Goal: Accelerate technology-based capital investment and job growth.
Outputs attempt to measure the impact of innovation and entrepreneurship on Virginia’s economy, particularly in relation to employment, payroll, and exports in high-tech, and in relation to general market trends for 11 industries targeted by the Commonwealth Research and Technology Strategic Roadmap (R&T Roadmap) as high-tech economic development strategic priorities for the state.
Virginia’s high-tech employment share was the same in 2015 as the year before, while payroll shares decreased slightly in 2015. The state continued to lead the nation on these measures. High-tech merchandise exports increased in 2014 but declined in both 2015 and 2016. Virginia’s high-tech exports as a share of state GDP ranked lower among U.S. states, in part because many goods, such as defense goods, were for domestic use and services were excluded. Employment and payroll in Virginia’s R&T Roadmap industries grew slightly slower than total Virginia employment and payroll.
Why are outputs important?
Innovation and entrepreneurship are important determinants of the state’s long-term economic competitiveness and will increasingly drive productivity, income, and employment growth in the future. Virginia’s efforts to stimulate innovation and entrepreneurship in strategic R&T Roadmap industries are expected to increase the number of high-tech jobs, expand high-tech and high-wage jobs, and expand exports. High-tech industries are a source of high-paying jobs and also generate significant employment opportunities outside the high-tech sector. Global high-tech exports measure Virginia’s ability to compete in new, high-value-added industry segments.
How has Virginia performed over the last five years?
High-Tech Employment Share
Virginia’s high-tech employment share remains very strong and has fluctuated within a relatively narrow band over the last five years. This share was 13.6% in 2010, reached a high of 14.0% in 2011, and dropped to a low of 13.4% in 2014 and 2015. Virginia’s high-tech employment share led the nation in 2015. The closest benchmark state was Maryland at 12.4%; the national average was 7.3%.
Among Virginia's regions in 2015, the Northern region had, by far, the highest percentage of high-tech establishments at 25.5%. This was down from 26.5% in 2013.
High-Tech Payroll Share
Not only does Virginia have a high percentage of jobs in high-tech industries, these industries pay substantially more than the average industry job. Virginia again led the nation in the percentage of total industry payroll attributable to high-tech industries. This percentage was 25.4% in 2015, which was down from a high of 26.6% in 2011. Virginia’s percentage was almost double the national rate of 13.2% in 2015. Once again, regional results vary widely. In the Northern region, the percentage of total payroll made by high-tech industries was 41.3%. One other region, the Eastern region, was above the statewide average with 26.3%.
High-Tech Export Share
Virginia’s exports decreased from $18.3 billion in 2012 to $16.4 billion in 2016. During this time, exports from high-tech industries – which here do not include service exports, an important source of export revenue to Virginia – dropped at a slightly higher rate from $4.2 billion in 2012 to $3.5 billion in 2016; consequently they also shrank in relative terms from 22.8% of total exports in 2012 to 21.2% in 2016. High-tech exports are a relatively small percentage of the state economy. They were 0.7% of state GDP in 2016, which is below the national average of 2.3% in the same year, ranking the state 39th among U.S. states. Virginia lagged all benchmark states in this measure. The leading state was Washington, with high-tech exports constituting 10.7% of state GDP.
The market trends metric shows how employment and payroll have changed over the last five years for all industries and Virginia’s R&T Roadmap industries, with the base-year index being 100. R&T Roadmap industries are key sectors where Virginia has strong capabilities and assets that present the best commercial opportunities. They include advanced manufacturing, aerospace, communications, cyber security, energy, environment, information technology, life sciences, , nuclear physics, transportation, and unmanned systems. The above industries may support other sectors important to Virginia; for instance, cyber security and IT support national security.
R&T Roadmap sectors have performed slightly below other sectors over the past five years. Total employment and payroll have grown over this period, and R&T Roadmap industry employment and payroll have grown at slower rates. Virginia’s R&T Roadmap employment increased 24% in from 2011 to 2015 versus 6% for total employment. R&T Roadmap payroll grew 140% over the same time period compared with 14% of total payroll.
What are the implications?
Virginia’s high-tech industry maintained its share of state total industry employment and payroll in 2015. The pace of growth in employment and payroll in these sectors over the last five years has been similar to other industries. Virginia’s high-tech employment share and high-tech payroll share continue to rank first in the nation. There are considerable differences among Virginia regions, with the Northern region driving state results. Virginia’s reported high-tech exports have decreased over the last five years, and the state ranks much lower than most states, indicating that most Virginia high-tech production occurs in the services sector or involves manufactured goods, such as defense equipment, for domestic use. Strategic R&T Roadmap sector employment and payroll grew slower than other Virginia industries during the 2011-2015 period.
Data Sources and Definitions:
Each IEMS indicator reports data available as of June 30, 2017 and provides a description of trends for five years of historical data when available.
Employment and Payroll: Data from U.S. Census Bureau, County Business Patterns with undisclosed data imputed by the Weldon Cooper Center for Public Service: http://www.census.gov/econ/cbp/. Available in May.
High-tech: Industries are classified as high-technology on the basis of the classification framework used by Daniel Hecker in “High Technology Employment: a NAICS-based update,” Monthly Labor Review, July 2005, which scored industries as high-tech on the basis of their labor force, production methods, and product types. In addition to the level 1 industries from this list, several additional industries were added by the Center for Innovative Technology (CIT) to reflect high-tech targets. The high-technology industries and corresponding 4-digit NAICS codes are: 3254--Pharmaceutical and medicine manufacturing, 3341--Computer and peripheral equipment manufacturing, 3342--Communications equipment manufacturing, 3344--Semiconductor and other electronic component manufacturing, 3345--Navigational, measuring, electro-medical, and control instruments manufacturing, 3364--Aerospace product and parts manufacturing, 3391--Medical equipment and supplies manufacturing, 5112--Software publishers, 5161--Internet publishing and broadcasting, 5171--Wired telecommunications carriers, 5172--Wireless telecommunications carriers, 5174--Satellite telecommunications, 5179--Other telecommunications, 5181--Internet service providers and Web search portals, 5182--Data processing, hosting, and related services, 5413--Architectural, engineering, and related services, 5415--Computer systems design and related services, 5416--Management, scientific and technical consulting services, 5417--Scientific research-and-development services, 6215--Medical and diagnostic laboratories, and 9271--Space research and technology.
Foreign Exports: State Export Data, U.S. Census Bureau, USA Trade Online: https://usatrade.census.gov/. Exports are based on origin of movement Only merchandise exports (not services) are counted. Available in February.
Roadmap Industries: Information on the industries included in the Commonwealth Research and Technology Strategic Roadmap is provided at: http://www.cit.org/initiatives/research-and-technology-strategic-roadmap/.