The Changing Nature of Technology- Based Industry in Washington State: Perspectives from 8 Technology Alliance Sponsored Studies William B. Beyers Department.

The Changing Nature of Technology-Based Industry in Washington State:

Perspectives from 8 Technology Alliance Sponsored Studies

William B. BeyersDepartment of GeographyUniversity of Washington

Seattle, WA [email protected]

Seattle Economists Club June 13, 2012Updated February 18, 2015

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 1995, 1997, 2000, 2003, 2007, 2009, 2011, and 2013

• 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 16.6% (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 16.6% 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 2012 industry-x-occupation matrix

Technology-Based Industries in 2013 StudyNAICS Industrial Definition % R&D Technology Intensive: R&D Occupations over 30%

5413 Architectural & Engineering Services 68.5% 5415 Computer Systems Design & Related Services 62.9% 5112 Software Publishers 62.2% 5417 Scientific Research & Development Services 58.0% 519 Other Information Services 43.6% 518 Data Processing & Related Services 38.2% 4541 Electronic Shopping & Mail-order Houses 37.2% 3364 Aerospace 35.7% University and Federal Research

(Not covered in ESD data base; see text)

Other Technology Industries: R&D Occupations 14.7% to 30% 5615 Travel Arrangement & Reservation Services 28.1% 334 Computer & Electronic Product Manufacturing 27.4% 5416 Management, Scientific, & Technical Consulting Services 27.2% 517 Telecommunications 24.6% 5629 Remediation & Other Waste Services 24.2% 3336 Turbine & Power Transmission Equipment Manufacturing 22.1% 55 Management of Companies & Enterprises 20.4% 3363 Motor Vehicle Parts Manufacturing 19.5% 324 Petroleum & Coal Products 17.5% 3335 Metalworking Machinery Manufacturing 15.9% 325 Chemicals Manufacturing 15.0% 4234 Commercial Equipment Merchant Wholesalers 14.7%

All Technology-Based Industries 41.4%

Examples of R&D Intensive Occupationsin SOC 15, 17, and 19

Standard Occupational Category (SOC)

Occupational Description

% of Total

15-1131 Computer Programmers 5.1%

15-1132 Software Developers, Applications 16.2%

15-2031 Operations Research Analysts 0.8%

15-2041 Statisticians 0.5%

17-1011 Architects, Except Landscape and Naval 1.4%

17-2011 Aerospace Engineers 3.3%

17-2051 Civil Engineers 5.1%

17-2161 Nuclear Engineers 0.4%

17-3012 Electrical and Electronics Drafters 0.4%

17-3023 Electrical and Electronics Engineering Technicians 0.9%

19-1021 Biochemists and Biophysicists 0.1%

19-2041 Environmental Scientists and Specialists, Including Health 1.5%

19-3011 Economists 0.1%

19-4021 Biological Technicians 1.3%

Other R&D Intensive Occupations 62.8%

Washington R&D by Users of Funds

Source: NSF 2014 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

2011 Rank

$ Used

2011 Rank

Indexed

2008 Rank

$ Used

2000 Rank

$ Used

1993 Rank

$ Used United States Sources: Total Used $17,979 6 4 6 8 11 A. Federal Government: Total Used (1) $268 19 18 24 14 21 B. Business: Total Used (2) $14,558 4 1 3 7 9 Federal Sources $578 12 16 13 D 8 Business Sources (3) $13,980 4 1 2 D 10 C. Universities & Colleges: Total Used(4) $1,570 13 24 34 14 14 Federal Sources $1,091 13 16 25 11 10 Non-federal Government Sources $92 11 20 32 35 32 University & College Sources $234 19 38 40 22 NA Business Sources $35 21 40 11 11 14 Non-Profit Sources $119 11 13 38 27 NA D. Non-Profits: Total Used (5) $1,504 6 5 4 4 5 Non-profit FFRDC $1,137 7 6 4 4 NA Other Non-profits $367 3 6 6 7 NA E. State Internal (6) $10 11 22 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

Employment Mix 2013

Changing Mix of Technology-Based Industry Employment

The share in 2013 was thesame as in2011

History of Technology-Based Employment in Washington State

Concentration of Technology-Based Employment in Washington State

Nonemployer = 9.8% of County Business Patterns Employment

NAICS Codes Industries CBP Non-

employer Combined

324 Petroleum & Coal Products Manufacturing 0.685 0.487 0.694

325 Chemicals Manufacturing 0.381 0.902 0.396

3335, 3334 Machinery Manufacturing 0.418 0.799 0.431

334 Computers & Electronics Manufacturing 0.978 1.478 1.002

3361, 3363 Aerospace & Motor Vehicle Parts Manufacturing 3.735 1.568 3.796

4234 Commercial Equipment Merchant Wholesalers 1.131 1.053 1.151

4541 Electronic Shopping & Mail Order Houses 1.109 1.600 1.204

5112, 5415 Software Publishers & Computer Systems Design 2.276 1.710 2.198

517 Telecommunications 1.097 0.917 1.111

518, 519 Data Processing & Other Information Services 1.558 1.183 1.507

5413, 5416, 55 Business Services 1.331 1.343 1.336

5417 Scientific R&D 1.204 1.355 1.228

5615 Travel Arrangement & Reservation Services 1.490 0.884 1.416

5629 Remediation & Other Waste Services 2.277 0.963 2.244

All Technology-Based Industry 1.488 1.399 1.491

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

Location Quotients 2011

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

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

Location Quotients – Tech Intensive

Industries with greater than 30% R&D related employment

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

Direct County Tech-Based Employment 2013

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

Total Direct and Indirect Employment Impacts 2013

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

Direct & Total Impacts $ in Millions

% Change from 2012 Study in Nominal $

Direct Impacts Sales $220,666 -4.5% Employment 460,242 6.0% Labor Income $55,231 34.5% Taxes $802 4.0% Total Cumulative Impacts Sales $370,342 0.2% Employment 1,381,917 -4.1% Labor Income $102,834 19.9% Taxes $6,919 12.8% Multipliers Sales 1.68 Employment 3.00 Labor Income 1.86

Multiplier History

Historic Trend in Technology-Based Industry Employment and Impacts

*

2013

*

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

Old Slides Follow

• These slides were left in the file for reference purposes

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

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

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

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

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

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