Goal: Accelerate technology-based capital investment and job growth.
Outputs are a measure of the economic impact of innovation and entrepreneurship in Virginia’s economy, especially as they affect employment and wages in key industries. The output metrics discussed below are focused on the growth of high-technology industries, as well as the general market trends among the eleven high-tech sectors identified in the Commonwealth Research and Technology Strategic Roadmap as strategic priorities.
High-tech output share increased between 2010 and 2011, though the share exports and employment decreased in 2012, and the share of wages and hypergrowth firms from high-tech industries were level as other industries improved from recession lows. Roadmap industries have consistently grown faster than the average for all industries in Virginia. The number of people in the workforce with at least some college education was little changed in 2012, but has risen over the past five years.
Why are outputs important?
Outputs seek to measure the ultimate impact of innovation and entrepreneurship in the Commonwealth’s economy. Virginia’s focus on innovation and entrepreneurship is expected to lead to an increase in the number of high-wage jobs, develop and attract a more highly educated workforce, and increase the workforce’s share of employment in high-tech sectors. High-tech industries offer high paying employment, and measuring the growth of high-tech firms provides an indication of their ability to find qualified workers and commercialize innovative products and services. Exports demonstrate Virginia’s global competiveness and the universal marketability and applicability of products. High-tech indicators are presented as a percentage share of Virginia totals to examine their relative contribution to the Commonwealth’s economy and compare growth to that of all industries. In addition, measuring outputs from innovation and entrepreneurship and comparing them to expectations from other IEMS metrics provides a check on how effectively the IEMS model is capturing relevant trends, if policies are having the desired impacts, and if policy changes are required.
How has Virginia performed over the last five years?
High-Tech Output Share
Between 2007 and 2011, the share of total output (revenue from firms) in Virginia from high-tech firms increased approximately two percentage points, from 25.0% to 27.1%. An increasing share of high-tech output suggests the importance of sales and revenue from high-tech firms in Virginia’s economy. High-tech output fluctuated during this period, falling from $183.8 billion in 2008 to $170.3 billion in 2010, then growing to $184.3 billion in 2011.
High-Tech Wage Share
The share of high-tech wages in Virginia has risen overall during the past five years, but declined slightly from 2011 to 2012. The share of total Virginia wages going to high-tech workers rose from 29.7% in 2007 to a peak of 32.0% in 2011. It stood at a slightly lower 31.6% in 2012, with total wages increasing from $58.1 billion in 2011 to $59.2 billion in 2012.
High-Tech Export Share
Total foreign exports in Virginia rose from about $23 billion in 2007 to over $28 billion in 2011. Exports from high-tech industries made up 35% of total exports in 2007, then peaked in 2008 at 43%. Exports from Virginia’s high-tech industries have grown on a year-over-year basis since 2009, but more slowly than total exports. High-tech exports rose to $10.8 billion in 2011 from $10.4 billion in 2010, a 4.2% increase, while total exports advanced at a faster pace over the same period: climbing 10.7% from 2010 to 2011, from $25.6 billion to $28.4 billion.
High-Tech Job Creation Share
Employment in high-tech industries as a percentage of total industry employment in Virginia fell 0.1 percentage point between 2011 and 2012. High-tech employment share has fallen since 2010, when it peaked at 16.6%. However, it increased 0.7 percentage points between 2007 and 2012.
Hypergrowth firms are defined here as firms with average annual employment growth greater than 50% for two consecutive years. In 2012, 9.8% of high-tech firms in Virginia met these criteria, compared with 7.1% of all Virginia firms. The number of high-tech hypergrowth firms has increased steadily since 2008, from 1,700 to nearly 2,100; although stabilizing in 2012, the high-tech share of total hypergrowth firms has decreased since 2009. The high-tech share of hypergrowth firms was 19.1% in 2012.
To compare trends in various sectors of Virginia’s economy, the market trends metric breaks out key industry sectors with commercial promise identified in the Commonwealth Research and Technology Strategic Roadmap. Roadmap sectors include advanced manufacturing, aerospace, communications, cyber security, energy, environment, information technology, life sciences, modeling & simulation, nuclear physics, and transportation. Since 2007, growth in both employment and wages in the Roadmap industries has outpaced overall employment and wage growth in Virginia. Indexed to 2007 levels, Roadmap employment in 2012 was essentially unchanged (+0.01%), while all-industry employment was down 1.5%. Wages increased 15.3% in Roadmap industries over the same period, compared with a 10.7% increase in total Virginia wages.
Workforce Education Level
In 2007, about 60% of Virginia’s workforce (defined as anyone between the ages of 25 and 65) had at least some college education. In 2012, that group had grown to make up 64% of the workforce. Between 2011 and 2012, the number of people in the workforce with a bachelor’s degree or higher decreased by nearly 35,000, while the number of people with some college education but less than a four-year degree increased by nearly 18,000. Foreign-born residents of Virginia made up about 15.5% of the workforce with a bachelor’s degree or higher in 2012.
What are the implications?
High-tech firms were especially important in Virginia’s economy during the recession, increasing their share of employment, wages, and export growth, and softening the effects of the recession in the Commonwealth. Their continued growth in recent years has been masked by faster growth in the overall economy as other industries, such as food manufacturing, recover from recession losses. The number of people in the workforce with a bachelor’s degree or higher decreased slightly between 2011 and 2012, yet remains well above the national average. The trends in employment and wages in the Roadmap industries indicate innovation and entrepreneurship are strong vehicles for growth in Virginia.
Data Sources and Definitions:
Each IEMS indicator reflects the latest available data and includes a discussion of trends in up to five years of historical data, depending on availability.
Employment and Wages: Data from U.S. Department of Labor, Virginia Employment Commission, and Chmura Economics & Analytics.
High-tech: The Congressional Office of Technology Assessment describes high-technology firms as those that are engaged in the design, development, and introduction of new prod¬ucts and innovative manufacturing processes, or both, through the systematic application of scientific and technical knowledge. No set of NAICS codes can perfectly capture high-tech employment. This analysis uses industries suggested by Daniel Hecker in “High Technology Employment: a NAICS-based update,” Monthly Labor Review, July 2005, modified to match the 2007 revised NAICS codes: pharmaceutical and medicine manufacturing (NAICS 3254); computer and peripheral equipment manufacturing (NAICS 3341); communi¬cations equipment manufacturing (NAICS 3342); semiconductor and other electronic component manufacturing (NAICS 3344); navigational, measuring, electromedical, and control instruments manufacturing (NAICS 3345); aerospace product and parts manu¬facturing (NAICS 3364); software publishers (NAICS 5112); data processing, hosting, and related services (NAICS 5182); other information services (NAICS 5191); archi¬tectural, engineering, and related services (NAICS 5413); computer systems design and related services (NAICS 5415); scientific research and development services (NAICS 5417); forestry (NAICS 1131,32); oil and gas extraction (NA¬ICS 2111); electric power generation, transmission, and distribution (NAICS 2211); basic chemical manufacturing (NAICS 3251); resin, synthetic rubber, and artificial synthetic fibers and filaments manufacturing (NAICS 3252); commercial and service industry machinery manufacturing (NAICS 3333); audio and video equipment manu¬facturing (NAICS 3343); manufacturing and reproducing, magnetic and optical media (NAICS 3346); professional and commercial equipment and supplies, merchant whole¬salers (NAICS 4234); other telecommunications; (NAICS 5179); management, scientific, and technical consulting services (NAICS 5416); federal government, excluding postal service (NAICS 9271,81); petroleum and coal products manufacturing (3241); pesticide, fertilizer, and other agricultural chemical manufacturing (NAICS 3253); paint, coating, and adhesive manufacturing (NAICS 3255); other chemical product and preparation manufacturing (NAICS 3259); industrial machinery manufacturing (NA¬ICS 3332); engine, turbine, and power transmission equipment manufacturing (NAICS 3336); other general-purpose machinery manufacturing (NAICS 3339); electrical equip¬ment manufacturing (NAICS 3353); other transportation equipment manufacturing (NAICS 3369); pipeline transportation of crude oil (NAICS 4861); pipeline transporta¬tion of natural gas (NAICS 4862); other pipeline transportation (NAICS 4869); wired telecommunications carriers (NAICS 5171); wireless telecommunications carriers, except satellite (NAICS 5172); satellite telecommunications (NAICS 5174); monetary authori¬ties, central bank (NAICS 5211); securities and commodity exchanges (NAICS 5232); management of companies and enterprises (NAICS 5511); facilities support services (NAICS 5612); electronic and precision equipment repair and maintenance (NAICS 8112).
Hypergrowth: Defined as firms with average annual employment growth greater than 50% over a two year period. Data obtained from the Virginia Employment Commission.
Industry Output and Foreign Exports: Calculated by Chmura Economics & Analytics using IMPLAN Pro®, an economic impact assessment modeling system developed by the Minnesota IMPLAN Group that is often used by economists to build economic models that estimate the impacts of economic changes in local economies.
Roadmap Industries: For more information on the Commonwealth Research and Technology Strategic Roadmap, including a full list of industries, see http://www.cit.org/initiatives/research-and-technology-strategic-roadmap/.
Workforce Education Level: Data obtained from the U.S. Census Bureau’s Current Population Survey, Annual Social and Economic Supplements, 2007-2012 at http://www.census.gov/cps/data/cpstablecreator.html. Workforce is defined as the population ages 25 to 65.
CIT acknowledges the important contribution of Chmura Economics & Analytics in preparing the IEMS.