April 16, 2021


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Is Silicon Valley Losing Its Shine?


If you are a young information technology worker, you probably dream of working in Silicon Valley, home to many of the world’s largest high-tech corporations, including Apple and Google. These companies offer a median base annual salary of $120,000 and $115,000, respectively, for entry-level software engineers, as well as opportunities to work on interesting new products and many other perks. Silicon Valley also dominates the US venture capital industry. Technology companies in the area raised more than $10 billion in the first three months of 2018, and the amount of investment capital increased by 13% over last year. A total of 408 companies were financed in this period, which was more than twice that of the next highest region, New York City. Not surprisingly, Silicon Valley’s 25 biggest employers most frequently hire graduates from two universities in the area, Stanford and University of California, Berkeley. Despite these reasons to work and live in Silicon Valley, many are leaving, including some high-profile defectors. Reportedly Facebook board member Peter Thiel is moving to Los Angeles and taking his personal investment funds there. While Thiel is moving for political and cultural reasons, many others are moving due to more practical reasons like taxes, real estate, and traffic.


California has among the highest taxes in the United States. An unmarried, entry-level software engineer in Silicon Valley pays a state income tax rate of 9.3%, which is quite high compared to states such as Texas and Florida, which have no state income tax. The high taxes in California have been a problem for companies in Silicon Valley before. Jim Clark, the co-founder of Netscape, moved to Florida during the first dot-com era, partly due to high taxes.


After getting paid and paying taxes, you need a place to live. An unmarried, entry-level software engineer in Silicon Valley at Apple or Google can expect to spend between 50% and 70% of their after-tax salary on housing. This is in contrast to Google and Microsoft software engineers in Washington State, who spend between 25% and 35% of their salaries on housing.


Once you start working and living in Silicon Valley, you have to deal with one of the worst traffic problems in the nation. Bay Area drivers spend 70% more time in traffic than they did in 2010. This is not surprising when you consider that 86% of commuters drive to work alone. And you can’t sleep through the long commute by using public transit. Only 28% of new offices built between 2010 and 2015 are within half a mile of local transit, and this drops to 9% if San Francisco’s transit systems are excluded.


Whether it’s because of the cost of living, tech burnout, or opposing political views, people are leaving Silicon Valley at the highest rate in more than a decade. If you need evidence of a mass exodus from California, simply look at U-Haul rental rates. The cost of a one-way truck rental from San Jose to Las Vegas is over 16 times more expensive than moving from Las Vegas to San Jose.

Also published on Medium.


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