Information technology (IT) is pervasive throughout the economy. Any business that uses computers or networks has some information technology employment embedded in its activities. We are not able to quantify all this activity. For example, our employment counts can capture employment at a hospital, but the detail is not deep enough to separate out how much of that hospital employment is just for information technology. So when we do enumerate information technology employment in Utah, understand that we cannot capture all this activity and that our estimates will be correspondingly understated.
What we can capture is employment in those businesses whose entire operation and product sold or service offered is information technology. This may include a software company, a data processing center, internet web services, computer systems design, or some form of telecommunications. These can be identified and isolated by specific industrial code. This can also include companies like ebay or Overstock.com who do not have storefronts but instead have an internet storefront—in other words they operate primarily through information technology.
The Governor’s Office of Economic Development (GOED) has established industrial clusters it is trying to foster and promote in Utah, largely focused on industries that offer higher-than-Utah-average wages. Information technology and software is one of those clusters. How is IT/Software performing in Utah?
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This evaluation requires something to compare it against, and that is generally the national IT/Software performance. This comparison is represented in the first graph. Four quadrants are presented and labeled. If an IT segment has employment as-a-percentage-of-all-Utah-employment higher than the corresponding national IT employment as-a-percentage-of-all-national-employment, then that IT segment is said to be “specialized” in Utah (represented by a placement above the horizontal axis). This Utah-share against the national-share is called a Location Quotient.
On top of that, the five-year Utah growth rate of an IT segment is compared against the national five-year growth rate of that same segment. If Utah’s segment grew faster than the national segment, it will be represented to the right of the vertical axis and is said to be “dynamic.”*
For example, in Utah, software develop employment is 0.554 percent of all Utah employment. Nationally it is 0.216 percent. So the Utah share is nearly three times as large (.554/.216 = 2.57). That Location Quotient of 2.57 is plotted on the vertical axis. Over the five-year period of 2008 to 2012, Utah software development employment grew by 21 percent. Nationally it grew by 9 percent. Therefore, Utah’s software development segment grew 12 percentage points more than the national average (21-9). This is represented on the horizontal axis. The intersection of these vertical and horizontal positions yields the location of the software development bubble.
Each bubble symbolizes an IT/Software segment, and its size is representative of its employment in Utah. Computer systems design has more employment than the other IT segments. Employment in each segment grew across the five-year interval in Utah, although computer systems design and internet and web services grew slower than the national average (left of the vertical axis).
The upper right quadrant represents IT segments where there is a higher degree of specialization in Utah than the nation, and employment growth is faster than the national average. That quadrant shows both specialization and dynamics. Software development, data processing, and IT support activities land there.
Telecommunications is growing in Utah, but it is not specialized when compared against the national share. Computer systems design is Utah’s largest IT employment segment, but it is neither specialized nor growing faster than the national average. Internet and web services grew much slower than seen across the nation as a whole. But even then, its concentration share is still higher in Utah (LQ of 1.8).
Another way to evaluate IT/Software is to just look at it within Utah. This is illustrated in the next graph. Here the quadrants are reflective of relative wage and employment growth against the Utah average. An average Utah wage (2012) and average employment growth (2008-2012) are easily computed. Then, each IT segment is compared against these averages. The vertical axis represents each IT segment’s average wage as a percent of the overall Utah average wage. Above the horizontal axis is above the Utah average wage.
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This is coupled with the IT segment’s five-year employment growth against the statewide average employment growth (horizontal axis). If the IT segment is to the right of the vertical axis, then it grew faster than the Utah average for all industries.
IT/Software NAICS Industry Codes* and Titles
Software Development511210 Software Publishers
517110 Wired Telecommunications Carriers
517210 Wireless Telecommunications Carriers
517410 Satellite Telecommunications
517919 All Other Telecommunications
518210 Data Processing, Hosting, and Related Services
519130 Internet Publishing and Broadcasting and Web Search Portals
541511 Custom Computer Programming Services
541512 Computer Systems Design Services
541513 Computer Facilities Management Services
541519 Other Computer Related Services
3341 Computer and Peripheral Equipment Mfg.
3342 Communications Equipment Mfg.
3343 Audio and Video Equipment Mfg.
3344 Semiconductor and Other Electronic Component Mfg.
334614 Software and Other Prerecorded Compact Disc, Tape, and Record Reproducing
425110 Business to Business Electronic Markets
454111 Electronic Shopping
454112 Electronic Auctions
• Industry code is North American Industry Classification System; NAICS
* A Location Quotient is a ratio of ratios.
(Utah IT segment employment/Utah all employment)
(National IT segment employment/National all employment).
The share of the IT segment in Utah is compared to the IT segment share nationally. If they are equal, then the LQ is 1.0. An LQ of 1.2 would mean Utah’s IT segment is 20% higher. At that level and above is generally considered a level of specialization in relation to the national profile.