Largest middle-wage industry in SF suffered a steady decline

The obvious signs are everywhere that San Francisco’s local economy is booming. People are jumping in and out of Uber rides, apartment rents are sky-high, grocery stores, bars and coffee houses are crowded and tax revenues are up.

Though strong, San Francisco’s local economy has shown one concerning trend. Unlike other sectors the local-serving industry, which includes nonprofits, local manufacturing, retail businesses, beauty salons and laundry, lost jobs during a recent seven-year business cycle, from 2004 to 2010.

Meanwhile the largely low-paying jobs of the tourism-related businesses, like hotels and restaurants, and the high-paying jobs of technology industry both grew.

These local-serving industry jobs are an important factor in preserving a middle-class in San Francisco, as they provide the most employment opportunities with middle wages without requiring a college degree.

“The local-serving industries employed over 186,000 people and averaged over one percent annual job loss over the last business cycle,” said the 2014 Economic Strategy report, a voter-mandated guide for economic policy, released this month by the Office of Economic and Workforce Development.

The report didn’t include analysis of the industries since the tech boom of 2011.

“That source of middle wage job in the local serving sector is going away because those businesses are not competitive in San Francisco and this has implications for the demographics of the city,” said City economist Ted Egan, who conducted the analysis. Data between 1990 and 2010 shows while the low income and high income population increased, those who earn moderate income, which for a family of four is an annual income between $80,950 and $121,450, decreased.

But Supervisor Mark Farrell, who chairs the Board of Supervisors Budget and Finance Committee, said the tech boom has resulted in “growth across all sectors.” Still, he said that “there is a ton left to do here locally to make sure that our current economic boom continues for San Franciscans of all stripes and backgrounds.”

Egan provided additional analysis to The San Francisco Examiner relying on Bureau of Labor Statistics that does show between 2010-13 a 7.4 percent growth rate in the local serving industry, for a total of 190,633 jobs. During the same time period, the creative industry, which includes technology companies, grew at an 11.4 percent rate and employs 115,505.

Experience industries, which include restaurants, bars and nightlife, employs 86,643 people and grew by 3.5 percent. The slowest growth was in financial sector at 2 percent. That industry employs 111,445. Unsurprisingly, the cost of housing is a large challenge facing the local-serving industry and other businesses.

“San Francisco’s high cost of doing business is a key reason to why the city’s employment was slower than the rest of the Bay Area, for most industries,” the report said. “The greatest contributor to this cost was labor cost, which is primarily driven by the high cost of housing.”

Farrell said that “there is a ton of work to do supporting our local serving industry and our small business community as commercial rent is rising and office space is becoming scarcer.”

jsabatini@sfexaminer.comBay Area Newseconomylocal-serving industrytechnology

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