Silicon Valley can afford to end poverty

Opinion: Poverty on 'my side' of Silicon Valley
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Story highlights

  • John Sutter: Tech companies have a moral obligation to reduce inequality
  • The tech sector long has been too cold to local issues, he writes

John D. Sutter is a columnist for CNN Opinion and creator of CNN's Change the List project. Follow him on Twitter, Facebook or Instagram. Email him at ctl@cnn.com. The opinions expressed in this commentary are solely those of the author.

(CNN)They marched across Silicon Valley to have a conversation about economic justice.

Four days and 30 miles later, the relatively small group of demonstrators -- carrying signs that read "March to Heal the Valley" -- arrived at the Cupertino, California, campus of Apple, the world's richest company.
"We showed up, and we were informed that we were not allowed to be there," said activist Andrew Bigelow, one of the brains behind the October 2013 demonstration, which he said included homeless people as well as those that couldn't pay the valley's exorbitant rents, which have been driven up by tech companies. "A lot of people just walked by and didn't even look at us in the eyes. A lot of people were, you know, shaking their heads or laughing -- talking to their friends while looking at us. It definitely felt different, you know."
    (An Apple spokeswoman declined to comment on the demonstration).
    Another participant in the march, Raj Jayadev, told me it felt "like a parable." I have to agree. It's like David asking Goliath to kindly hear his grievances, only to have the giant plug his ears.
    It's high time for Apple, Google, Facebook and other Silicon Valley companies to acknowledge their role in creating a valley that not only is an economic powerhouse but also is crippled by inequality and poverty. These companies aren't entirely to blame, but their founders and employees do have the cash to help stop this valley of strip malls and subdivisions from becoming a place where only the very wealthy can survive. With few counterexamples, the tech set has been shirking on its local civic duties -- either ignorant of the fact that one in three kids in this rich valley is at risk for hunger or largely unwilling to care.
    They aren't helping enough.
    And they have a moral obligation to do so.

    $1,000 a month for a garage

    In November, after readers of this website voted for me to cover this topic as part of the Change the List series, I visited Silicon Valley to document child poverty for CNN. Companies such as Apple and Google love to tout the fact that their mammoth companies have humble roots in Silicon Valley garages. They've become symbols of bootstrap innovation. But I found garages being used for a much different purpose these days: They house children.
    I met a young mother raising an infant daughter in a single-car garage in San Mateo, California. Her monthly rent: $1,000. No kitchen, of course, and barely room for the crib. And all of that is a remarkable improvement. The Samaritan House helped her out of homelessness and into that garage.

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    Worse, perhaps, were the working parents I met in a San Jose homeless shelter operated by a group called Family Supportive Housing. Mom was working as an office receptionist and dad, ironically, as a home builder. But two incomes apparently won't keep a roof over your children's heads in this valley of riches. Not when median rent in San Mateo County is nearly $3,000 a month, according to Zillow estimates, and it's always rising, in part because the valley's engineers are paid so well. A family of four would need an often-unattainable $60,000 to $100,000 a year just to get by, according to the Insight Center for Community Economic Development.
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    And none of that's to mention the children who, when I visited, were living in a tent camp and shanty town called "the jungle," right in the heart of San Jose.

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    'Moral shame' of Silicon Valley

    Apple, meanwhile, raked in $18 billion in profit from October through December last year alone. The company is valued at more than $730 billion, which is more than the GDP of Switzerland.
    San Jose Mayor Sam Liccardo told me these inequities are the "moral shame" of Silicon Valley. He's right, but there's little sign the valley's millionaires and billionaires see it that way.
    True, some of the richest people in tech are quite generous. The Chronicle of Philanthropy, for example, lists three Silicon Valley tech billionaires among its top 10 American donors of 2014. Those three men -- Jan Koum of WhatsApp, Sergey Brin of Google and Nicholas Woodman of GoPro -- donated a combined $1.4 billion to charity that year alone. They should be commended for it. But much of that money goes outside Silicon Valley, leaving local nonprofits strapped for cash and unable to meet the needs of the homeless and hungry.
    The Silicon Valley Community Foundation, which holds $6.5 billion in assets and is the main target of the valley's big donors, gave less than 46% of its 2014 grants to organizations in the greater San Francisco Bay Area, which includes Silicon Valley as well as seven additional counties. The foundation's CEO, Emmett Carson, told me the mix of global and local donations reflects the diversity and priorities of the Silicon Valley community. Carson also contends the actual amount of the local donations is still sizable: $216 million.
    It is, but it's also clearly not enough.
    While there are countless worthy causes around the world, I find it hugely upsetting that poverty and homelessness are allowed to persist in Silicon Valley amid such jaw-dropping wealth. Especially since Big Tech helps exacerbate these local problems.
    This is more the fault of the donors than the foundation. Ninety percent of the contributions given to the foundation are put into donor-advised funds, according to Carson. The donor gets a tax break immediately -- and can decide later how and where to spend the money, as long as it goes to a nonprofit.
    "(Facebook CEO Mark) Zuckerberg gave a billion to the community foundation, and it's sitting there," said Peter Hero, founder and principal of the Hero Group and former CEO of the community foundation's predecessor organization. "It's actually sitting on Wall Street. It's not going out. (Zuckerberg) hasn't decided what to do with it."
    (Foundation spokeswoman Sue McAllister told me at least $225 million of Zuckerberg's $990 million donation has been allocated, including $75 million to a San Francisco hospital, $120 million to Bay Area schools and $5 million to the Ravenswood Family Health Center in East Palo Alto, California.)
    "Being a good neighbor is extremely important to Facebook," the company said in an e-mailed statement. "It's not just about philanthropy but listening to and working with the larger community to improve and revitalize the local area we share. Facebook and its executives have donated hundreds of millions of dollars to over 50 local organizations, but we understand it's not just about money. Facebook's employees lead by example in sharing time, knowledge and access."

    'Death by a thousand cuts'

    It's true philanthropy alone won't fix Silicon Valley's problems.
    In addition to funding solutions, however, the area's most influential people -- the billionaires who design our smartphones and shape the digital world -- also could throw some more hip behind smart policies that would help people survive.
    That lobbying should start with affordable housing. Silicon Valley suffers from an incredible dearth of housing stock, in part because of its geography. Located south of San Francisco, the valley is hemmed by mountains and ocean on the west and mountains on the east. In response to my reporting on child poverty in Silicon Valley, many readers suggested poor people should just leave the valley.
    That's offensive and impossible for two reasons: There's no place to go but the Central Valley of California, which is largely agricultural and would result in an expensive, two-hour commute; and because Silicon Valley needs low-wage workers, both to function economically and to be a diverse, inclusive society. It can't operate as a valley of programmers.
    The valley's municipalities, meanwhile, have been negligently slow to allow new housing developments. In one particularly shocking example, which the San Jose Mercury News detailed in 2013, voters in Palo Alto rejected a 60-unit apartment complex for low-income seniors.
    Some of this is structural. There are about 100 municipal entities in the Bay Area, said Egon Terplan, regional planning director at SPUR, a nonprofit that deals with urban planning issues. Each seems to be hoping that someone else will allow denser, taller housing developments. But none of them, with the possible exception of Redwood City, in Silicon Valley, wants to allow it.
    "It's a death (by) a thousand cuts," he said.
    It's also about attitudes, which, again, are shaped by the big players in tech.

    'Silicon Valley is becoming Aspen'

    The tech companies "have these record profits and are really driving the cost of living up," said Maria Noel Fernandez, campaign director for Silicon Valley Rising, a grassroots and labor movement pushing for economic justice in the valley. "Just as we would expect any other piece of our community to respond when something is not working for the vast majority, I think there is a responsibility for these tech companies to engage in conversation and to be part of the solution -- and to really be a part of this community. There's a sense that the headquarters of these companies are these little islands. They're such different worlds."
    Many of the valley's engineers ride company-owned buses to a company-owned "campus," where they get a free company-funded lunch at a company-owned cafeteria. These employees typically work long hours -- and then ride the company bus back home.
    Like many hardworking people in transplant cities, they have few roots in the community and often know remarkably little about it. It's as if the tech giants have manufactured a way to keep employees from caring about the people and places around them.
    It's a phenomenon Fernandez calls "occupational segregation."
    And the outcome isn't pretty.
    "Silicon Valley is becoming Aspen," Peter Hero, the philanthropist, told me. "It's becoming a region of rich people and its servants, and it shouldn't be that way. There's not a sense of community. There's not a sense of civic engagement and civic responsibility ...
    "We need people to participate -- to serve on the board of the food bank, to serve on the board of the preschool association. If everyone did, we wouldn't have a problem. They'd see the issues first hand ... (But) there isn't that sense of volunteerism and engagement."
    Bill Somerville, founder of the Philanthropic Ventures Foundation, and another major player in Silicon Valley philanthropy, agrees. He told me it's "very easy, on the peninsula, to isolate yourself from poverty."
    "The big question is, 'What is Silicon Valley doing with regards to poverty in its midst?' " he said. "I don't think (the big tech companies) can say they're doing much."
    In an e-mailed statement, Apple spokeswoman Kristin Huguet said the company donated $50 million to Standord's hospitals; supports technology in schools; and matches employee donations to charitable organizations, including making donations when employees volunteer.
    Google spokeswoman Meghan Casserly, meanwhile, said in an e-mailed statement that, "Thousands of Googlers call the Bay Area home, and we want to be good neighbors. Since 2010 we've given more than $100 million to local nonprofits and employees have volunteered thousands of hours in the community; we're excited to be expanding that work in 2015."
    Google also says it has a policy of matching employee donations. Employees, for example, donated $1.3 million to the Second Harvest Food Bank of Santa Clara and San Mateo Counties last holiday season.
    Tami Cardenas, vice president of development and marketing for the food bank, told me many of the valley's tech executives and employees are "incredibly generous," and that companies, many in tech, provided 18% of the organization's $32.5 million in revenue for the fiscal year ending in June 2014.
    Other nonprofits feel far less supported. And it remains true that "there are a lot of hungry kids, and there are a lot of hungry people in these counties," Cardenas said.

    'Silicon Valley Rising'

    There are reasons for hope, however.
    One is Fernandez and the Silicon Valley Rising movement.
    Protesters have helped persuade Big Tech to provide better wages and benefits for some of the lower-income workers who support its operations -- the janitors, security guards and bus drivers. In recent months, Apple and Google announced they would bring many contract security guards onto their payrolls, giving them a bump in wages and benefits. The companies also are giving raises to contract bus drivers. And contract bus drivers for Facebook, meanwhile, voted to unionize.
    These companies "were not receptive at the beginning, but the fact they have made this movement makes me more hopeful than I would have been if you talked to me four months ago ago," Fernandez said. "It's clear (economic justice) is not going to happen magically. We're going to have to demand it, and we're going to have to work for it."
    Such efforts should include a push for a "Silicon Valley minimum wage," an idea supported by Terplan, from the regional planning group. The fragmented mosaic of wage laws is confusing and unfair to workers. NPR's Planet Money reported on a mall in Silicon Valley that actually paid two different minimum wages within the same building. The mall splits the line between the communities of San Jose and Santa Clara, according to the report, and each of those municipalities paid a different minimum wage.

    'A race to the bottom'

    Another bright spot is Marc Benioff, the CEO of Salesforce, based in San Francisco. He's been an outspoken critic of the tech industry's cool indifference to economic inequalities.
    "As practiced today, capitalism too often becomes a race to the bottom," he wrote in a Huffington Post op-ed. "In low-growth economies, a focus on earnings-per-share is leading to more unemployment and deepening inequality. According to Oxfam, the richest 1% in the world are expected to hold more than 50% of the world's wealth by 2016. In fact, today just 80 individuals account for the same amount of wealth as more than 3.5 billion people. Imagine what would happen if those 80 individuals made a simple decision to give a large portion of their wealth back before they die? What progress could we make?"
    More progress than we're currently making, certainly.
    Better still would be taxing these companies and individuals fairly, and using the money to help reduce economic inequality. Bloomberg News found in March that the eight biggest tech companies "added a combined $69 billion to their stockpiled offshore profits over the past year" -- in theory to avoid higher tax rates in the United States. Not all of the companies are located in Silicon Valley, but Apple ($69.7 billion offshore in total) and Google ($47.4 billion offshore) are listed as among the biggest offenders.
    "The difference with Silicon Valley is we're the one region in the country that could actually eliminate child poverty -- because of the amount of accumulated wealth," said Raj Jayadev, from the group Silicon Valley De-Bug, which raises awareness about poverty and other social justice issues in the valley. "If we don't take that opportunity, you sorta wonder what the larger point of Silicon Valley is."
    The point seems to be for a few people to get wildly rich.
    And, consequently, to drive low- and middle-income people away.
    It doesn't have to be like that. Silicon Valley can afford to fix these problems. It just needs to open its eyes and then do what it's known to do best: Create another future.