The Bay Area and Structural Unemployment: A Lesson from History and Its Impact on Real Estate

The bustling streets of the Bay Area, from the tech hubs of Silicon Valley to the green rooftops of San Francisco, tell a unique tale of innovation and transformation. This region has been at the forefront of technological advances for decades, showcasing the duality of progress: the jobs we lose and the new opportunities we gain. Throughout American history, every major technological breakthrough has led to the loss of jobs. This phenomenon is neither novel nor detrimental in the long run. It's termed as "Structural Unemployment" by economists. This refers to the unemployment resulting from industrial reorganization, usually instigated by technological evolution rather than supply and demand dynamics. Sometimes, this change is driven by the peak demand of the old technology, nudging innovators to develop the next big thing.


Take the shift from fossil fuels to renewable energy, for example. If America pivots its focus fully towards renewable energy, the job losses might appear significant initially. Yet, in the broader scope, solar power jobs have already surpassed those in the oil industry. As for coal – which currently employs roughly 172,000 workers, a minuscule fraction of the national workforce – these roles can swiftly transition. By retraining coal miners, we can usher them into renewable energy sectors that promise a safer and healthier work environment.


History is rife with similar examples. When computers emerged, replacing typewriters, many felt the economic tremors. But today, in the heart of the Bay Area, the tech industry stands as a testament to the millions of jobs it created, dwarfing the numbers from the typewriter era. Another case in point is the decline of giants like Kodak and Polaroid with the rise of digital photography. And who can overlook the seismic shift from print to digital media? Yet, as we stand on the cusp of a new era where robotics and A.I. threaten to replace unskilled jobs daily, the Bay Area has a message for the world: adaptability is the key. It's imperative that we emphasize skills and continuous learning.


As someone deeply passionate about education, I believe it's high time we put an emphasis on STEM in our grade schools. But this technological renaissance is not without its ripple effects. The Bay Area is increasingly becoming the beacon for young innovators, entrepreneurs, and tech enthusiasts. They're flocking to this region, eager to be part of the next big wave of innovation.


This influx of talent and aspiration is having a profound impact on real estate in the Bay Area. Housing demand is skyrocketing, pushing prices upward and creating a sense of urgency to address the glaring lack of inventory. To accommodate this new wave of residents and ensure sustainable growth, there's a dire need for more housing. Solutions range from high-density housing projects to re-zoning initiatives, but the bottom line remains: to sustain our position as a global tech leader, the Bay Area must also lead in creating innovative housing solutions.


In the ever-evolving landscape of the Bay Area and the world at large, embracing change and preparing for it is not just an option – it's a necessity. As history has shown, with every door that technology closes, several more open. The future belongs to those ready to walk through them, and for the Bay Area, that future must include room for everyone.


- By Mark Palermo, President-Palermo Properties Team

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