A recent report from the Washington Technology Industry Association puts hard evidence behind the easy-to-deduce benefit of the tech sector on the state’s economy. Among the report’s highlights:
- There were 8,610 tech firms in the state in 2013
- 90 percent of those firms employed fewer than 20 workers
- The market value of the state’s tech companies was more than $1 trillion
- Washington companies — both tech-sector firms and others — employed 238,900 tech-specific workers
- 90,000 Washington residents worked in tech jobs
- The tech sector paid $22 billion in wages in 2013
All numbers a state can be proud of, but one figure really stands out: The claim that each high-level tech job — think engineers and programmers — yields seven additional jobs.
The study’s logic is that each tech-specific job results in 1.7 more jobs within the company itself, and each of those new positions creates the demand for 2.7 more jobs outside the company. So for every engineer Microsoft or Valve hires, 1.7 support positions will be created within the company, and 2.7 baristas, construction workers, or salespeople will be hired outside company walls to serve them coffee and build their homes.
It’s a sexy number, and it will serve as yet another rallying cry for the state to focus more on computer science education and jobs — the report says their annual supply shortage in the state’s tech industry is 3,000 workers — but the figure is nuanced.
A worker’s ability to have a ripple effect on the economy depends largely on his/her wage and the ability of the employer to add new jobs; the industry of employment is just a trait. An educator or a machinist that makes $80,000 is just as likely to buy coffee, a house, and new clothes as a programmer that makes $80,000. So the tech sector’s greatest impact might be its relatively high compensation level. The report says median tech salaries in the state are between $100,000 and $140,000, while the U.S. median is $52,000. “That disposable income … begets an entire collection of jobs that multiplies out from the original activity of one coder,” says WTIA CEO Michael Schutzler.
That disposable income is especially important considering tech isn’t a labor-intensive industry. An entrepreneur starting a factory or a restaurant must hire support staff from the beginning, whereas an early-stage software company can be run by a small collection of people, if not one person. But tech firms do have an advantage from a human capital perspective — they can grow quickly. Few startup founders want their companies to remain one-person firms, and successful tech companies generate enough momentum and income to hire a lot of people in a short amount of time.
The WTIA report says the state can foster that type of climate. “By investing into attracting and developing the workers needed for these essential ICT (information and communication technology) occupations,” it reads, “the State could build a sustainable, robust economy for the next several decades.” Very true, assuming the tech sector remains the viable economic driver it is today. All indications are that will be the case, but somebody could have made the same argument about the aerospace industry in the late 1960s. Instead, Boeing’s workforce was halved from 1970 to 1971.
That’s not to say the report’s conclusions and claims are false; high-paying jobs help the economy, and the high-paying jobs right now are in the tech sector. As the report says, the state isn’t keeping up with demand. It’s estimated state companies could employ 4,500 computer science graduates each year, but state universities are only graduating 1,800 a year. Thus, the report calls for a greater investment in the state’s education sector and public-private systems of retraining unemployed adults.
“The general issue at the higher-education level is that tuition is really hard for people to afford … let’s direct some resources at (computer science programs),” Schutzler says. At the K-12 level, Schutzler says, the discussion needs to focus on spending new funding on computer literacy, not simply reducing class sizes. “That is important … but if you’re going to prioritize limited resources, you should invest in teacher training in computer science so it’s injected in the entire curriculum from kindergarten through 12th grade.”
Added computer science emphasis in the schools could bolster the state’s tech industry, but it will only continue adding jobs at the 7-to-1 clip if those jobs remain some of the highest-paying ones around. If wages normalize, or only a small number of people receive them, the sector’s job-creation powers become moot.