While the San Francisco Bay Area is home to many of the country’s most successful startups and innovations in technology, it’s also a region of staggering inequalities. NPR reported last year that one-third of the households in Santa Clara County, where Google, Apple and hundreds of high-tech startups have their headquarters, don’t earn enough to cover basic income expenses. And in the city of San Francisco, troves of data confirm the already apparent trends in rising income inequality, increasing poverty rates, and a shrinking middle class. With these realities, it’s not surprising that anger, resentment, and frustration, among longtime residents in San Francisco watching their neighborhoods become increasingly unaffordable have been directed to newcomers working for technology companies, both big and small. But, as many have suspected, tech startups may not be responsible for this kind of increasing inequality, after all.
That’s what renowned urban economist Richard Florida concluded in a recent study that examined the relationship between high-tech startups and increasing inequality in cities throughout the country. Florida and his partner at the Martin Prosperity Institute charted venture capital investment in startups against the two primary measures of inequality: wage and income disparity. In urban tech hubs across the country from Boston to Seattle, they found a fairly high correlation between wage inequality and venture capital investment. Notably, however, this same trend did not hold when charting venture capital investment against the more common measure of inequality: the Gini coefficient, a measurement based on income distribution within an economy. Income inequality didn’t necessarily increase as venture capital investment in a given area did.
These mixed results are evidently limited in the extent to which they can diagnose urban challenges. Perhaps these findings can only demonstrate that urban inequity is a complex matter with dozens of factors. Whether it’s simply correlation or more significantly (though not addressed in this study), causation, inequality has myriad historical, political, and economic sources, even city by city. (And for a formidable, detailed account of what's happened in the San Francisco Bay Area, check out this Tech Crunch article.)
To put it another way: the data shows us that urban tech startups aren’t worsening inequality—that means there’s a lot of room for startups to make things better for a wider range of citizens.
We already know these new businesses create jobs, supply municipal tax revenue, and can make urban life more efficient and convenient. Yet urban innovation—technology for local governments, neighborhoods, and schools; tools to create safer streets, smarter public transit, and more efficient energy use—may still be in its infancy.
As startup hubs continue to expand across the country, they’ll play an increasingly important role in the urban fabric of their host cities. For the sake of long term economic prosperity, it’s incumbent upon burgeoning entrepreneurs as well as urban policymakers to understand existing inequities and think about how technology can create a “more inclusive urbanism,” as Florida puts it.
This includes not only building tools for a more diverse and urban public, but also training a new generation of citizens to contribute to creating that technology. Examples of organizations already doing this work aren’t hard to find. In San Francisco, an organization called Missionbit offers public school students free coding classes. Another exciting pogram we’ve seen is the Coalition for Queens, an organization with the mission to “increase economic opportunity and transform the world’s most diverse community into a leading hub for innovation and entrepreneurship.” With the support of both local government and technology experts, the organization has launched an entrepreneurial and computer programming program for low-income New Yorkers called Access Code. As they grow and add alumni to their network, the Coalition for Queens and programs like it could serve as models for cities both new and established as centers for startups—in creating more diverse and participatory startup ecosystems and perhaps a new technologically-empowered middle class.
