In a previous article, ‘Tech innovation is no panacea’, it was explained that the tech industry was not able to be the driver of broad-based growth – the kind that employs large swathes of the workforce; the kind that creates upward pressure on wages across the whole labour market; the kind that developed economies around the world have been searching for since the GFC. This is a consequence of the nature of the markets that these firms operate in. It is not a fault of their business practices or governance policies. The detrimental effect that these firms have on the local communities around their monumental corporate campuses are created by their own business choices. Via their own accord, the giants of Silicon Valley are failing to contribute to the communities that they thrive in.
With tech firms’ record profits and current low interest rates it is the perfect time to build. The tech giants sure think so. Last year Facebook built a new office – the largest open plan office building in the world – which is now linked to its existing office at 1 Hacker Way, Menlo Park, California by a tunnel. Its stand out feature is a nine-acre private park and picnic area on its roof. And Facebook is not the only one. Last February, Google submitted plans for a 230,000 square meter site complete with futuristic rearrangeable canopies, before it ran into planning permission hurdles in May. Meanwhile, Apple, not to be outdone, has recently opened its new donut shaped corporate headquarters in Cupertino, CA. Dubbed the ‘mothership’ by the Mayor of Cupertino, it is two-thirds the size of the pentagon.
These aren’t the first companies to build monumental corporate headquarters. Think the Chrysler or Bank of America Buildings in New York, or the Petronas Towers in Kuala Lumpur. Surely, these buildings would stimulate the local economy by giving a boost to construction? But whilst that may be true in the short term, what makes tech campuses different is that they are designed to be insular. They are not embedded in the fabric of a city; they are deliberately separated. Their business models don’t rely on proximity to others to the same extent that many other firms do. As a result, a deliberately isolated industry practice has been developed, limiting integration with the local communities in which they operate.
Despite this, tech giants are often praised for the benefits they provide to their employees. One ‘Googler’ provided an enviable list. He has access to “three prepared organic meals a day… unlimited snacks, artisan coffee and tea to free personal-fitness classes, health clinics, on-site oil changes, haircuts, spa truck, bike-repair truck, nap pods, free on-site laundry rooms, and subsidised wash and fold.”[1] Over at Facebook they even throw in dry-cleaning. The downside of this is that employees never have to leave their offices. Instead of creating opportunities for small businesses that provide these services to set up shop nearby and profit on some of the million-dollar salaries being paid to employees, they remove the market for these services entirely.
Eateries around North Bayshore, for example, have seen a huge drop in customers as older firms such as Siemens and VISA have relocated to make way for more Google offices. In response to concerns from local business owners, Google seems to acknowledge that they may have made local businesses obsolete, instead suggesting small businesses shift to providing more specific services including alcohol, delivery and take home dinners, which Google does not supply.[2]
It is not just the immediate area around these campuses that suffer either. 6,400 Googlers a day are ferried to Google’s offices by a free shuttle.[3] Consequently, well-payed employees live in and drive rents up in trendy areas of San Francisco, but only interact with their local communities at a minimal level. They travel on parallel and exclusive transport infrastructure before spending their days and running their errands in the parallel society of their corporate campus.
Even when tech companies have more traditional offices in the centre of cities, similar effects can be seen. Twitter, for example, moved into a building in Central Market, San Francisco in 2012, and was followed later by other companies including Spotify and Square, encouraged by generous tax incentives predicting gentrification of the neighbourhood.[4] But because generous benefits and exclusive ‘community’ spaces leave little reason to leave the headquarters, rents have skyrocketed and construction has boomed in the local community in response to a rising number of tech employees moving to the area, while existing residents and businesses face a surge in eviction rates and only little interaction with the newcomers.[5]
Tech companies are generally at the forefront of espousing corporate responsibility, but the nature of their corporate headquarters has insidious effects on their communities. Introducing such generous on-site benefits, which supplant so much of the local economy, may be a hard habit to break. Companies like them because they keep employees at work for longer. Employees like the convenience. And who doesn’t like free stuff? But of course, these perks are not free. They are, in effect, part of employees’ remuneration. However, fewer benefits and a higher cash wage would see more money spent in the local economy. If such on-site benefits were reduced, tech firms may be able to complement and add to the communities they move into, creating rather than stifling new market opportunities around them.
Inevitably, insular corporate campuses create parallel markets that exclude the wider community. Interactions, which would otherwise take place outside of work, increasingly occur within a closed circle, yet rent costs rise for everyone. This scenario is now entrenched within the industry. Employers would find it hard to attract potential employees without such perks. Nonetheless, a change would be welcome. Because unfortunately, inequality is not helped when the highly paid have little incentive to spend their money in the local economy.
[1] http://fortune.com/best-companies/google-alphabet-1/
[2] http://www.mv-voice.com/news/2013/07/11/cant-compete-with-free-eats
[3] https://www.google.com.au/green/efficiency/oncampus/
[4] http://www.nytimes.com/2013/11/02/business/twitter-helps-revive-a-seedy-san-francisco-neighborhood.html?_r=0
[5] http://www.nytimes.com/2013/12/14/opinion/what-tech-hasnt-learned-from-urban-planning.html?_r=2
Image source: https://en.wikipedia.org/wiki/Googleplex#/media/File:Google_Campus2_cropped.jpg