The Information Technology Sector is Back

June 2007

By John Rees, Junior Project Manager

AngelouEconomics

The information technology sector is back. Having experienced severe declines in the wake of the dotcom collapse, the information technology industry has witnessed a turnaround in recent years. After posting two consecutive declines in employment from 2001 through 2003, the industry witnessed sustained growth beginning in 2004. While information technology employment remains approximately 10% below 2001 levels, the industry's labor force grew 3.1% in 2005—a rate 75% higher than the overall growth rate in the U.S. labor market.

In addition to the healthy growth rates posted by the technology sector, workers in the information technology sector continue to enjoy substantially higher annual wages than the U.S. average. In 2005, the annual wage of a technology worker was $81,447, more than double the U.S. average annual wage of $40,677.

While emerging industries such as biotechnology, nanotechnology, and sustainable energy have increasingly captured the imagination of economic developers throughout the country, many communities are again looking towards the information technology sector as a potential source of economic growth. With this interest in mind, AngelouEconomics has examined the 100 largest metropolitan statistical areas in the country and identified the drivers of a successful local information technology sector. Although the following analysis is presented in an abbreviated form, a more detailed examination will be published in next month's Trade & Industry Development magazine.

Of the 3.1 million individuals that work in computer and mathematical science occupations as defined by the American Community Survey conducted by the U.S. Bureau of Census, more than 80% reside in the 100 largest metropolitan statistical areas. These 100 cities were ranked according to four attributes: the percentage of employment represented by computer and mathematical science occupations, the percentage of college-educated residents over the age of 25, the percentage of residents between the ages of 25 and 44, and math and computer science R&D spending among area academic institutions.

The results revealed that most cites with a high percentage of computer and mathematical science employment also featured large populations of college-educated and 25 to 44 individuals. Many of these cities also enjoyed impressive amounts of computer science R&D expenditures.

Five cities—Austin, San Francisco, San Jose, Raleigh, and Washington D.C.—ranked within the top 20 across all four categories. These cities featured computer and mathematical science employment at more than twice the national average. They also expended nearly four times the nation average in research and development. Ten additional cities ranked within the top 20 in 3 of the examined categories, including Colorado Springs, Colorado; Baltimore, Maryland; Seattle, Washington; Denver, Colorado; Worcester, Massachusetts; Minneapolis, Minnesota; Boston, Massachusetts; Columbus, Ohio; Atlanta, Georgia; and Madison, Wisconsin.

Although employment in computer and mathematical occupations is strongly associated with educational attainment, age, and research and development expenditures, several cities excel in information technology employment without ranking highly among these attributes. Seattle, for example, is not among the top metropolitan areas university research and development spending. Notably, several other cities that ranked well in other categories, such as workforce educational attainment, did not appear to have especially strong information technology sectors.

Clearly, factors other than those examined contribute to a strong information technology presence in a community. July's issue of Trade & Industry Development magazine will present an examination of other important components of a successful local technology industry, including the availability of venture capital funding, a history of commercially applicable patents, and the quality of life enjoyed by area residents.