From the outside, Palo Alto is a startup wonderland filled with Teslas, baby-faced millionaires and multi-million-dollar Eichler homes.
“It’s a town where even the homeless have laptops,” jokes one entry on the online Urban Dictionary.
And in some respects, this stereotype holds true. Palo Alto’s median household income is $137,043 — more than double that of the U.S. at large. Median home sale prices reached an all-time high at $2.67 million in 2017, and at least 2,300 startups call the suburb home.
But this vision of a foie-gras-nibbling, tree-lined paradise doesn’t necessarily match the reality of those living here who are just trying to make ends meet in one of the most expensive communities in the nation.
From the inside, Palo Alto is a place where some monthly rents have increased by $2,000 in a single year, and younger families find themselves drowning in mortgage payments topping $15,000 a month. Everyone from doctors and top-tier tech workers to the self-employed and those with graduate degrees feels the squeeze.
This high cost of living has changed traditional ideas about status, spending and what it means to be middle class.
To more closely examine this unwieldy middle in Palo Alto — a place where spectacular wealth and economic struggles coexist — the Weekly compiled 250 anonymous responses to a short survey, as well as interviews with community members who consider themselves in some way to be middle class. In doing so, the Weekly found the label to be amorphous. Nearly everyone described themselves as “middle class” regardless of their income or spending habits. At the same time, for all of their wealth relative to the rest of the country, many of those interviewed requested that their income levels not be published; others expressed discomfort about using their names in connection with such personal information.
In the end, the picture that emerges of the middle class in Palo Alto is one in which “keeping up with the Joneses” is increasingly difficult, coupled with the fear that the city is digging itself into unrecoverable wealth and income inequality — leading some residents to question whether it’s even worth it.
Defining ‘middle class’
Pew Research Center defines the middle class as those who earn between two-thirds of and double the median household income for a given area, after adjusting for household size. According to a recent analysis using this definition, Santa Clara County’s middle class shrank to 47.2 percent as of 2014 — down 11 percentage points since 1989.
For 2016, the national middle class encompassed those earning between $38,411 and $115,224 annually. In Palo Alto, the range was between $91,362 and $274,086 for 2016, the U.S. Census’ latest estimate of median household income (with an average household size of 2.4 people).
But income alone does not determine who is in the middle, Palo Alto residents say. Educational attainment, culture and spending choices, for example, also factor into the self-identification.
One respondent with a household income between $250,000 and $300,000 for a family of four wrote that his family is upper-middle class because they don’t spend more than $500 in a single purchase — except for four weeks of travel each year, housing, their children’s activities and $1,700 each month on farmers market food.
Meanwhile, another person making between $35,000 to $50,000 yearly for a family of two wrote she is also upper-middle class because of her credentials as a former professor with advanced degrees. A third said their four-person household identified as working class while making $150,000 to $200,000 because there was “not room to have any extras.”
“There’s the financial structure — how much you make and how comfortable you are with it — and social structure, based on where you came from,” said Ramji Digumarthi, a former aerospace engineer living in the Fairmeadow neighborhood of Joseph Eichler-developed homes. “It’s a hard thing to define because everyone looks at it in different ways.”
Multiple residents said that the term had more to do with educational background and culture than income or wealth. Jens Jensen, a semiconductor engineer from Germany, struggles with the term for this reason. Growing up in an industrial town, Jensen once had a job unloading bananas off ships, and he still feels connected to a more blue-collar attitude. “Middle class” implies a host of attributes he doesn’t want to necessarily associate with — the belief that everyone should achieve higher education, for example.
Palo Altans’ quickness to claim the middle-class label, despite their income diversity, is explained by research. Across income levels, “middle class” is still the most popular self-chosen designation, according to Pew Research. And in a recent book on the lives of New York City elite, a sociologist found that the wealthy feel stigmatized, instead choosing to describe themselves as “affluent” and “fortunate.”
“I know that we’re lucky and I don’t want anyone to think I’m bragging, or holding this over them or anything like that,” a survey respondent who requested anonymity said in an interview. The family of three’s combined income is between $300,000 and $350,000. “I guess I don’t want to be judged by it, that’s probably the best way to put it.”
Rita Lancefield, a 79-year-old in the Duveneck neighborhood, views class labels in the same way as Pew: income on a local scale. But she added that the relative terminology hides other privileges that are obvious from the outside. Most Palo Altans — aside from some pockets of residents — have unique elite educational and work opportunities that cannot be brushed aside.
“In terms of lifestyle, I’d say almost everyone in Palo Alto is upper class,” Lancefield said. “You take education, you take cultural opportunities, you take cost of living, you put all of these together — I think you’d have to say on a nationwide scale, almost everyone in Palo Alto is upper class.”
High income but ‘house poor’
But for many families, access to opportunity doesn’t change the sense that they’re squeaking by from paycheck to paycheck. And being able to afford one’s housing directly correlates with people’s notions of class.
In 1976, Karen Price moved to Palo Alto on her 24th birthday to pursue “the dream of California.” A Chicago native, she first rented a studio apartment on a minimum-wage salary at Kepler’s Books in Menlo Park before becoming a “Rolfer,” a type of bodywork therapist. She never bought a home; by the late 1980s when Price was ready to invest, her mother thought that $200,000 was too much and refused to lend her money.
Price has run her own successful therapy studio for nearly 40 years but has been forced to raise the rates of services to keep up with rent hikes on her apartment. She worries it won’t be enough, but at this point doesn’t know where she would move.
“Unfortunately, it really hits a lot of self-employed professionals … because there kind of is a ceiling or cap on your income,” she said. “At a certain point you can’t really charge too much more, and you can’t really work too much more.”
The loss of the “service class,” as she put it, has severely undercut the sense of community — where a heterogeneous mix of professionals and tradespeople intermingled, creating stability and diversity. Instead, the city’s becoming a place full of tech companies and workers that come and go.
Other residents also spoke to a stark divide between homeowners and renters. After moving to Midtown in 2015 to begin work at the East Palo Alto branch of San Mateo County Libraries, 28-year-old Kelly Reinaker was worried about her financial stability as a renter. Most people consider renting as a way to save up money to purchase a home. But despite financial support from her parents, Reinaker feels that her rent leaves no room for emergency circumstances or long-term purchasing power.
“Am I middle class, or what does that mean today?” she said. “When half of your monthly income goes toward rent, it’s really hard to save anything substantial over the period of a year.”
According to Census data, about 33 percent of Palo Altan renters spend more than 35 percent of their income on gross rent. But across Santa Clara County and California, an even higher number of renters are coughing up such a hefty portion of their income — 39 and 47 percent, respectively.
High home prices create “two realities” that in turn lead to distinct lifestyles and sets of concerns, according to some residents. Lancefield, of Duveneck, said that she sees a division between older homeowners and younger, wealthier families, who are in much more stressful economic situations. Another resident described the two categories in Palo Alto as: “old and rich.”
Lancefield described a typical younger family as having two jobs, a backbreaking mortgage, three kids and significant taxes. Between work, activities and payments, many people in Palo Alto just don’t have the bandwidth to develop neighborhood relationships, she said.
“You don’t have time to talk to your neighbors. You can’t,” Lancefield said, noting her own block has done a good job with maintaining friendships and hosting social gatherings. “It takes a really conscious effort to talk to your neighbors and bring about some kind of community feeling, and I think that’s something we’ve really lost in Palo Alto.”
She added, “I really feel for the younger families who are in our neighborhood now because it’s really hard for them.”
Owning a home, as elusive as the achievement may be, still has its downsides. A house worth $3 million is not the same as having $3 million in the bank, and it may still disqualify owners from financial aid or other services. Several of Price’s friends feel stuck. Those who rent eventually leave and those who own a home stay, she said, even if neither group wants to do so.
Buying, wrote one survey respondent, “requires a level of sacrifice you can never imagine before you do it.” Another said that because their income puts them below the Palo Alto median but their home value is high, they’re not sure whether to identify as middle or upper-middle class anymore.
For Price, the Rolfer, a healthy Palo Alto would encourage middle class lives like the one she’s led: the ability to rent or own a space as a young person and chase ambitions of all kinds.
“(We should) make this a community where that’s fostered, and that’s important,” Price said. “Not just like, ‘Well, gosh, we can get $10 dollars a square foot, and we have computer companies and computer people everywhere around, and aren’t we great.’ Because we aren’t.”
(Not) talking about spending
Money may be at the top of people’s minds in Palo Alto, but the residents we spoke with described talking about it as uncomfortable — a Pandora’s box of jealousy and awkwardness that only serves to separate people. Most of this anxiety stems from a sense of comparison and the fear of being judged, either for having too much money or too little. And that judgment has to do with the ways that people choose to spend.
Flight attendant Kathryn Soler said that while some of her “tech friends” would think a $400 haircut is a steal, her own range is around $75. She wouldn’t think to ask them about bargains for groceries or dry cleaning — they’re on a budget, too, but in their own bracket.
Terry Roberts, a user-experience designer for Tableau, has always been a saver, and it surprises her to see younger coworkers who make a lower salary buying coffee every day. She described the spending of many Palo Altans as “down-to-earth” even if their salaries would allow for more obvious consumption.
“Most people don’t seem ‘ostentatious’ rich,” she said. “They seem like ordinary people — middle class people who are able to afford some nice travel and stuff in their homes … It feels like our folks are kind of the middle-class-y rich people rather than the rich-rich people.”
Many survey responses spoke to this attitude, explaining or justifying the status of “middle class” through the lens of spending. One respondent described himself as “wealthy on paper” but with low expenses and no big purchases; another said, “I know we’re rich though I don’t feel that way and we are fairly frugal.”
Not talking about money, though, doesn’t stop friends from knowing each other’s financial situations. Roberts said that she and her friends generally can surmise what people earn by their job titles.
Because society at large tends to associate money with self-worth, she speculated, naming salaries remains taboo.
“If there’s somebody making $30,000 more than you, that’s the company’s statement to the both of you that that person is worth $30,000 more than you’re worth. And that’s kind of an embarrassing thing for both people to have staring you in the face,” Roberts said.
Roberts added later that it would be impractical to assume anything without examining someone’s whole budget because there are myriad reasons why people can or can’t afford things, like the number of children they have. Focusing on income alone seems odd — which also begs the question as to why definitions of middle class tend to do exactly that.
Reinaker, the librarian, said that she’s upfront when she can’t afford to do something, which happens from time to time. Her own spending habits have changed significantly in Palo Alto — she used to shop at thrift stores for fun, and getting drinks was part of her normal social routine back in Ohio.
Now she focuses on finding free activities like hiking and appreciates the opportunity to go to library conferences in other parts of the state.
“It’s not really something, especially among friends, that I’m ashamed of,” she said. “It’s just being honest and especially understanding that living in this area is crazy-expensive — how can you afford to do anything?”
Money and the next generation
When Roberts’ now-adult daughter was in middle school, she lamented that her friends were able to go on hundred-dollar sprees at Stanford Shopping Center and said she “really wished” that she could do the same.
“That was so antithetical to anything that was me, or the way I was raised or the way I am,” said Roberts. “And I was appalled.”
Others described pressure to pay for expensive after-school activities for younger children or fights with adolescents over their desires for fancy vacations. One Palo Alto parent, who asked to remain anonymous due to her position as an educator, recently turned down an offer for her child to try out for a traveling club baseball team that would cost thousands. Meanwhile, a private art class for her 8-year-old would have cost about $50 per session; she turned that down too.
Still, she described fruitful conversations with her children about the family’s financial reality while surrounded by what she called “ubiquitous” privilege. The children’s school, she said, seems not to recognize disparities between Palo Alto and surrounding communities or encourage service as much as she would like.
“There’s a lack of awareness that there actually is a lot of diversity,” the parent said. “I think people here are so privileged, sometimes they’re blind to it — because there always is a level of, ‘We don’t have the Tesla SUV, but we have the Tesla.’”
Digumarthi, the former aerospace engineer, tries to discuss consumption with his school-age children, too. He’s not sure how other parents talk to their kids about money, and it’s not something he would ask. But he does think that kids should learn the value of a dollar.
“I personally don’t believe kids should be provided everything — they need to understand that sometimes you have to work for it,” he said. “There are times I have to say ‘no.’”
Other parents say that completely divulging the family’s financial status can be just as uncomfortable with one’s children as anyone else. Several survey respondents described waiting until their kids were adults to discuss finances, and others said the topic never comes up at all. One simply wrote, “It is obvious to them that we are not poor.”
The question of how kids are experiencing their parents’ and peers’ financial situations is central to the future of the middle class in the city, according to several residents. Steve Levy, a research economist, still remembers the passing of the Tinsley Voluntary Transfer Program in 1986. Designed to reduce racial isolation — and enacted after a 10-year legal battle — the program allows minority students in the Ravenswood City School District to transfer into seven other districts, including Palo Alto.
Levy’s then-elementary-school age son befriended several students in the transfer program, and to Levy, the experience represented what Palo Alto will be missing if it doesn’t begin to solve endemic issues of affordability and housing. When generations grow up only seeing people who look like them, with the same houses and consumption habits, people lose crucial understanding of anything beyond themselves, Levy said.
“Our children benefit by growing up with people who they will live and work with in their adult lives,” he said, and added, “I don’t want to shut the gate — I want to pass it on. I love this city, I love that it was open to me; I want to make it open to new people.”
Lancefield echoed this sentiment. For much of her life in Palo Alto, it was possible to survive on one salary. And now for the last 10 to 20 years, people have gone in circles with the same conversations about housing, traffic and affordability.
“In Palo Alto we have a tremendous opportunity to learn how to solve these problems,” Lancefield said. “We have a highly educated, highly diverse population — and we need to find a way to come together, and figure out what kind of Palo Alto we want. And how to get there.”
Fiona Kelliher is a former Weekly editorial intern.
TALK ABOUT IT
Do you share the experiences and opinions of the Palo Altans quoted in this article? Talk about what middle class means to you on Town Square, the community discussion forum at PaloAltoOnline.com.