One of the first projects the Technology Alliance undertook in the mid-1990’s was to measure the size and economic contributions of Washington’s technology-based industries. When we refer to “tech,” we mean it in a broad sense, as we attempt to capture all of the industries that comprise our innovation ecosystem – from aerospace and devices manufacturing, to scientific research and software.
We came up with a definition that relies on the share of an industry’s workforce engaged in research and development (R&D) occupations, which include engineering, computing, and life and physical sciences. Washington’s creators of innovation are a diverse bunch, in terms of the variety of industries that fit our definition, and employment in these industries continues to grow.
We’ve commissioned several studies in recent years including the 2014 report by William B. Beyers of the University of Washington Geography Department, “The Economic Impact of Technology-Based Industries in Washington State (2013).” A few key findings and trends have emerged that warrant particular attention as we strive to have a productive conversation about how to grow family-wage jobs and our economy in Washington.
All industries are increasingly reliant on technology and technical talent
When we first examined technology-based employment 17 years ago, we decided upon a definition of technology-based industry as one in which 10% of the workforce is engaged in R&D occupations. Roughly a decade on, we noticed something curious. Industries that one would not reasonably include in tech – insurance, for example – began to meet the threshold we had set. Insurance, and many other service industries, had become reliant on technology, and therefore technical talent, to remain competitive.
But this posed a problem. How could we accurately measure the contributions of technology to our economy but avoid capturing industries that clearly should not be labeled as tech?
We had to raise the bar. As a result, over the past several studies, we have steadily increased the percentage threshold for what constitutes a technology-based industry. In order to focus on the industries that are generators of innovation – not just the users, but the creators of technology – we changed our definition from a flat 10% threshold to twice the state average for all industries.
Even as the percentage of R&D workforce rose, so too did technology-based employment. With a couple of exceptions, the industries represented in the current study have at least 16.6 % of their workforce engaged in R&D occupations – twice the state average for all industries. Using this definition, we counted more than 460,000 people employed by technology-based industries last year in Washington: nearly 420,000 direct-hire jobs, and an estimated 40,000 jobs for the self-employed.
Computing is the major driver of technology-based growth
Aerospace is historically our largest single industry when it comes to tech employment, based on the North American Industrial Classification System. But taken together, software and other computing-related industries surpassed aerospace years ago. Whereas aerospace employment tends to be cyclical and has remained relatively flat over the years, with a recent uptick, computing employment has exhibited explosive growth.
If we combine software publishing with other information-based industries such as computer systems design, data processing, and a couple of others, the sector as a whole employed nearly 120,000 people in our state last year, including 107,000 direct-hire jobs. The latter represents an increase of nearly 900% since 1988, and now directly accounts for more than one-quarter of total tech-based employment.
And all indications are that computing industries will continue to grow – an important advantage for Washington, which has established itself as a center of computing innovation.
As goes the tech industry, so goes Washington
Whether it’s software, or airplanes, or medical devices, or electronic shopping, the results of the tremendous growth are felt statewide. King County dominates tech employment, but there are many communities around the state that are dependent upon tech to drive their economies. Fourteen counties have more than 1,000 tech-based jobs, and in six of those, we counted more than 10,000 tech-based jobs.
Technology-based industries, as we define them, directly account for nearly 14 percent of total state employment.
But that isn’t the whole story. Through multiplier effects, technology-based employment and associated economic activity support a total of nearly 1.4 million jobs across all sectors of our economy, equivalent to 42 percent of total Washington employment. That 42 percent represents retail, recreation, construction, and financial and legal services provided by more than 920,000 people in our state thanks to the growing presence of tech.
For every 100 tech jobs, another 200 jobs are created in other industries. This makes them significant contributors to the overall economic health of industries and communities throughout the state.
There are a number of ways in which tech-based jobs support so many other jobs. Direct sales of tech-based goods and services exceeded $220 billion last year; tech supported more than $370 billion in sales of goods and services in all sectors. Total annual payroll in tech exceeds $55 billion; these industries directly or indirectly generated a total of nearly $103 billion in wages across all sectors.
We should celebrate these findings, but we also must continue to feed our job-creating industries with the talent and investment they need in order to grow in the future. Both the private and the public sectors need to do their part. The Technology Alliance, for its part, is committed to ensuring that future studies like this one continue to be a good-news story for not only our industries, but the entire state of Washington.