Professional, Scientific, and Technical Services: A Textbook Example of an Economy in TransitionJanuary 8, 2019 It’s well known that the U.S. economy is undergoing a structural shift, moving away from producing goods and towards providing services. In 1990, manufacturing was the largest private-sector employer in 35 states – including Oregon – and accounted for 16 percent of all jobs in the United States. Over a quarter of a century later, it dominates in only six states and accounts for just 8 percent of national employment.
The headline story is the rise of health services. Indeed, this sector is now the leading employer in 23 states. But it’s not the only industry transforming the economy. Professional, scientific, and technical services is another classic, albeit far smaller, example of our shift towards a service-based economy.
Companies within this sector sell knowledge and expertise, using human capital as the major input – equipment and materials don’t play a major role (as in manufacturing). Its share of total statewide employment has steadily increased since 1990, with the exception of the dot.com recession in the early 2000s.
Professional, scientific, and technical services is comprised of a range of subsectors that provide highly specialized services to clients in a variety of industries and, in some cases, to households. Services include legal, accounting, engineering, tax prep, computer systems design, advertising, public relations, research and development, and graphic design.
Recession, Recovery, and Beyond
Oregon’s professional, scientific, and technical services started this century with 66,000 jobs, and then soon lost nearly 8 percent of its employment base during the brutal dot.com recession of the early 2000s. (This would be the only time in its nearly 30-year history when growth lagged the rest of the economy).
The Great Recession was much milder. Losses totaled ‘just’ 3.8 percent (2,800 jobs); far less painful than the 8.5 percent decline across the broader economy. Its recessionary resiliency stems from the fact that even in difficult times, especially in difficult times, companies still need expertise to increase efficiency and remain competitive. After just one year in the red, the sector regained its footing in 2010, reached an all-time high in 2011, and hasn’t looked back since. Since the end of the recession it’s added 26,000 jobs for a growth rate of 36 percent; more than three times faster than the overall economy.
Today, professional, scientific, and technical services provides nearly 100,000 jobs. Although this represents just 5 percent of statewide employment, it accounts for nearly 10 percent of net gains since the end of the recession. Growth has been largely fueled by consulting services and computer systems design – companies such as Puppet, Urban Airship, and AWS (formerly Elemental Technologies). Growth has been slower in the hard-hit architecture and engineering firms and negative in legal services, where employment is still below pre-recession levels.
Outperforming the Nation
At nearly 100,000 jobs, Oregon’s professional, scientific, and technical services industry can’t compete with such powerhouses as California, Texas, and New York. It ranks 27th among all states; the same as the size of our total economy.
At 5 percent of statewide employment, it plays a smaller role in our economy than in the nation as a whole (6%) and in 26 other states, led by Washington D.C. with its plethora of legal firms and political consultants (15%), Virginia (11%), and Maryland (9%).
But Oregon is competitive when it comes to growth. Not only has our post-recessionary job growth outpaced the U.S. (36% vs. 24%), it also ranks fifth-fastest nationwide (after Utah, North Carolina, Missouri, and Texas).
Highly Educated, Highly Paid
Given that most companies in this sector provide highly specialized services that are almost wholly dependent on workers’ skills and expertise, educational requirements are high. Nearly 60 percent of jobs in the sector require a bachelor’s, master’s, or doctoral degree. That’s much higher than the economy as a whole, where roughly 25 percent of jobs require a bachelor’s degree or higher. Put differently, 12 of the 20 largest occupations (which make up nearly half the sector’s workforce) require a bachelor’s degree or higher.
On the opposite end of the spectrum, just 20 percent of the sector’s jobs require no more than a high school diploma; significantly lower than the 60 percent across all industries.
High earnings go hand-in-hand with the high educational requirements for jobs in this industry. The average annual wage is $77,500 (2018), nearly 50 percent higher than the average across all industries ($52,100).
Common occupations within this sector, such as software developers, accountants, and lawyers, all pay high wages. In fact, all but six of the 20 largest occupations pay above average wages. In stark contrast, only four of the 20 largest occupations across all industries pay above average wages.
Growth, resiliency, and high wages combine to paint a rosy picture, but it’s not all rainbows and unicorns. One challenge facing the sector is its lack of diversity, particularly ethnically. Just 5.6 percent of the workforce in Hispanic; half that of the economy as a whole (11.7%).
Racially, the picture is a bit better. The sector has become more racially diverse over the last 25 years, from 5.6 percent non-white (1992) to 11.9 percent (2017). However, this still trails the overall economy (12.8% non-white). Asians are driving the diversity; every other race is underrepresented compared with the economy as a whole.
Outlook: The Future Is Bright
Strong growth is projected over the coming years. Oregon’s professional, scientific, and technical services sector is forecasted to grow 20 percent by 2027, adding 18,400 jobs. In comparison, employment across all industries will increase about half as fast (12%). The computer systems design component will be a clear leader within the sector and economy-wide. With a projected growth rate of 30 percent, it’s expected to be the state’s second fastest-growing (published) industry.