You can see this if you compare San Francisco today to Detroit a century ago. San Francisco is in the midst of a boom driven by information technology, just as Detroit was in the midst of an automobile-driven boom in the early 20th Century. Yet these booms have had dramatically different effects on the cities where they occurred.
In 1900, a few years before Henry Ford founded his auto company, the Detroit metropolitan area had around half a million people. By 1920, the population had almost tripled to 1.4 million, and it grew to 2.5 million people by 1940. Thanks to the booming auto industry, Detroit grew a lot faster than the nation as a whole. Those extra 2 million people weren’t just workers on Henry Ford’s assembly lines — they included barbers, schoolteachers, doctors, janitors, waitresses, and others providing services to the growing population of middle-class auto workers.
Since 1990, the San Francisco Bay Area has been experiencing a similar economic boom. Google, Facebook, and hundreds of other new technology companies are creating thousands of new jobs. Increasingly affluent engineers want haircuts, restaurant meals, remodeled kitchens, medical care, schools for their children, and so forth, just as auto workers did a century ago. Ordinarily, you’d expect workers across the income distribution would flock to the Bay Area to provide these kinds of services. The population of the Bay Area should be swelling.
But that mostly hasn’t happened. Since 1990, the San Francisco Bay Area has grown more slowly than the nation as a whole. Strict housing regulations make it difficult to expand the housing stock. So rather than creating a tide that lifts all boats, Silicon Valley’s millions have pushed housing prices up and non-wealthy San Franciscans out. Over the last two decades, a lot of them have left the area for fast-growing places like Phoenix and Las Vegas. The job opportunities there aren’t as good, but you can afford to buy a house on a middle-class salary.