Income inequality has risen in recent decades and now rivals that of other cities that have experienced tech booms, such as San Francisco. From 2015 to 2019, the top 20 percent of households made 5.3 times more than the bottom 20 percent. The overall asset poverty rate – when a household does not have enough net worth to live at the poverty level for three months in the absence of income – is 22.7 percent, but when broken down by race, it is 19.2 percent for white people, 49.5 percent for Black people, and 37.5 percent for Latinx people. Low-income households pay a premium for being in poverty – with more expensive groceries, longer commutes, and overdraft fees and higher interest rates for bank accounts, among other challenges.
While the tech industry fuels Seattle’s economy, many of these companies do not hire locally, threatening to displace longtime residents who cannot keep up with the increasing cost of living. More than 60 percent of Seattle’s workforce was educated outside the city. Data also indicates that these high-paying tech jobs are in primarily white communities or displace Black populations when they move into predominantly Black communities. One example is Seattle’s historically Black Central District, where 20 percent of the Black population left the neighborhood despite the overall population growing nearly one-third between 2010 and 2020. At the same time, Central District experienced significant job growth and gentrification.
Compounding the problem is the rising cost of living in Seattle. In July 2021, Seattle area home prices rose 25.5 percent year-over-year, the highest increase the city has ever experienced. A January 2020 city government report found that rental and ownership cost increases have put affordable housing out of reach for more than half of the city’s population. A 2021 analysis by Redfin found that 42.7 percent of households earning 80 percent of the area median income ($75,222) are rent-burdened, meaning they spend more than 30 percent of their income on rent.
In 2018, the Regional Affordable Housing Task Force estimated that King County, where Seattle is located, would need 244,000 new affordable homes by 2040 to ensure that residents will not be cost-burdened. In 2019, the Seattle City Council approved the Mandatory Housing Affordability (MHA) plan to allow for more multi-family developments in Seattle’s densest neighborhoods; MHA would transition six percent of the city’s single-family properties and create more affordable housing units. The plan faced significant opposition from homeowner groups that did not want their neighborhoods to become denser, as well as affordable housing activists that said the plan did not go far enough. The City Council continued their focus on affordable housing in July 2021 with discussions around reforming single-family zoning and providing resources to make upzoned neighborhoods affordable for low-income households and communities of color.
Another outcome of the city’s rapid economic growth is an increase in its unhoused community due to lack of affordable housing units. In 2016, Zillow Research found that a five percent average rent increase would have added over 250 individuals to Seattle’s unhoused population. Communities of color are disproportionately impacted. The city’s Point-in-Time Count of Individuals Experiencing Homelessness in 2020 found that while Native American/Alaska Native people make up only one percent of the population in the county, they accounted for 15 percent of people without housing. Similarly, Black people make up seven percent of the population and Latinx people make up ten percent but constitute 25 and 15 percent of people without housing, respectively. Like the asset poverty rate and educational attainment, communities of color are experiencing worse outcomes than white residents.
As the COVID-19 pandemic inched us closer to a cashless society, that transition has adversely impacted low-income and unhoused populations that may not have access to bank accounts or credit cards due to minimum balance requirements or bank fees. In 2019, the Federal Deposit Insurance Corporation found that among unbanked households, the top two reasons people cited for not having a bank account were not meeting minimum balance requirements and not trusting banks. In 2017, 18.6 percent of households in the Seattle Metropolitan Statistical Area were underbanked. For unhoused and unsheltered people, a cashless society may also limit access to donations that have traditionally taken the form of cash payments.
The challenges facing low-income and unhoused populations in Seattle provide an opportunity for the private sector to support through increasing access to capital, offering financial education, and hiring local talent.
In 2021, the Electronic Transactions Association found that tech-based finance could increase financial inclusion in underserved communities by increasing financial literacy, enabling mobile payments and peer-to-peer lending, and providing access to capital and banking services. Traditionally, low-income populations are less financially literate with fewer assets or credit. Financial education can empower low-income communities to repay and avoid debts and accrue savings, build trust between communities and companies, and generate a healthier and more equitable economy. Some tech leaders are already predicting that Seattle will become a fintech hub, with Amazon and Microsoft partnering with financial services and diversifying payment and lending options. Fintech platforms uniquely allow users to forego minimum balance or deposit requirements, access low-interest lending, and circumvent transaction and commission fees.
Seattle’s private sector is infamous for bringing in talent but fails to foster and hire a local and diverse workforce. While Black people make up six percent of Seattle’s workforce and Latinx people make up ten percent, they constitute only two percent and five percent of tech talent across all industries in the city, respectively. Meanwhile, the average wage for tech jobs is $126,730, compared to $65,841 for non-tech occupations. Seattle’s private sector can dedicate more resources toward professional and workforce development for the city’s low-income, Black, and Latinx communities, which continue to be excluded from and underrepresented in the city’s high-paying industries like tech and financial services.
Ichor supports companies partnering with community members and local organizations to source local talent, advance financial inclusion, and expand access to resources such as community-based lending and mutual aid, credit or alternative credit, and direct deposits. Our on-the-ground presence in communities and expertise using research and analytics allows us to help companies develop effective community strategies, help those in need, and gain new customers.