The cost of living in the San Francisco Bay Area rose dramatically during the boom of the 1990s but failed to subside in the slump that followed. Expensive housing and energy, commuter gridlock, and high corporate premiums for workers’ state insurance now threaten the region’s fledgling recovery.1 The Bay Area (including Silicon Valley) has a third of all US venture capital investment, strong ties to the global economy, and a high concentration of technology workers—strengths that make it the most productive region in the United States, with an average output per employee nearly twice that of the country as a whole.2 But when adjusted for the high cost of living, the region’s productivity dipped from 143 percent of the national average in 2000 to 131 percent just two years later. If the Bay Area’s leaders fail to address its problems, productivity could drop further, making it less attractive to workers and businesses alike.
About the Authors
Diana Farrell, the director of the McKinsey Global Institute, is a principal in the San Francisco office, where Lenny Mendonca is a director.
Notes
2 Lenny T. Mendonca, Ryan Nichols, and Kausik Rajgopal, "
The Bay leads the way,"
The McKinsey Quarterly, 2000 Number 1, pp. 10–2.