If you haven’t noticed, San Francisco’s economy is seriously booming on fire. In just the last 4 years, the population has grown by 47,000 (or nearly 6 percent), the median monthly rent for an apartment went up almost 40 percent and the median cost to buy a house rose 56 percent. At an average of $400 a night, San Francisco’s hotels are the most expensive in the world. Toast is $4, and there is barely a city in the U.S. where you feel more pain at the gas pump.
Official government data shows that prices in San Francisco have significantly outpaced the rise in the cost of living in other major cities over the last several years – this is based on a basket of goods that includes groceries, gas, rent, and other famously high-cost Bay Area goods.
But how is this affecting people who provide hired services like dog walking, house cleaning and event DJing? A booming economy should be good for everyone, right?
We set out to answer this question by creating a “price index” based on the average price of 13 popular services offered on Thumbtack, including dog walking, personal training, house cleaning, and photography. Changes in the level of this price index is a good indicator of how much service providers have been charging for their work over time.
We found that between March 2013 and October 2015, the price of the services we looked at increased 6 percent in San Francisco, while incomes, rents, and housing costs, have gone up much, much faster.
The preceding chart displays the percentage change from 2013 to 2015, except for household income, which contains the most recently available data from 2012 to 2014.
While service industry prices only went up by 6 percent, it is still possible that service providers are actually better off than this number suggests because they are able to book more of their time thanks to increased demand and better booking technologies. Even still, the prices these pros are quoting for their services are not rising anywhere near as fast as the cost of living in San Francisco.
Over the past two years, certain service industries experienced large price increases and others saw substantial declines. The following chart displays the change in average quoted prices on Thumbtack across 13 very active categories in San Francisco between March 2013 and October 2015. They are listed in order – industries with the greatest decreases at the top, and industries with the greatest increases at the bottom.
A few trends can be seen in this data, some intuitive, some not. As San Francisco has boomed and more and more technology companies have started to call it home, prices have increased dramatically for high-end services and for services that cater to a corporate crowd, like interior design or headshot photography.
Some prices for leisure projects accessible to those with spare time and extra money – like taking guitar lessons or hiring a personal chef – have gone up. At the same time, prices for other luxury services like massage therapy and house cleaning have gone down.
In certain cases, industries with large barriers to entry (like expensive equipment for event DJing) have seen their prices go up. One industry that saw a new series of government regulations put in place over this period, dog walking, has dropped in price 3 percent, despite what you might think economic theory would dictate. The price of bartending has dropped dramatically, despite the fact that San Francisco bartenders reportedly earn the highest wages in the nation.
It isn’t just the economy in San Francisco that’s changing – new technology is also changing how people find and book service professionals. As new technology has lowered the transaction costs associated with bringing a house cleaner into your home, this could bring more house cleaners into the market to and push down the prices of house cleaners thanks to increased competition. However, there’s also the potential for a demand-side effect: as it has become easier than ever to order a housecleaner, more demand could result in higher prices.
To visualize price change trends in San Francisco against those in the rest of the country, we mapped two categories – headshot photography and house cleaning – in the chart below. While quoted prices in San Francisco soar in some industries and stagnate in others, the national data shows far less dramatic swings. (The data is smoothed using a localized regression model to make it easier to see what’s happening in the long term.)
In addition to analyzing service price trends, we also look at where service providers were located geographically, and whether that changed over time. We found that almost 50 percent of service professionals in the categories we looked at were based outside the city of San Francisco. The overall number of service providers based in the city shrunk slightly from 52.4 percent in 2013 to 51.7 percent in 2015. People who serve events, like DJs, are the least likely to be based in the city while people serving pets, like dog walkers, are most likely.
|Service Type||Percent of Pros Based in SF||Percent of Pros Based Outside of SF|
Our data show that some of this wealth has trickled down to service providers, particularly those who are in industries like interior design and headshot photography, which cater to high end or corporate clients. Other services providers have not seen their prices grow, probably because supply has increased at the same time as demand, dampening down wages.
As President John F. Kennedy once said, when it comes to the economy, “a rising tide lifts all boats.” In San Francisco, it has raised the boats of some service industries, but not all of them, and certainly not enough to keep up with the rents.
Thumbtack is a service that connects customers who need something done with the right professionals. More than 200,000 professionals service over 5 million projects a year on Thumbtack, across over a thousand categories including house remodeling, event planning, and music lessons. Since 2012, Thumbtack has used its unique access to data on the small business economy to publish independent research, including the annual Small Business Friendliness Survey, and to represent the interests of small businesses across the United States to policymakers and local governments.