Executive Summary Technology-based industries continue to be at the forefront of the development of the Washington economy. They account for the largest share of employment, business activity, and labor income of any major sector in the state’s economic base. Other key industries include natural resource-based sectors such as agriculture and food products, forest products, and services including tourism and transportation.
This study defines technology-based businesses as those with a strong proportion of their labor force in research and development (R&D) related occupations. This definition is consistent with recent analyses by the U.S. Bureau of Labor Statistics of measures of “high-tech” industries. In this study, the industries considered to be technology-based or “high-tech” have at least 14.6% of their employment in R&D related occupations. In Washington State in 2007, technology-based industries had an average of 43% of their employment in these occupations. In other industries just 3.1% of employment was in these occupations.
State of Washington Employment Security Department (ESD) data benchmarked against the year 2006 were used to define industries included in this study. Industries meeting this test employed over 343,000 people in Washington State in the year 2007 (this includes estimates of university and federal research employees; it excludes self-employed people not covered by the ESD). Through multiplier effects, a total of 1.16 million jobs were created due to technology-based industries, which is 40% of total covered (non-proprietor) employment in Washington State in 2007. Similar percentages of overall Washington State business activity (sales, labor income, and tax revenues) are associated with the industries included in this study.
Economic impacts of industries included in this study are relatively high due to the wages paid in these industries. Technology-based industries support an average of 3.39 jobs for each direct wage and salary job, compared to 2.75 jobs for all industries. Labor income in technology industries averaged $117,691 in 2007, compared to the state average of $54,097, a figure 117% above the state average. Technology-based businesses contribute strongly to the export-base of Washington State, as 80% of their sales are out-of-state, compared to an economy-wide average of 40%.
There has been rapid growth in technology-based industries, compared to overall economic activity. Employment has expanded from 96,000 private sector jobs in 1974 to 334,581 private sector jobs in 2007, an increase of 249%. This compares to statewide increase in covered employment of 211% over the same time period. In 2007 there were 8,790 public sector and Federal research related jobs in Washington State, bringing total technology based employment to 343,371. Total technology based employment has grown from 6.7% to 11.8% of total state covered employment over the 1974-2007 time period, indicating that technology-based industries have made a growing contribution to the economic base of the state.
The concentration of technology-based industries in Washington State is well above the national average. Based on 2005 data, the latest year for which data are available to make national comparisons with the definitions of technology-based industry used in this study, Washington State has employment in these industries 35% above the national average. Our aerospace and software/computer services sectors are the primary contributors to this high index.
If we exclude aerospace, our historically largest technology-based industry and still our largest employer, Washington is 17% above the national average, up from 13% in 2003. Non-aerospace technology-based industries have grown in Washington State in recent years at a faster pace than nationally. Waste-remediation activity in Washington State has a concentration over twice the national average, largely due to activities at Hanford, while research and development has a concentration 38% above the national average. The concentration of technology based industries overall in Washington State increased slightly from the last study, from 34% to 35% of the national average, even with the increased threshold for defining technology-based industry from 10% of employment in R&D – the standard applied in previous studies – to 14.6% for the current study.
Research and development expenditures in Washington State, an important indicator of technology-based industry, outpaced the United States over the time since the last Technology Alliance economic impact study. R&D activity in Washington State as a share of Gross State Product in 2004 was 4.3%, compared with the national average of 2.4%. We have especially strong receipts and expenditures by industry and non-profits, while university and college research receipts are similar to the national average. Industry R&D accounts for the largest share of R&D dollars in Washington State (81% in 2004), with very strong receipts in the information industry. Washington has a concentration of R&D receipts that places us 9th in the U.S. in terms of dollars received, and 6th when the size of R&D expenditures in Washington State is indexed by Gross State Product. Washington’s concentration of industrial R&D and of federally funded research and development centers ranks 4th in the U.S., while we rank 5th in “other non-profits.” For comparison, Washington is the 15th most populous state in the United States.