The wider impacts of high-technology employment: Evidence from U.S. cities

Abstract

Innovative, high-technology industries are commonly described as drivers of regional development. ‘Tech’ workers earn high wages, but they are also said to generate knock-on effects throughout the local economies that host them, spurring growth in jobs and wages in nontradable activities. At the same time, in iconic high-tech agglomerations like the San Francisco Bay Area, the home of Silicon Valley, the success of the tech industry creates tensions, in part as living costs rise beyond the reach of many non-tech workers. Across a large sample of U.S. cities, this paper explores these issues systematically. Combining annual data on wages, employment and prices from the Quarterly Census of Employment and Wages, the Department of Housing and Urban Development and the Consumer Price Index, it estimates how growth in tradable tech employment affects the real, living-cost deflated wages of local workers in nontradable sectors. Results indicate that high-technology employment has significant, positive, but modest effects on the real wages of workers in nontradable sectors. These effects appear to be spread consistently across different kinds of nontradable activities. In terms of substantive wider impacts, tech appears benign, though fairly ineffectual.