What's going on in East Palo Alto?

The new Silicon Valley business models deployed by companies like Uber, Lyft, TaskRabbit, and SpoonRocket all share a common feature: the central company employs relatively few, well-paid people, but the business depends on a vastly larger network of contractors.

The economic geography this business model implies is interesting: rich cities packed with rich people need poorer people to provide all the services they want to access through their phones.

Which is one reason why Kim-Mai Cutler’s recent essay in TechCrunch on the small city of East Palo Alto—nestled between Google and Sand Hill Road and Facebook’s new campus—is so interesting.

East Palo Alto was once the murder capital of the United States. Things aren’t that bad anymore.

The booming economy in the Bay has provided more ways for people to make money in the city, but the companies that are making coders rich are just helping people in East Palo Alto get by. They’re the ones taking the low-wage delivery services and transportation employees.

“Based on the tech companies that have released diversity data so far, it’s likely that you have a small base of full-time employees with job security and equity that are primarily white and Asian, and then a substantially larger and more diverse base of contractors that have neither,” Cutler writes.

And as the city’s economic and safety situations improve, the workers for the companies that provide the contracting jobs are starting to push out the long-time residents.

Lerisa Puckett, a native of East Palo Alto, works for Google Shopping Express, and says that it is the lowest paying job she has ever taken. She no longer lives in her native town; she only comes back to visit her grandfather who still resides there. Puckett says, “I’d love to live here, but this has become a gold mine.”

The TechCrunch article notes that the city of East Palo Alto is surrounded by affluent places, like Atherton and Redwood City, where the median house price is 4.6 million and 1.6 million, respectively; while the median home price for East Palo Alto is just over 500 thousand.

With the land being so inexpensive (by comparison), and the town being strategically located at the intersection of the Dumbarton Bridge and the popular highway route 101, East Palo Alto (EPA) is prime territory to be the next gentrified city; many would argue that the plan is already unfolding.

As investors move in and the cost of rent rises, the unemployment rate remains sky-high (unemployment rate of %10, reports the US Bureau of Labor Statistics in September of 2014).

The issue of the Haves versus the Have-nots is well documented in Silicon Valley. In fact, late last year U.S. Dem Rep Jackie Speier told the USA Today, “the biggest problem in this country isn’t Ebola or ISIS— it’s income inequality.” U.S. Rep. Jackie Speier’s congressional district includes East Palo Alto and many of the surrounding cities.