The Regional Economic Impact of Technology Jobs

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This year, Atomic is proud join the group of investors that help fuel The Right Place, a regional non-profit economic development organization that has been serving West Michigan since 1985.

I’m very excited that The Right Place has recognized the technology sector an important part of West Michigan’s economic future by including Technology and Communications in their 2014-2016 strategic plan.

This morning (Jun 12, 2014) I’m talking about the importance of technology jobs at The Right Place Investors Breakfast. I’ve always had opinions and anecdotes to share, but the information I found in preparation for my talk really drove home the regional importance of attracting and retaining the best technology talent.

Breaking Down the Value of Job Creation

In Michigan, job creation headlines are commonly focused on Manufacturing and Health Care. Any job creation is great news, but it’s interesting to consider the spending power certain jobs bring to a local economy.

Using the Bureau of Labor Statistics (BLS) Occupational Employment Statistics Query System, I was able to find annual mean wage data for different Standard Occupational Classifications (SOC) in our Metropolitan Statistical Area (MSA). The BLS Query System allowed me to see the annual mean wage data at different levels of granularity for the different SOC categories.

Computer and Mathematical Occupations includes software development jobs like Software Developers Applications and Computer Programmers. Healthcare Practitioners and Technical Occupations includes jobs like Dentists, Physicians, Surgeons, and Nurses. Healthcare Support Occupations includes jobs like Aides, Assistants, and Phlebotomists (likely the majority of the jobs created when healthcare business grows). Production Occupations includes many manufacturing jobs like machinists, tool and die makers, and machine operators.

Based on May 2013 data, the rolled up annual mean wages for these SOC categories are:

  • Computer and Mathematical Occupations: $69,210
  • Healthcare Practitioners and Technical Occupations: $66,180
  • Healthcare Support Occupations: $28,070
  • Production Occupations: $32,440
  • All Occupations in MSA: $42,610

Some specific developer jobs break down as:

  • Software Developers Systems Software: $85,810
  • Software Developers Applications: $76,620
  • Computer Programmers: $64,820

I was surprised that tech jobs, on average, compared very well to highly-regarded healthcare jobs. The annual mean wage for tech jobs far superseded healthcare support or manufacturing jobs.

The BLS data reinforced that well-paid tech jobs are far more likely bring higher amounts of discretionary income to the local economy.

Distribution of Highly-Paid Jobs

Unlike health care, where the distribution of jobs likely includes fewer highly-paid professional jobs and more less-paid support jobs, large tech employers can bring an even distribution of hundreds of highly-paid jobs. For instance, General Motors created 4,000 high-tech jobs across its four new innovation centers. GM selected the locations for their innovation centers based on areas having tech talent resources and a lower cost of living. GM’s Chandler, AZ Innovation Center brought 1,000 high-wage technology jobs to the region.

Job Multiplier Effect of High-Tech Jobs

The regional economic benefit of adding high-tech jobs is highlighted by the work of U.C. Berkley Economist Enrico Moretti in his 2012 book The New Geography of Jobs. Moretti studied 320 MSAs and found a likely job multiplier effect of 5x stemming from high-tech jobs — meaning that in the long run, for every new high-tech job, five jobs are also created locally outside of the technology sector. Most surprisingly, two of the five jobs created are professional jobs like physicians and attorneys. The other three jobs are generally nonprofessional occupations like waiters or clerks.

The BLS data and Moretti’s research build a strong case for attracting tech talent to a region, but it’s also thought provoking to consider the importance of retention when considering the inverse of Moretti’s job multiplier. How many jobs are lost when we lose a high-tech job?

Given U.S. News prediction on the growth of software development jobs (ranked number one best job in 2014) and the benefits these jobs bring to a local economy, The Right Place is definitely smart to include growth of our region’s technology sector in their 2014-2016 strategic plan.