By Bryan Bezold
Information technology (IT) is an important part of the
St. Louis economy. This may sound strange at first, because
St. Louis isn’t associated with IT the same way as Seattle or
Silicon Valley. IT is very important, though, because St. Louis
is home to a number of companies in a variety of industries
that use IT to produce and sell goods or services. For that
reason, St. Louis has a higher rate of IT employment than the
U.S. average. These IT jobs also have a significant economic
impact on the St. Louis region’s economy.
To explain, this, you need to know a little bit (but just a
little) about employment statistics. When you hear about employment
growing in a city, state or the entire U.S., what you’re usually
hearing about is employment by industry. In those surveys, employment
is measured at the firm level, and added up by firm for each
industry. All of a bank’s employees would be classified as being
employed in the financial services industry, regardless of what
they actually do at the bank. For the most part, this makes
sense, because most of the people em-ployed at a bank perform
a task that is related to banking, just like most workers at
Boeing; for example, perform a task related to aerospace manufacturing.
Most comparisons of states and metropolitan areas that compare
IT employment do so by these industry measures, so they’d count,
for ex-ample, all World Wide Technology’s employees as IT workers,
but none of the workers at, say, Scottrade would count as IT
workers.
Scottrade is obviously a financial services firm. It is a financial
services firm, though, that is based on the electronic delivery
of services, more so than face-to-face delivery of services.
That means that IT is central to its business, and many of the
workers will be engaged in IT-related tasks.
That example illustrates that a better way to get a handle on
a the importance of IT to a particular region is to look at
employment by occupation, which is to classify employment by
the types of tasks people are engaged in daily, rather than
the industry in which they work. By that measure, St. Louis
actually has a slightly higher concentration than the U.S. average.
Put another way, St. Louis has approximately 40,150 workers
engaged in IT occupations, or 3.0 percent of all workers. In
the broader U.S. economy, that share is just 2.4 percent. If
the share of IT workers in the region matched the U.S. share,
St. Louis would have roughly 32,000 IT workers, or about 8,000
less than it does. That prompts two logical questions. One,
why does St. Louis have more IT workers than the U.S. average
would predict, and two, does it matter?
The “why” has to do with the mix of industries in St. Louis.
On an industry basis, St. Louis has a slightly higher share
of employment than the U.S. average in several industries that
are considered technology intensive1. This is measured with
something called a “location quotient,” which is the ratio of
an industry’s share of total St. Louis employment to that industry’s
share of total U.S. employment. Any number over 1.0 indicates
that St. Louis has a higher than average share of employment
in that industry. Referring to the table on the left, we can
see that 11 technology-intensive industries have above average
employment in the St. Louis region.
These industries have a greater need for technology, and thus
a greater need for skilled IT professionals. Some of these industries’
connection to IT are obvious— aerospace product and parts manufacturing
is one. Most St. Louisans are already aware of the role Boeing
plays in the St. Louis economy, and the idea that Boeing would
need skilled IT workers to design and build aircraft and guided
missiles is fairly intuitive. Others are less obvious, such
as chemical manufacturing or commercial service machinery manufacturing.
As manufacturing becomes more and more sophisticated, and firms
get better and better at making more with less, then IT becomes
an important part of the production process.
The answer to the second question, why does it matter that we
have slightly more workers in IT occupations, is more straightforward.
IT occupations are high value occupations that improve productivity,
and thus pay above average wages. The mean wage of all occupations
in St. Louis was $38,930 in 2006, but the average salary for
IT occupations was almost twice that, $67,510. That means those
workers have almost twice as much disposable income to spend
on local goods and services ranging from housing to food to
clothing to cars.
Through both retail spending and business activity, those 40,150
workers in IT occupations support another 40,550 jobs in other
industries throughout the St. Louis region. The total economic
impact of those combined 80,700 workers is approximately $11.8
billion dollars annually.
There’s also a longer term benefit for St. Louis from the above
average concentration of IT workers in the region. The presence
of those workers means that firms in St. Louis can draw upon
a deep reservoir of skilled workers when they need to expand.
That bodes well for future economic growth in the region.
Information technology has a larger share of employment in St.
Louis than the U.S. because of the mix of industries in the
region, which favors some technology intensive industries. The
IT workers in the region have significant economic impact on
the region, both in terms of local spending are of employment
in St. Louis than the U.S. because of the mix of industries
in the reg
1 For more information about technology intensive industries,
including a complete list of industries considered technology
intensive, see “High tech employment: a NAICS based update”
by Daniel Hecker in the July 2005 issue of Monthly Labor Review.
