The Economic Impact of Technology-Based Industries in Washington State - 2007 William B. Beyers Department of Geography University of Washington Seattle, WA 98195 beyers@u.washington.edu May 2008

Overview I. Introduction II. Defining Technology Base Industry and R&D in the Washington economy III. Trends in Washington Technology- based Industry and a U.S. comparison IV. Economic impacts V. Concluding Comments

I. Introduction This is the 5th estimate of technology-based industry prepared for the Technology Alliance (Prior studies published in 1997, 1998, 2001, and 2005) We have attempted to have them be consistent in their scope and methodology This has been complicated by changes in how economic activity is measured in the U.S., what industries have been deemed technology-based, and due to changes in the economic impact models

II. 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 Prior Technology Alliance studies defined technology-based industries as those with at least 10% of their workforce in R&D related occupations The current study raises this share to 14.6%, which is double the average for the Washington economy of those employed in R&D related occupations. This decision 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)

R&D Related Jobs are very important in technology-based industry Source: WA State Employment Security Department

Technology-Based Industries in Current Study

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

Washington R&D by Users of Funds Source: NSF 2007

III. Employment and Trends in Technology Based Industry In WA & Other States Data for 2007 Data for 2007

History of Technology-Based Employment in Washington State

Concentration of Technology-Based Employment in Washington State Nonemployer = 11.2% of County Business Patterns Employment

Location Quotients – Technology Based Employment 1.35 1.06 1.21 1.18 1.39 1.01 1.08 Washington ranks 4th

Location Quotients – Less Aerospace 1.17 1.48 1.09 1.33 1.19 1.18 1.43 1.00 1.07 Washington ranks 10th

Location Quotients – Very High Tech 1.96 1.65 1.07 1.70 1.44 1.35 2.07 0.93 1.06 Washington ranks 2nd

Direct County Employment in Technology-Based Industry 45,265 203,664 12,602 12,337 13,026 10,189 10,109

IV. Economic Impact Analysis

Total Direct and Indirect Employment Impacts 1,163,423 Services 820,052 Indirect Other Industries 343,371 Trade Mfg. + = High Tech Direct

Direct & Total Impacts Modest Change Why this downturn in 2004 1.77 3.80 1.9 Why this downturn in The employment multipliers?

Employment Multipliers State Average

Output Multipliers – Technology Based Industries 3 on diagonal 3 higher in 2002 6 lower in 2002

Labor Income Per Job

Tech-Based industry is strongly export oriented, and tends to have slightly lower local linkages than all Washington

Shifts in the State Economy Washington State has a rich history of input-output models based on survey data No other state in the U.S. this data base Here is one slide that depicts structural change from the legacy of these models – here the changing composition of output Technology-based industry has become more important over this history More information on these trends will be available from OFM in the coming months

Concluding Comments Technology based industry continues to drive the Washington economy The nature of activity has changed over time; this is a dynamic part of our economy There has been a clear shift from tech-based manufacturing to tech-based services over time, and this reflects the larger shift of the economy towards services Technology-based sectors are strongly oriented to markets outside Washington State, contributing to our economic base. Their contribution is rooted in high levels of R&D activity and the concentration of R&D-related employment Thanks to the Technology Alliance for asking me to re-estimate these impacts