February 11, 2015
The Brookings Institution just published a paper outlining the importance of our advanced industries (AI), and a call to do more to support its growth. To be classified as advanced industries must spend more than $450 per worker on R&D, putting them in the 80th percentile, and the share of workers whose jobs demand a high degree of STEM (Science, Technology, Engineering and Math) knowledge must exceed the national average of 21%. Overall, industries so classed constitute our tech sector at its broadest: most manufacturing operations including aerospace, automotive, navigational instruments, medical equipment and supplies; energy including electric power, mining and extraction; and services, including architecture and engineering, data processing, satellite communication and scientific research.
Between 1980 and 2013 such industries grew 30% faster than the rest of the economy, or 5.4% annually, but employment levels held basically steady, largely because of productivity advances. Since the Great Recession both activity and employment have been on the rise, the sector adding one million direct jobs between 2010 and 2013, with employment and output rates 1.9 and 2.3 times faster than the nation as a whole. And AI employment has a high multiplier: those 1 million direct jobs likely generated another 2.2 million outside the industry itself, which compares to about 6 million total jobs created nationally over the same stretch. Advanced services were responsible for 65% of the total AI jobs, with computer design by itself up 250,000. Industries building transportation equipment have been adding jobs, finally, after decades of losses. A lot of attention has been focused on contributions to national payroll gains made by AI subsector gas and oil extraction since the recession.
A boost? Certainly, but dwarfed by the mothership.
Each worker in the sector generates about $210,000 in value added, in comparison to the $101,000 average overall, which helps offset the sharp increase in wages. In 2013 the average AI worker earned $90,000 annually, close to twice the overall average. Between 1975 and 2013 inflation-adjusted AI wages were up 63%, compared with 17% outside the sector. Total AI employment was about 12.3 million in 2013, about 9% of total overall employment, with another 27 million jobs riding AI's coattails. Together with the directly employed, that’s about one-fourth of US employment. Surprisingly, about half of the workers in the sector hold less than a bachelor’s degree, and Brookings ranks it as an accessible field. And one where more workers are needed.
Computer systems design owns the largest share of total AI employment, 13.8%, followed by architecture and engineering, 11.0% and management and technological consulting, 9.6%. Between 2010 and 2013 fastest rates of employment growth took place in information services, 10%; railroad rolling stock, 8.4%; automotive, 8.1%, and gas and oil extraction 7.6%.
Advanced industries tend to thrive in urban areas: San Jose is our most advanced hub, with 30% of the workforce laboring in the sector, followed by Seattle, 16%, Wichita, 15.5%, Detroit, 14.8%, and San Francisco, 14%. San Jose, Detroit and Seattle have the broadest array of advanced industry. (We’ll be presenting more data on this in coming months.)
We are losing international share, and there are a host of serious problems we like to nag about, but even in its somewhat weakened state our AI sector a powerful thing. And if we’re worried about productivity, as we should be, it’s a great place to start.