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The Changing Nature of Technology-Based Industry in Washington State:
Perspectives from 7 Technology Alliance Sponsored Studies
William B. BeyersDepartment of GeographyUniversity of Washington
Seattle, WA [email protected]
Seattle Economists Club June 13, 2012
Outline
• Defining Technology-Based Industry• The Changing Nature of R&D – WA vs. Other
States• Current Employment• Trends in Employment• The Changing Geography of Tech-Based Industry• Changes in Economic Impacts
The Technology Alliance Technology-Based Industry Economic Impact Studies
• Studies have been benchmarked against the years 2005, 2007, 2000, 2003, 2007, 2009, and 2011
• They have tried to use a consistent methodology
• Changes in underlying data sources have made this difficult
• We are unaware of any similar legacy of studies of this type
Defining Technology-Based Industry• Many definitions of “high tech”• Some are based on % of sales related to R&D, some based
on arbitrary definitions of industries included, some based on % of R&D related occupations
• Early Technology Alliance economic impact studies defined technology-based industries as those with at least 10% of their workforce in R&D related occupations
• Starting in 2008, we defined tech-based industry as those with double the state average in R&D employment for all industries. In the current study, that threshold is 16.2% (up from 15.6 in 2010).
• This definition leads to some changes in industries included in the study, but other factors also lead to changes to industry inclusion (shift to NAICS, occupational structural change)
• After careful inspection of occupational structure, we included two industries with less than 16.2% R&D related occupations (electronic shopping & waste treatment/disposal)
R&D Related Jobs are very important in technology-based industry
Source: Calculated From Washington State Employment SecurityDepartment 2010 industry-x-occupation matrix
42%
3%
65%
35%
0% 10% 20% 30% 40% 50% 60% 70%
High TechEmployment
Non High TechEmployment
% of Total S&E Jobs
% Industry in S&EOccupations
Technology-Based Industries in 2011 StudyNAICS Industrial Description % R&D
Technology Intensive: R&D Occupations Over 30%
5413 Architectural and engineering services 70.1% 5415 Computer systems design and related services 66.3% 5112 Software Publishers 64.8% 5417 Scientific research and development services 60.5% 3364 Aerospace 35.7% 5191 Other information services 35.5% 5416 Management and technical consulting services 34.8% 518 ISP and Data Processing 33.0% University and Federal Research (Not covered in ESD
data base: see text)
Other Technology Industries: R&D Occupations 11.8% - 30% 334 Computer and Electronic Mfg. 29.4% 3241 Petroleum & Coal Prod. 27.9% 3361 Motor vehicle manufacturing 26.7% 517 Telecommunications 24.2% 335 Electrical Equipment 23.4% 3336 Turbine and power transmission equipment mfg. 23.3% 4234 Commercial equip. merchant wholesalers 22.0% 5511 Management of Companies & Enterprises, millions 19.5% 5629 Remediation and other waste services 17.9% 3335 Metalworking machinery manufacturing 17.8% 3332 Industrial machinery manufacturing 16.6% 325 Chemicals 16.2% 5622 Waste treatment and disposal 13.9% 4541 Electronic shopping and mail-order houses 11.8% All Technology-Based Industries 41.9%
Examples of R&D Intensive Occupationsin SOC 15, 17, and 19
Standard Occupational Category (SOC)
Occupational Description
% of Total
15-1031 Computer Software Engineers, Applications 11.7% 15-1032 Computer Software Engineers, Systems Software 6.6% 15-2031 Operations Research Analysts 0.5% 15-2041 Statisticians 0.2% 17-1011 Architects, Except Landscape and Naval 1.3% 17-2011 Aerospace Engineers 2.7% 17-2051 Civil Engineers 5.2% 17-2141 Mechanical Engineers 2.5% 17-3023 Electrical and Electronic Engineering Technicians 1.1% 17-3029 Engineering Technicians, Except Drafters, All Other 1.5% 19-1023 Zoologists and Wildlife Biologists 0.8% 19-1042 Medical Scientists, Except Epidemiologists 2.0% 19-2031 Chemists 0.8% 19-2041 Environmental Scientists and Specialists, Including
Health 1.7%
19-3021 Market Research Analysts 3.7% 19-3051 Urban and Regional Planners 1.2% 19-4021 Biological Technicians 1.6% Other R&D Intensive Occupations 54.7%
Washington R&D by Users of Funds
Source: NSF 2012 D – data not disclosed NA – data not available for this yearIndexed ranks are against Gross State Product, which controls size of state economies
Performer and Sources of Funds $ Millions 2008 Rank $
Used 2008 Rank
Indexed
2000 Rank $
Used
1993 Rank $
Used United States Sources: Total Used $16,696 5 6 8 11 A. Federal Government: Total Used (1) $258 18 24 14 21 B. Business: Total Used (2) $13,876 5 3 7 9 Federal Sources $717 14 13 D 8 Business Sources (3) $13,159 5 2 D 10 C. Universities and Colleges: Total Used(4) $1,058 14 34 14 14 Federal Sources $721 14 25 11 10 Non-federal Government Sources $61 17 32 35 32 University & College Sources $156 22 40 22 NA Business Sources $81 13 11 11 14 Non-Profit Sources $39 25 38 27 NA D. Non-Profits: Total Used (5) $1,504 4 4 4 5 Nonprofit FFRDC $1,137 4 4 4 NA Other Nonprofits $367 4 6 7 NA E. State Internal (6) NA NA NA NA
1995 Study Employment Mix
1997 Study Employment Mix
Software and Other Computer Services
15.0%
Engineering,Commercial Research, and Consulting Services
19.1%
Services39.3%
Federal and UniversityResearch
3.8%
Bio-Technology/Bio-Medical
Manufacturing Services 2.8% 1.3%
Aerospace39.6%
Manufacturing60.7%
Computers and Electronics
8.7%
Motor Vehiclesand Machinery
5.2%
Specialized Instrumentsand Devices
3.1%
Chemical Production andPetroleum Refining
1.5%
Total Employment:266,451
2000 Study Employment Mix
Engineering, Commercial Research,
and Consulting Services18.4%
Software and Other Computer Services
21.0%
Federal and University Research
3.8%
Services2.7%
Bio-Technology/Bio-Medical
Manufacturing2.8%
Chemical Production and Petroleum Refining
2.0%
Specialized Instruments and Devices
2.9%
Computers and Electronics
8.3%
Aerospace32.6%
Manufacturing54.1%
Services45.9%
Total Employment:285,835
Motor Vehicles and Machinery
5.5%
Engineering, Commercial Research,
and Consulting Services18.4%
Software and Other Computer Services
21.0%
Federal and University Research
3.8%
Services2.7%
Bio-Technology/Bio-Medical
Manufacturing2.8%
Chemical Production and Petroleum Refining
2.0%
Specialized Instruments and Devices
2.9%
Computers and Electronics
8.3%
Aerospace32.6%
Manufacturing54.1%
Services45.9%
Total Employment:285,835
Motor Vehicles and Machinery
5.5%
Employment Mix 2003 – After the shift from SIC to NAICS
Employment Mix 2007
Employment Mix 2009
Employment Mix - 2011
Aerospace & Motor Vehicle Mfg.
19%
Commercial Equipment Merchant
Wholesalers3%
Electronic Shopping & Mail Order Retail
3%
Software Publishing, Data Processing & Other Information
Services15%
Telecommunications6%
Architecture & Engineering
9%
Computer Systems Design
10%
Management Consulting
7%
Petroleum & Chemicals Mfg.
2%
Scientific Research5%
Waste Treatment & Remediation
3%
Management of Companies
8%
University & Federal Research
3%Machinery Mfg.
1%
Computer & Electrical Eq. Mfg.
6%
Manufacturing 28%
Services 72% Total 434,343
Data for 2011
Includes Self-Employed for the first time
Changing Mix of Technology-Based Industry Employment
History of Technology-Based Employment in Washington State
Boeing Employment
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,00019
16
1918
1920
1922
1924
1926
1928
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
Boeing Employment FluctuationsBoeing Employment
0
20000
40000
60000
80000
100000
120000
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Boeing’s Long-Run Trend towards Outsourcing
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1963 1967 1972 1982 1989 1997 2002
Intermediate Goods andServices
Value Created
Regional Purchases are about 7% of total, mostly services
Source: Washington State Input-Output Tables
Concentration of Technology-Based Employment in Washington State
Nonemployer = 9.4% of County Business Patterns Employment
County Business Patterns Self-Employed Combined
Petroleum Refining 0.693 0.432 0.676 Chemicals 0.346 1.020 0.360 Machinery 0.712 1.020 0.727 Computers 0.938 1.457 0.958 Electrical Equipment 0.338 0.967 0.353 Aerospace & Motor Vehicles 5.409 1.074 5.483 Commercial Equipment Merchant Wholesalers 1.079 1.110 1.097 Electronic Shopping & Mail Order 0.903 1.565 1.018 Software Publishers & Computer systems design 2.801 2.550 2.25 Telecommunications 1.230 0.802 1.238 Data Processing & Other Information Services 1.353 1.175 1.328 Business Services 1.241 2.383 1.343 Scientific R&D 1.263 1.314 1.280 Waste Management 1.898 0.622 1.860 All Technology Based Industry 1.410 2.059 1.465
Location Quotients - 1993
Location Quotient(1.00 = National Average)
0.28 to 0.580.58 to 0.760.76 to 0.930.93 to 1.041.04 to 1.261.26 to 1.74
1.29
1.465
1.101.06
1.12
Washington Ranks 2nd. - Peer States Black/White NumbersOther High Location Quotients - Red
1.17
1.20
1.16
0.901.27
1.121.41
1.191.468
Location Quotients – All Hi Tech 2009
1993 Location Quotients – Less Aerospace
Location Quotient(1.00 = National Average)
0.30 to 0.620.62 to 0.790.79 to 0.940.94 to 1.031.03 to 1.211.21 to 1.90
0.79
Washington Ranks 3rd - Peer States Black/White Numbers Other High Location Quotients - Red
1.31
1.10 1.05 1.14
1.24
1.19
1.31
1.00
0.93
1.461.171.221.52
Location Quotients – Less Aerospace
1993 Location Quotients- Tech Intensive
Location Quotient(1.00 = National Average)
0.21 to 0.480.48 to 0.610.61 to 0.800.80 to 0.990.99 to 1.431.43 to 2.69
1.62
1.93
1.17
1.221.24
0.921.37
1.111.441.97
1.552.20
Washington Ranks 3rd - Peer States Black/White Numbers Other High Location Quotients – Red
1.27
Location Quotients – Tech-Intensive
Location Quotient Trend – Washington State
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
1995 1997 2000 2004 2007 2009 2011
All Industries
Less Aerospace
Very High Tech
Washington County Employment 1997
EMPLOYMENT
0-1
2-100
101-1000
1001-15000
49555
144378
233,475
52,918
15,048
18,739
11,929
Direct County Tech-Based Employment 2011
52,918
233,475
15,048
18,739
11,929
Economic Impact Analysis
DirectHigh TechActivity
Out-of-State Sales Revenues
Purchases OutsideState
IndirectActivity
In-S
tate
Pur
chas
es
Results:
• Output
• Jobs
• Labor Income
• Tax Revenues
Employment Impacts 1997
+ =
DirectJobs
IndirectJobs
Total JobsImpact
TradeOther Industries
Services
HighTech
Mfg.
266,451
628,917
895,368
Direct
Indirect
Direct Jobs Indirect Jobs Total Jobs Impact
434,343
1,007,378
1,441,721
HiTech
Trade
Services
Dir
ect
Mfg.
OtherIndustries
Ind
irec
t
Total Direct and Indirect Employment Impacts 2011
2010 Report: 381,546 826,644 1,208,189
Direct & Total Impacts % Change from 2010 Study (Nominal $) $ in Millions Direct Impacts Sales $230,960 73.7% Employment 434,343 13.8% Labor Income $41,059 -2.3% Taxes $770 -8.1% Total Cumulative Impacts Sales $369,543 55.0% Employment 1,441,721 19.3% Labor Income $85,775 11.8% Taxes $6,132 15.1% Multipliers Sales 1.60 Employment 3.32 Labor Income 2.09
B&O tax only
B&O and Sales Tax
Multiplier History
Historic Trend in Technology-Based Industry Employment and Impacts
Concluding Comments• Washington has strong technology-based industry, but it has
changed over time• The occupational foundation for defining technology-based
industry continues to rise• Our R&D position relative to other states has also risen• Service industry components of technology-based industry
have continued to expand• While these industries are strongly concentrated in the Puget
Sound region, there has been geographical spread to other parts of the state
• Growth of technology-based industry has been faster than the state average, leading to growth in economic impacts that have also gradually risen.
• Thanks to the Technology Alliance for supporting this unique set of portraits of technology-based industry in Washington State