The Changing Nature of Technology- Based Industry in Washington State: Perspectives from 7 Technology Alliance Sponsored Studies William B. Beyers Department.

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

mailto:[email protected]

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


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


Engineering, Commercial Research,

and Consulting Services18.4%


21.0%

Federal and University Research

3.8%

Services2.7%


Manufacturing2.8%

Chemical Production and Petroleum Refining

2.0%

Specialized Instruments and Devices

2.9%


8.3%

Aerospace32.6%

Manufacturing54.1%

Services45.9%


Motor Vehicles and Machinery

5.5%

Engineering, Commercial Research,

and Consulting Services18.4%


21.0%

Federal and University Research

3.8%

Services2.7%


Manufacturing2.8%

Chemical Production and Petroleum Refining

2.0%

Specialized Instruments and Devices

2.9%


8.3%

Aerospace32.6%

Manufacturing54.1%

Services45.9%


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


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


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

The Changing Nature of Technology- Based Industry in Washington State: Perspectives from 7 Technology Alliance Sponsored Studies William B. Beyers Department.

Documents

study slide

naics slide

aerospace slide

time slide

type slide

study employment mix

rd employment

economic impacts slide