointed out $400k salary was a big exception than a norm. Then A gave another exception $40k. The correct median scenario would be $80k, or that is what I thought.

  60. nomadic Says:

    austindweller – I’m afraid this brawl was for naught. A’s point wasn’t that your wife (or anyone in particular) would be making $400k – a number pulled from the original article. I believe his point was solely that if the salary being considered for resignation were much higher, the decision would be very different. You get to keep a significantly higher portion once the commuting & childcare expenses gobble up the first $20-30-40k (whatever that amount may be).

    :-)
    Can’t we all just get along?

  61. A. Lewis Says:

    #59 – well, I think DreamT read my post more carefully than you did (he read it TWICE!! – we’re totally BFF) and he got the gist of it – my argument was not based on the number being $400k OR $40k (or $80k), my point was that for SOME salaries (and SOME commutes, some childcare costs) you might choose not to work, and for others you would. So since it DEPENDS on those variables, you can’t make a blanket conclusion like, say: “the system screws all spouses and encourages them not to work”. I don’t find that a useful summary, and I disagree with it as a generality.

    I also tried to make the point that I don’t necessarily consider choosing not to work a bad thing, or a failure of any system.

    If we made a system which ALWAYS gave you a $ benefit for choosing to have both spouses work instead of stay home with the kids, is that the ideal capitalist outcome? Or just ideal outcome?

    I’ll go ahead and say…NO. There should be some cases where it’s best for the family to have both spouses work, and some cases where it’s best to have one work.

    The complex combination of salaries, commutes, daycare costs, and taxes give each family it’s own answer.

    If you wish to tweak one or another factor, you will affect many families in many different ways.

    Feel free to advocate for such a change, and we will discuss, but know that I won’t analyze it in a vacuum.

  62. A. Lewis Says:

    I think salaries should be higher, and housing costs and child care costs lower, and keep the taxes about where they are, and you end up with more 2-income families because it pays off.

    But specifically on salaries it should be the minimum wage should be indexed to inflation (so it’d be way higher than it is now), and salaries for teachers and some other underpaid professions that are potentially good and fairly well-matched to child-raising should go up – and we can lower the overpaid hedge-fund managers and bank CEOs to pay for it, along with nationalizing health care to reduce the burden on employers of all sizes to have workers at all.

    My happy socialist comrades and I are forming a ring, holding hands, and singing folk songs at you. You can’t stop us!!!

  63. austindweller Says:

    #64 ” you can’t make a blanket conclusion like, say: “the system screws all spouses and encourages them not to work”. ”

    I believe I did not make that conclusion. How about “the screws in such a way that for this range of household income for a couple(assuming both work) 200k to 300k, it disincentivizes for both to work. These couple are very commonly observed in SV technology jobs. I would dare to say that this catgory could be median household income (or atleast between 50-60 percentile) for technology couples.

  64. austindweller Says:

    “I think salaries should be higher, and housing costs and child care costs lower, and keep the taxes about where they are ”

    How can these both be simultaneously true ? The daycare folks salary should bump up and that would increase the child care costs. It’s not as simple as the statement above. It’s a more complex systems and the “parameters” actually influence each other and hence they are not really parameters. There are very few variables/incentives in our had (like tax rate, interest rates, incentives, deductions in taxes). Rest are all coupled.

  65. DreamT Says:

    austindweller – $400k is outrageously high to complain. If it was considered SV norm, this thread would not exist in the first place. Yes, $80k is
    more or less median SV income (see http://realestate.yahoo.com/California/Santa_Clara/neighborhoods) and a good basis for discussion. I don’t think we had a disagreement here.
    As for your second comment in #63, I can’t comment either since our household is far below $400k. I imagine deciding whether your spouse should work or not, based on tax issues, is a “good” problem to have. Many people would love to ponder that kind of choice.

  66. austindweller Says:

    DT,

    I agree with you. But I said 200K -300k being a norm for a couple’s household income. I think if 400k was my houshold income (i.e together husband and wife not just my wife’s) then I think I would still consider staying there. But I guess we are not there yet. I believe at 200-300k salary one is pretty average household in BA. Below 150k poverty starts in BA. Becuause you can’t really do much with 150k, just sustain a very middleclass living.

  67. DreamT Says:

    austindweller – what’s wrong with a very middle-class living?… In any case, $150k is plenty enough to live in the BA and double the median household income. You can get by with the median, $80k (which is median household, not median individual – check http://www.census.gov/acs/www/Products/Ranking/2003/R07T050.htm). I’d call poverty around $40k. But the $400k family would probably agree with you.
    It’s all a matter of standards, compromises, and properly set expectations. You don’t get to buy in Los Altos just because having graduated from Stanford, you just got a job at Google. It takes a bit more than that.

  68. nomadic Says:

    #62 is contradictory, as pointed out in #64.

    salaries should be higher, and housing costs and child care costs lower
    .
    salaries for teachers and some other underpaid professions that are potentially good and fairly well-matched to child-raising should go up

    HUH?

  69. austindweller Says:

    austindweller – what’s wrong with a very middle-class living?…

    Nothing. What’s wrong is 150k required to lead middle-class living. Rest of the nation 80k is sufficient to be called middleclass. But in BA 80k is to quote you “You can get by with the median, $80k”. Rest of the nation enjoys better standard of living at much less income.

  70. DreamT Says:

    You also get better standard of living in third world countries. Obviously the people who settle in the bay area aren’t looking for the highest standard of living for the present, but for opportunities for the future. The epicureans don’t belong in the SV unless they are so wealthy they don’t need to work.

  71. anon Says:

    Although, the quality of food here is unbeatable. At least in my opinion…

  72. austindweller Says:

    You also get better standard of living in third world countries

    I would disagree. No. In third world, despite having a lot of money you may not get better standard. Again here it becomes very subjective. To some having made servants is better, for some having 24 hours of electricity and for some having clean air. But the statement is not generically true.

    Obviously the people who settle in the bay area aren’t looking for the highest standard of living for the present, but for opportunities for the future.

    Myth. The saving potential in BA is too low. In technology somebody who gets 150k in BA can fect 115-120K in TX. Factoring cost of living BA salaries are less. All you can boast about in cool air (but it’s not clean though, it’s polluted) in BA. I don’t know which future opportunities you are talking about. May be you change your job every three years. Even that is not certain in next few years.

    The epicureans don’t belong in the SV unless they are so wealthy they don’t need to work.

    Rightly said. It’s a third class dump not meant for people who value quality of life.

  73. austindweller Says:

    made servant = maid servant

  74. DreamT Says:

    austindweller – you’re entitled to disagree on the third world aspect and to call future opportunities myths. We both had different experiences and formed different viewpoints, but you don’t seem open to that possibility, so I’ll leave it at that.

  75. DreamT Says:

    if anything though you should be smart enough to realize that I am not talking about future _savings_ opportunities but about potential ROI for entrepreneurs and those who assist in creating added value early on.

  76. austindweller Says:

    DT,

    May be my last statement was uncalled for. After all, this is a social forum and we should respect each others opinion (except may be RealIdiot). I apologize if anything I said has pained you. I respect your choice and thanks for a nice friendly debate.

  77. austindweller Says:

    potential ROI for entrepreneurs and those who assist in creating added value early on.

    I agree with this completely. The start up opportunities could make you very wealthy. And ample opportunities here. Though success rate is less than 0.1%, it’s still a chance. It’s a great place for enterprenuers. I have seen a few who failed doing this start up stuff. (Why do I see more failures ? Because they are abundent). They told me I am lucky for not leading the life they lead. 2 of them got divorced while doing their startup. So it’s not everybody’s cup of tea.

  78. DreamT Says:

    I’m not pained, but thanks :D
    It takes a strong drive to be an entrepreneur. IMO it’s a personality curse rather than a gift. The success rate isn’t as dismal as you say (I read it’s “only” 90% of startups that fail the first year). Though bob will disagree, if you’re an entrepreneur and you’re looking for like-minded partners, I can’t think of any other place that beats the BA.
    If you value quality of life and have money, follow the Hollywood stars.. you don’t meet too many around this area :) France is a popular destination… but no place’s perfect and there are many intangible things the SV offers that France does not have.

  79. austindweller Says:

    What if I value quality life and don’t have money and don’t have (or want to sacrifice) what it takes it to be an enterprenuer ? I think people can be catergorized in following buckets.
    1. Those who don’t have what it takes and don’t know it.
    90% of those who try startp come in this category. Life is really miserable for them. But hey if you think you have it, you should give it a try.
    2. Those who don’t have what it takes and know that they don’t have it.
    People like me.
    3. They have it and know it.
    A very few % of these finally become very successful. Luck separates rest.
    4. They have it and don’t know it.
    I don’t thin this category really exists.

  80. austindweller Says:

    Obviously the people who settle in the bay area aren’t looking for the highest standard of living for the present, but for opportunities for the future.

    I generally hate the concept of toiling my green years to get green bucks in my gray years. For me the postponement of quality living, comforts beyond a predictable period (or forseeable future) does not make sense, for I cannot guarantee that I would be there to enjoy those things. Life is now and “present” is the most important tense. I am glad some think differently, for they are the ones who employ me and pay for my current needs.

  81. CB Says:

    I believe at 200-300k salary one is pretty average household in BA. Below 150k poverty starts in BA.

    Let’s see, a family of four can afford:

    *A 500k home, and this means a 3-4 bed, 1400-1700 sq ft SFH outside of the RBA (PITI = $36000/yr)

    *15000/yr in daycare for two kids.

    *15000 401k contribution.

    *A 350/mo car payment ($4200/yr)

    *30 k in federel/state/ssdi

    And still have 50,000 to play around with.

  82. austindweller Says:

    below 500k outside RBA ? May be now, not 2 yrs back. I remeber Fremont 1000 sq ft condominiums costing around 430k. SFH would go for 750k then. May be now it’s 500k. But then unemployment in BA now is 11%. It is projected ti climb upto 15%. So if you buy a house and you are the unfortunate one then that wipes out everything. Also outside RBA means commute of 1 hr.

  83. cardinal2007 Says:

    Myth. The saving potential in BA is too low. In technology somebody who gets 150k in BA can fect 115-120K in TX. Factoring cost of living BA salaries are less. All you can boast about in cool air (but it’s not clean though, it’s polluted) in BA. I don’t know which future opportunities you are talking about. May be you change your job every three years. Even that is not certain in next few years.

    Air in the Bay Area is cleaner than air in Houston and Dallas. You might be able to get a good salary in those metro areas, but the air will be worse. It is best to stick to the facts.

    Ten Most Polluted U.S. Cities (Ozone Rated Only)

    1. Los Angeles (Long Beach, Calif., Riverside, Calif.)
    2. Bakersfield, Calif.
    3. Fresno-Madera, Calif.
    4. Visalia-Porterville, Calif.
    5. Merced, Calif.
    6. Houston (Baytown, Huntsville, Tex.)
    7. Sacramento (Arden, Calif., Arcade, Calif., Truckee, Nev.)
    8. Dallas/Forth Worth
    9. New York (Newark, N.J., Bridgeport, Conn.)
    10. Philadelphia (Camden, N.J., Vineland, N.J.)

    Ground level ozone is the component most responsible for smog.

  84. CB Says:

    #82, You’re right, if you factor the 150k household buying a home at the absolute apex of the bubble, and that household experiences unemployment risks at the projected peak, then your assertion of “poverty” at 150k holds a shred of merit.

  85. DreamT Says:

    #84 is fallacious – as long as you factor a purchase you cannot sustain,then any salary amount can be ‘poverty’.
    #79 – I tend to see things the same way (if your startup fails your shortcomings are probably much more to blame than adversity), but keep in mind some people fail miserably once or twice, then go on to succeed.
    #80 – word. In particular, failing to be there as your children grow up so you can focus on your company never made any sense to me, but some don’t even question that.

  86. austindweller Says:

    “but keep in mind some people fail miserably once or twice, then go on to succeed.”

    Sorry DT, I have to disagree. Most of them (more than 90%) give up after first set back. The remaining after 2nd. Business loans is the reason. Just because you aren’t breaking even the bills don’t stop coming. Life becomes too much to handle after first set back. Believe it or not I tried my luck 6 years back. I left with a profit of 3k. But I have seen people going in debt. After the first set back they immediately start looking for jobs. If they are lucky, the old employers will accept them. In this kid of economy, they get royally screwed. The second set back almost all quit.

    Keep in mind failing first 2 times is not a recipe of success the third time. I believe the best ones succeed in a very small amount in the begining and keep maintaining the small successes until a big one makes its way.

  87. CB Says:

    #85:

    Austin is assuming the absolute worse conditions to describe the average. Nothing fallacious about me pointing that out.

  88. DreamT Says:

    #87 – actual poverty is not being able to afford basic necessities. The World Bank’s definition for extreme poverty hovers around $1 per day. So to see the word used for a $150k earner who just happened to buy a house he/she has a hard time paying off, that blows my mind.
    #86 – some people, most of them, recipe for success.. We’re describing different scenarii, not necessarily disagreeing. But you’re right that I overused “miserably”: the folks who keep on trying probably more often just broke even and are back for more.

  89. CB Says:

    DT, I agree. You must not have realized my sarcasm in post #84.

    My point is in direct terms, a family of four earning 150k in the BA lives very well. This is not an estimation of a hypothetical experience. Rather, it is my personal experience as described in post #81.

  90. DreamT Says:

    yes, i missed the sarcasm. nevermind ;)

  91. austindweller Says:

    #88 Agree with my usage of the word poverty asociated with a salary of $150k was excessive. I take that back. But the real point is excessive amount required to lead a barely middle class life in BA. But I guess we all agree about that. I appreciate this good discussion with you guys.

  92. BuyersAreIdiots Says:

    My point is in direct terms, a family of four earning 150k in the BA lives very well

    I would not necessarily agree with that statement.

    How do you define “very well”? Does that mean a nice house with a room for each kid, a decent commute, a friendly neighborhood and plenty of money left over for retirement/college funds/savings?

    In the end, the only families I know that are living “very well” in that circumstance are those that either got here very early (prior to the big runup in housing), cashed out on stock option thereby bolstering their net worth or they are simply average folks living in rentals.

    The primary purpose of burbed (correct me if I am wrong) was to demonstrate the ludracris nature of housing in the Bay Area and that it does not conform to what the median salaries dictate the prices should be.

    I have heard the argument about Google millionaires, VM Ware millionaires, those amazing Apple engineers, etc. But those three companies do not subsist the entire employment picture of the Bay Area. Numerous folks here work for Intel, Sun, Microsoft, small to medium tech firms and other assorted places. By the logic above, I could easily claim that Austin housing should be stellar because of Dell or that Dallas housing should be stellar because of EDS or Texas Instruments.

    When it comes to quality of life in the Bay Area, I am sorry, but it is lower for the general population when compared to our counterparts in other states. They have lower housing prices, lower taxes and can function at much lower salaries. I can name easily three people I directly know that left the Bay Area for greener pastures elsewhere and watched their standard of living rise dramatically.

    But as stated above, housing is the mitigating factor here. While taxes are a pain and the commutes suck, housing is absolutely dog-friggen nuts. Everyone is aware of this (except Real Excreter) yet I feel this area wants to desperately hold only the illusion of certain housing wealth because they don’t want to admit they made a poor decision when purchasing.

    What caused the housing mess is complex and varied and certainly did not come from one source. But ultimately, it IS the primary reason why the standard of living here is so much lower than other parts of the USA. We all know that and we all know it will correct. It will take time with a lot of head fakes along the way. But it will correct. My suspicion is that many in the Bay Area will be shaking their heads in dis-belief in the next 3-5 years as they watch housing drop to levels they never dreamed possible. Not unlike the dot com crash, nobody thought the stock would go THAT low! ;-)

  93. unearthly Says:

    7.8% (44k out of 556k) of households in Santa Clara county make over $200k per year.

    San Francisco Bay Area: Distribution of High Income Households

  94. CB Says:

    How do you define “very well”? Does that mean a nice house with a room for each kid, a decent commute, a friendly neighborhood and plenty of money left over for retirement/college funds/savings?

    That is exactly my definition.

    This does not include a home in Palo Alto, a new E-Class in the garage, more techno-gadgets one knows what to do with, Coach purses, luxury vacations twice a year, dining out 2-4 times per week, and a hot Brazilian au pair with a PhD equivalent in child development watching your kids.

    It means “owning” a good house in Fremont, Milpitas or some select neighborhoods in SJ with competitive schools, a 25-45 min commute (by car or bike), a couple of late model Toyotas, yearly trips to Kauai staying in a rented house (not a 5-star resort), 10% + employer contributions to retirement and college savings to fund UC tuition, and a home day care you found by intensely interviewing providers in your price range (rather that seeking out one your pier groups would admire). Oh, and two Coach purses.

    This is for the most part my situation. I am not a BA throwback. I’m young, I bought high at the beginning of the bubble and consider my family to be living better than most, in the BA and abroad.

    Of course, there are going to be cases where what one defines as success clashes with what the BA can provide.

  95. austindweller Says:

    Yuo summed up my last 20 or so posts.

  96. austindweller Says:

    #92 You summed up my last 20 or so posts.

  97. cardinal2007 Says:

    If someone maxes out their 401k for 40 years, while working in CA, then moves to a state with low COL to stretch their 401k money, if the state has no, or low state taxes, does that mean that they’ve just screwed CA out of ~$650,000 of taxable income, or about $60,000 of taxes by moving out of state?

    The reason I ask is that I’m trying to decide what I should put in Roth vs regular 401k.

  98. nomadic Says:

    You bet. You pay tax on the money when you take it out (regular 401k) – based on where you live then.

  99. BuyersAreIdiots Says:

    #97

    You bring up an interesting point and I believe that mindset is what many in California are considering.

    I myself am a renter (for many of the aforementioned reasons above) and I know many people such as myself are considering the prospect of renting in the BA for many years before moving to an area with lower prices and taxes and then living comfortably in my golden years. As I see it, the only way I will be able to effectively benefit from my higher California salary is to simply bank it and live in a cheaper rental for my duration here. As that cash reserve grows and I maintain a debt free existence, I can easily transition to places like Texas, Nevada, Florida, etc. where cost of living is far more reasonable. With that in mind, I think that is a strategy that many are following.

    It goes in line with the statistic that I read which indicate that the median age of the Bay Area is steadily increasing. That signifies that there is a net export of younger individuals to other parts of the country. Much of that can be traced back to things like Prop 13 which merely deferred tax to the subsequent generation thereby blocking their ability to live as comfortably as their parents did in this area.

    As we move forward, that will play out very interestingly for California as it begins to steadily bleed its middle and younger aged workers to other states. Oh sure, San Francisco will probably still be a draw for many urban hipsters that want to be close to a rust colored bridge and good sushi. But in the end, the core of what drives the Bay Area may end up leaving creating a vacuum in its wake. If that happens, we end up with an elderly population with little to no tax revenue from it while at the same time having a lack of a strong middle class from which to draw taxes.

    Not a pretty scenario.

  100. Neko Says:

    If the statement is about “upper-middle class”, it kinda makes sense. Buying a nice-looking house in one of the valley’s good school districts would easily cost $2M without being extravagant. In the rest of the country, people tend to associate upper-middle class life style with owning such a house.

    Without stock options or other windfalls, 400K is probably the minimum salary required for newcomers to buy and maintain such a house comfortably in the valley. Even if you get 400K salary, you may end up paying more than a half of your take home pay (20K+ monthly) for the housing-related expenses. Private schools for your two/three kids? Forget it.

    Except for the out-sized mortgage, those people would probably live like most middle-class folks, worrying about monthly expenses, retirement, kids’ college funds, etc.

  101. DreamT Says:

    “Buying a nice-looking house in one of the valley’s good school districts would easily cost $2M without being extravagant.”
    Try $700k, without being extravagant.

  102. Neko Says:

    For $700K, one might get a nice-looking modified garage, without being extravagant.

  103. DreamT Says:

    nice-looking modified garage could be worthwhile, but for that price I’ll settle for an actual house (without the extravagant modifications to the garage)

  104. DreamT Says:

    but don’t get me wrong, I’ve nothing against garage fetishes

  105. CB Says:

    At $2M non-RBA and other metro areas start to look really similar.

    But, this is all very shocking. 400k or bust in the Bay Area.

  106. A. Lewis Says:

    #105 – no, just the ever-shrinking RBA. The $600k-$800k homes are available in quite a few parts of SV & Peninsula, not to mention going up towards Pacifica, SSF, and various neighborhoods in SF, all of which are near to some jobs.

    And people with $200-$300k salary can ‘afford’ those.

    I still think that $200k as an entry-point to ‘modest’ living is shocking (you’d be top 1% in most of America), but it ain’t $400k anymore.

  107. Waklyn Says:

    #62 states:

    I think salaries should be higher, and housing costs and child care costs lower

    followed by

    .. salaries for teachers and some other underpaid professions that are potentially good and fairly well-matched to child-raising should go up

    Ummm… I could maybe understand these statements in two separate posts in two different forums, but one after another in the same post?!?

    My happy socialist comrades and I are forming a ring, holding hands, and singing folk songs at you. You can’t stop us!!!

    Ahhhh.. this last paragraph explains everything. You’re clearly not in touch with reality.


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