Tech Employment Returns to Dot-Com Heights

Thinkstock/Huntstock

Technological innovations and automation are creating huge impacts on consumer and business behaviors. So what has been the impact on the technology sector itself, where firms, entrepreneurs and innovators develop these disruptive technologies? A recent article in The Regional Economist took a look at employment in the tech sector.

Regional Economist Charles Gascon and Research Associate Evan Karson found that the technology sector¹ has grown rapidly in recent years. This is true not just for the U.S. as a whole, but also in the Eighth Federal Reserve District.²

“While the tech sector is small in size, it plays a critical role in driving innovation and productivity growth, and the sector generates disproportionate economic spillovers,” the authors wrote. “The tech workforce is also one of the most highly skilled labor pools in the economy, and high demand for tech workers has been a key driver of wage growth.”

“The technology sector has a dynamic history of expansion and contraction,” Gascon and Karson wrote. “Its first high-growth period lasted from 1990 to 2000, a time traditionally thought of as the ‘dot-com boom’ or the ‘tech bubble.’”

During that boom, national employment in the tech sector shot up by 36 percent, while average wages for tech workers doubled. At its peak in 2000, tech employment represented just over 4 percent of total private jobs.

After the tech bubble burst in early 2001, tech employment fell sharply. “By the time it bottomed out in 2004, the sector’s workforce had shrunk by 17.8 percent and the tech employment share had declined to 3.4 percent,” the authors wrote.

From 2004 to 2008, the tech sector experienced modest job growth, which ended in 2009 as the sector contracted due to the financial crisis and the Great Recession.

Beginning in 2010, the tech sector began a robust expansion. “In 2015, U.S. tech sector employment reached 4.6 million, pushing the tech share to 3.9 percent of total employment, effectively matching its level in 2000,” Gascon and Karson wrote.

Over the past 25 years, the tech sector has seen other changes beyond employment figures, according to the authors.

In terms of wages, the tech sector has outpaced the private sector:

• In 1990, the average tech-sector worker earned $1.60 in wages for every $1 earned by the average private-sector worker.
• By 2015, the tech-sector worker earned $2.20 for every $1 earned by the average private-sector worker.

The distribution of jobs within the tech sector also has changed in the past 25 years. Until 1996, the majority of tech jobs (about 60 percent) were in manufacturing. In 2015, nearly 80 percent of tech workers were in services.

The share of tech jobs in the Eighth District is relatively modest. In the District, tech jobs³ accounted for an estimated 2.1 percent of private-sector jobs in 2015, compared with 3.9 percent nationally as seen in the table below.

However, the number of tech jobs in the Eighth District has been increasing at a faster pace than the U.S. From 2010 to 2015, the District’s tech employment rose 26.3 percent compared with 20.3 percent nationally.

During that period, tech jobs grew 52 percent in Louisville, Ky., far outpacing the growth of these jobs in St. Louis and Memphis, Tenn. Little Rock, Ark., saw its tech jobs drop mostly due to employment losses in data-processing services.

¹ The technology sector is defined as these industries: computer manufacturing; electronic shopping; software publishing; data processing, hosting and related services; internet publishing and broadcasting and Web search portals; computer systems design; and scientific research and development services.

² Headquartered in St. Louis, the Eighth Federal Reserve District includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

³ Due to nondisclosure at the county level for some industries over time, the authors calculated estimates for the Eighth District technology sector as the sum of data for the entirety of all District states except Illinois. The authors excluded Illinois from their calculations since most of that state’s economic activity stems from the Chicago area, which is outside the District.

• The Regional Economist: Growth in Tech Sector Returns to Glory Days of the 1990s
• On the Economy: Does Trading with the U.S. Make the World Smarter?
• On the Economy: The New World Leader in Innovation