OLMIS

by Jill Cuyler
Published Sep-18-2008

Introduction What is High Tech? Systems Design and Related Services Software Publishing Computer and Electronic Product Manufacturing Semiconductors Dominate the Industry Recession Pummeled Industry Very High Wages Occupations and Wages Future Trends

The high-tech industry is an important and dynamic part of Oregon's economy. During the late 1990s, it experienced rapid employment growth while paying wages that were significantly higher than those of many other industries. In 2007, high-tech contributed $5.1 billion in covered payroll to the state's workers and families. The industry represents over one-quarter of total manufacturing employment, predominately in computer and electronic manufacturing.

As of July 2008, the state's high-tech industry employed 57,900 people – 1,200 less than in July 2007. During the recession from 2001 to 2003, employment quickly declined. Despite modest growth since, the industry is still 11,100 jobs below 2001 pre-recession employment levels (Graph 1).

While Oregon's total nonfarm employment has reached an all-time high, high-tech employment has not followed suit. Many wonder if the industry will ever return to its peak, especially given the large losses in semiconductor manufacturing over the past few years.

The high-tech industry is not an official industry sector with one definition or official government code. Instead, it is a mix of service and manufacturing businesses from a variety of industries. High-tech means different things to different people and organizations.

The Oregon Employment Department (OED) has its own definition, which corresponds to three North American Industry Classification System (NAICS) codes – computer and electronic product manufacturing (NAICS 334), systems design and related services (NAICS 5415), and software publishing (NAICS 5112). This definition does not include electronic equipment and appliance manufacturing (NAICS 335), which employs less than 2,500 people statewide.

The American Electronics Association (AEA) has a much broader definition of high-tech, which it uses annually in its well respected national report, Cyberstates. The AEA definition includes at least 50 individual NAICS codes from more than 15 larger industry sectors including high-tech manufacturing, telecommunications services, Internet services, and computer training.

The OED and AEA definitions of high-tech are two of many definitions depending on the organization. The important thing to know when one reads or hears about high-tech is what is being measured or counted. In 2002, for example, the AEA reported 87,524 high-tech jobs in Oregon; OED reported 61,100 jobs. Both counts are correct. The OED definition of high-tech is used in this article, unless otherwise stated. Each of the three groupings OED includes in high-tech have their own unique characteristics.

In 2007, systems design and related services accounted for 16 percent of Oregon's high-tech employment or 9,200 jobs (Graph 2). This industry sector's employment was still down by 19 percent in 2007 compared to 2001. However, 2007 did bring an increase of 1 percent, or 100 jobs, since 2006 (Table 1).

This industry comprises establishments primarily engaged in providing information technologies through one or more of the following activities: (1) writing, modifying, testing, and supporting software to meet the needs of a particular customer; (2) planning and designing computer systems that integrate computer hardware, software, and communication technologies; (3) on-site management and operation of client's

computer data processing systems; and (4) other professional and technical computer-related advice and services. Common services include computer facilities management; computer hardware or software consulting; computer systems integration design; custom computer programming; and software installation.

In 2007, software publishing accounted for 15 percent of Oregon's high-tech employment or 9,100 jobs. This sector grew 12 percent in 2007, adding 1,000 jobs. Still, employment was slightly below 2001 pre-recession levels, but inroads were made compared to 2006, when the employment level was down 12 percent compared to 2001.

Companies in this industry are primarily engaged in the design, development, and publishing of computer software. Important products in this industry include operating, utility, and applications programs. Establishments in this industry may also provide user services such as preparation of software documentation; installation of software; and training in the use of the software.

Software publishing is more likely to have a high proportion of self-employed individuals than other high-tech sectors. However, there are some rather large software companies in the state. These software publishers produce software for many industries including banking, payroll, human resources, computer games, and operating systems.

The computer and electronic product manufacturing industry is clearly Oregon's largest high-tech employment sector. In 2007, computer and electronic product manufacturing accounted for 69 percent of Oregon's high-tech employment, or 40,500 jobs. In 2007, this sector's employment was still down 8,800 (-18%) jobs compared to 2001. Jobs in this sector are also down by 1,500 (-4%) since 2006 (Graph 3).

For businesses in the computer and electronic product manufacturing sector, manufacturing processes are fundamentally different from those of other machinery and equipment companies. The design and use of integrated circuits and the application of highly specialized miniaturization technologies are common elements in the production technologies of the computer and electronic subsector.

The computer and electronic product manufacturing industry consists of several components. The manufacture of computers, communication equipment, audio and visual equipment, magnetic and optical media, technical instruments, and semiconductors are all part of the industry.

In Oregon, the manufacture of semiconductors dominates the computer and electronic product industry. Nearly three-fourths of its employment in 2007 consisted of jobs in semiconductor manufacturing (Graph 4).

Semiconductors – also known as integrated circuits or computer chips – are tiny electronic circuits etched on silicon. Their purpose is to electronically process, store, and move information. From the microprocessors that control our car engines to the chips in our digital watches, semiconductors are the heart of the modern technology we take for granted.

Despite considerable job losses over the past few years, this is not an industry to be ignored as it still has a huge economic impact on the state. In 2007, its total covered payroll to Oregon workers was more than $2.6 billion. It has become more vulnerable as investment in chip manufacturing has shifted overseas.

During the late 1990s, Oregon's computer and electronic product manufacturing industry showed remarkable growth, adding 14,400 jobs (+43%) from 1994 through 2000. Peak employment was reached in February 2001 with 50,900 workers.

The industry declined rapidly from 2001 through 2003. On an annual average basis, it lost 8,700 Oregon jobs, corresponding to an 18-percent decline in two years. Nationally, from peak to trough, the industry lost 30 percent of its employment, or more than 553,700 jobs. As indicated in Graph 4, most of this loss was a result of the rapid decline in semiconductor manufacturing.

One of the most outstanding features of the computer and electronic products industry is its relatively high wages. In 2007, computer and electronic product manufacturing paid more than $3.5 billion to its Oregon workers, for an average of $88,222 per employee (Table 2). This compares with an average wage of $51,707 for all Oregon manufacturing workers in 2007. In 2007, the average wage for all workers in all industries statewide was $39,566. The technical nature of the work accounts for the higher wages. Manufacturing high-tech products requires engineers, designers, computer programmers, and technical sales staff.

The computer and electronic product manufacturing industry is arguably one of the most important sectors of manufacturing in Oregon. However, its employment is primarily in the Portland metro area. In 2007, 72 percent of the industry employment was in the Portland metro area. Washington County alone accounts for 66 percent of the industry's employment in Oregon.

As for the service side of high-tech, systems design and related services as well as software publishing also pay higher-than-average wages. In fact, in 2007 software publishing had the highest annual average wage of the three high-tech sectors at $89,910. Systems design and related services workers earned an average annual wage of $75,838. These industries seemed to be spread out in larger areas of the state but were still concentrated around the Interstate 5 corridor. They also had a noticeable presence along Highway 97 in Deschutes and Klamath counties.

Table 3 offers a sampling of occupations most common to semiconductor manufacturing. The high-tech sector overall has similar but slightly different staffing patterns. More than one-half of its occupations require a bachelor's degree or higher. Engineers and engineering technicians make up the bulk of the workers. Several of the occupations listed require less than a bachelor's degree but still manage to command higher-than-average wages.

Semiconductor processors accounted for over 3,700 of the semiconductor workers in 2006, with an annual mean wage in 2008 of $29,661. However, many of the occupations in the high-tech industry are not high-tech occupations. This industry requires many of the same support staff found in other industries, including managers, accountants, finance managers, sales people, shipping clerks, clerical workers, and maintenance staff. As shown in Table 3, executive secretaries and administrative assistants are among the most common workers in the semiconductor industry.

The Oregon Employment Department forecasts a decline of just over 4 percent for computer and electronic product manufacturing over the 10 years from 2006 to 2016. This compares to overall employment growth projected at 14 percent.

A more promising future for Oregon's high-tech industry is in its service sectors. Systems design and related services is expected to grow by 20 percent and the software publishing industry is projected to grow at a rate of 22 percent from 2006 to 2016. Both are well above the statewide growth rates.

No one knows for sure what the future holds for this dynamic industry. Early in the last recession, many believed this was a typical downturn in the business cycle. However, since the official recovery started in June 2003, economists wonder if it signals a major structural change in Oregon's manufacturing industry. Regardless, high-tech is a key industry for Oregon's economy. Its rapid growth during the 1990s enhanced Oregon's ability to compete in the global high-tech economy. High-tech continues to be one of the state's largest exporters, along with agriculture and wood products.