One of the most important metrics regarding the health of an economy is job creation and growth. All jobs are not created equal, however, and among the most desirable are those in technology industries. While technology industries only represent about 6 percent of private employment in Texas, they nonetheless have a high indirect impact on the economy.
There is a not a single, uniform definition of the specific subindustries included in “technology industries.” It is also an ever expanding definition as new fields are created. A common definition includes companies manufacturing semiconductors, communications equipment, computer hardware, and technology-related office equipment, in addition to providers of related consulting and IT services. However, other broad definitions have included industries from oil and gas extraction to chemical manufacturing.
One indicator for whether a field can be considered a technology industry is the proportion of the workforce in science and technology occupations, often requiring some multiple of the national average. Another indicator is the relative amount of funds devoted to research and development on average in the industry. Many times, a distinction is drawn between whether an industry is generating technology rather than just implementing it. Different studies can include different subindustries, so statistics about technology industry growth are all over the map.
Regardless of the exact definition used, Texas has received excellent ratings in regard to the technology industry’s performance in our state. Recently, Texas became the top state for technology exports, passing California with exports of more than $45 billion in products such as semiconductors, telecommunication devices, and computers to other countries. Texas is second only to California in terms of technology-industry employment and business establishments, according to CompTIA’s Cyberstates 2016 Research Report. In 2015, Texas employed over 585,600 workers in technology fields, representing a nearly $58.4 billion payroll. Technology employment in the state has increased by 2.4 percent from 2014 levels and by over 15.6 percent since 2010. Furthermore, the state saw an increase of over 900 technology business establishments for a total of 34,144 establishments, an increase of 2.8 percent.
Many of the fastest growing cities in the U.S. are those with a growing technology industry, and Texas is no exception. Austin was recently rated by Forbes as the city with the strongest technology sector expansion, having experienced 73.9 percent growth in tech employment from 2004 to 2014.
Corporate locations and expansions generate positive effects for suppliers and vendors across a spectrum. In addition, when new jobs in a community are added, they indirectly affect other industries by the additional demand created by the new employees. Economist Enrico Moretti recently estimated in his book The New Geography of Jobs, from an analysis of 320 metropolitan areas, that every high tech job has the potential to create five additional local jobs outside of the technology industry, in particular two professional jobs such as doctors or lawyers and three nonprofessional jobs.
Gov. Greg Abbott’s economic development strategy for Texas highlights six key sectors, all of which can be considered technology industries: Advanced Tech and Manufacturing; Aerospace, Aviation and Defense; Biotechnology and Life Sciences; Information and Computer Tech; Petroleum Refining and Chemical Products; and Energy. The state has also put considerable resources towards science, technology, engineering, and mathematics (STEM) education in order to remain competitive and innovative in the future economy, to the point where STEM has become a buzzword in regards to future economic growth (we need to add the arts (STEAM) in order to foster the creativity needed to compete in generating the new technologies of the future, but that’s another column).
Businesses choose to relocate for numerous reasons. For example, Texas is a popular destination due to the lower cost of living compared to other locations like California. This is both a benefit to businesses who can hire more employees for less, as well as for employees who can see a salary go farther than in more expensive locales. Also, the multiple higher education institutions in the state have produced an educated labor force that can meet the needs of new enterprises. “Knowledge” workers, by far the most important resource to emerging technologies segments and firms, also place a premium on quality of life, outstanding public schools, and environmental factors in choosing locations. These areas cannot be ignored if success in major technology industries is to be sustained.
Texas is an attractive location at present partially because of its open business environment, including lower taxes and less regulatory burdens than in many states. Incentives for municipalities also do much in convincing a business to choose Texas for new locations or expansions. While many of the development strategies, incentives, and business policies of the state are largely unnoticeable to the average citizen (or at times are even criticized), they have a major impact on attracting the new growth in sectors that will define our future. To build on past achievements, Texas must focus on the various components that are essential to creating, locating, and expanding the industries of tomorrow.
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M. Ray Perryman is president and CEO of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.