HIGH- TECHNOLOGY ACTIVITIES
IN ARIZONA: 2007 UPDATE
Released January 2008
Prepared by
Center for Competitiveness and Prosperity Research
L. William Seidman Research Institute
W. P. Carey School of Business
Arizona State University
Tempe, Arizona
High Technology Activities in Arizona: 2007 Update
January 2008
Prepared by:
Center for Competitiveness and Prosperity Research
L. William Seidman Research Institute
W. P. Carey School of Business
Arizona State University
Tempe, Arizona
Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:
Dan Anderson
Assistant Executive Director for
Institutional Analysis
Arizona Board of Regents
Brian Cary
Corporate Economist
Strategic Economic Services
SRP
Lisa Danka
Assistant Deputy Director, Finance
and Investment
Arizona Department of Commerce
Kent Ennis
Deputy Director
Arizona Department of Commerce
Wayne Fox
Director, Bureau of Business and
Economic Research
Northern Arizona University
James B. Nelson
Economic Development Manager
Salt River Project
William P. Patton, PhD
Senior Research Economist
Economic & Business Research
Center
The University of Arizona
Elliott D. Pollack
Elliott D. Pollack & Co.
Brad Steen
Chief Economist
Arizona Department of
Transportation
© 2008 by the Arizona Department of Commerce. This document may be reproduced without restriction provided it is reproduced accurately, is
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HIGH- TECHNOLOGY ACTIVITIES IN
ARIZONA: 2007 UPDATE
Revised, January 2008
Center for Competitiveness and Prosperity Research
L. William Seidman Research Institute
W. P. Carey School of Business
Arizona State University
Box 874011
Tempe, Arizona 85287- 4011
( 480) 965- 3961
FAX: ( 480) 965- 5458
EMAIL: tom. rex@ asu. edu
www. wpcarey. asu. edu/ seid
1
TABLE OF CONTENTS
Summary 2
Definition of High Technology 3
Data 5
High Technology in Arizona and the Nation 6
High Technology in Arizona Compared to Selected States in 2005 11
Changes in High Technology between 2001 and 2005 13
High Technology in Arizona Counties 16
Economic Impact of High Technology in Arizona 19
LIST OF TABLES
1. Definition of High Technology 5
2. Measures of High Technology by Category in Arizona in 2005 10
3. High- Technology Location Quotients by Category for Selected States in 2005 14
4. Measures of Changes in High Technology by Category in Arizona from 2001 to 2005 15
5. High- Technology Employment by Category and County in 2005 17
6. High- Technology Location Quotients by Category and County in 2005 18
7. Economic Impact of High- Technology Activities on the Arizona Economy in 2005 21
LIST OF CHARTS
1. Total High- Technology Location Quotients in Arizona from 1990 through 2005 7
2. High- Technology Manufacturing and Services Location Quotients in Arizona from
1998 through 2005 8
3. High- Technology Location Quotients by Category in Arizona in 2005 11
4. High- Technology Location Quotients for Selected Categories in Arizona from 1998
through 2005 12
5. Total High- Technology Location Quotients for Selected States in 2005 13
2
SUMMARY
High- technology manufacturing and services are highly desired economic activities. The
high- technology workforce possesses strong skills and educational attainment, and is highly paid
— upwards of twice as much as the rest of the workforce. Further, a high proportion of the goods
and services produced by high- technology activities in Arizona are sold to consumers from
outside the state. Thus, these activities import monies into Arizona that would not be present if
these activities were not physically located in the state.
Economic impact analysis traces the full impact, direct and indirect, of an economic
activity on jobs and incomes in a local economy. The direct impact of high- technology activities
on the Arizona economy in 2005 amounted to 4 percent of employment, 5 percent of value added
( gross state product), and 7 percent of earnings. The inclusion of indirect impacts pushes the
impact of high- tech activities to 10 percent of employment, 11 percent of value added, and 13
percent of earnings in Arizona.
However, the concentration of high- technology activities in Arizona continued to decline
between 2001 and 2005. In 2005, Arizona no longer had a high- technology presence much
different than the national average.
Employment in high- technology activities decreased between 2001 and 2005 in Arizona.
Coupled with significant employment growth in other sectors, the high- technology share of the
Arizona economy dropped considerably. High- tech employment also fell nationally, but at a
lesser rate than in Arizona. With national employment growth modest in other sectors, high-tech’s
share of the national economy did not fall much.
Per capita employment in high- technology activities in Arizona decreased from 20
percent higher than the national average in 2001 to 4 percent more in 2005. Most of the other
states with a strong high- technology concentration also experienced a decline in per capita high-technology
employment between 2001 and 2005, but in only one state was the magnitude of the
decline greater than in Arizona.
Arizona has a narrow base of high- technology activities. Only two activities with
substantial employment — manufacturing of aerospace products and manufacturing of
semiconductor and other electronic components — had a much greater relative presence in
Arizona than the national average in 2005. Four other high- tech categories ( of a total of 16) had
an above- average concentration in Arizona, but per capita employment in these categories either
was only slightly higher than the national average and/ or the number of employees in these
categories was not significant.
Within Arizona, high- technology activities are highly concentrated in the two populous
urban counties. In 2005, Maricopa County had above- average activity in several high- tech
categories, particularly aerospace manufacturing and semiconductor and electronic component
manufacturing. Instruments manufacturing and data processing services were other significant
high- tech activities. In Pima County, aerospace manufacturing had a very strong presence.
Instruments manufacturing and software development were other important high- tech activities.
The decrease in high- technology employment in Arizona between 2001 and 2005 largely
occurred in Maricopa County. However, a decline also occurred in Pima County.
3
DEFINITION OF HIGH- TECHNOLOGY
The North American Industry Classification System ( NAICS) was first defined in 1997
and replaced the Standard Industrial Classification ( SIC). The NAICS has been revised twice, in
2002 and 2007. Federal government agencies gradually switched from the SIC to the NAICS
between 1997 and 2002, but all have produced data solely by the NAICS in recent years. The
NAICS has a hierarchical structure, with 20 two- digit sectors divided into three- digit subsectors,
four- digit industry groups, and five- and six- digit industries.
“ High technology” is not defined in the NAICS or SIC. Multiple efforts to define high-technology
activities had been made by different groups using the SIC. In recent years, several
definitions using the NAICS have been published. Some of these definitions are derivative,
based on the definitions used in other studies; some are specific to a particular geographic area;
and some are based, at least in part, on judgment/ expert opinion. Three sources were used to
define high technology for this report of high- tech activities in Arizona:
• U. S. Bureau of Labor Statistics ( BLS): “ High- Technology Employment: A NAICS- Based
Update,” Monthly Labor Review, July 2005 ( author Daniel E. Hecker). Conceptually, the
BLS wanted to define high technology based on five factors: ( 1) intensity of science,
engineering, and technician occupations, ( 2) research and development ( R& D) employment,
( 3) production of high- technology products, ( 4) use of high- technology production methods,
and ( 5) the relationship between high- technology industries and productivity growth.
However, “ due to data and conceptual problems, only science, engineering, and technician
occupation intensity was used to develop a list of industries.” The BLS identified 46 four-digit
NAICS industry groups based on this factor, dividing the list into three intensity levels.
• American Electronics Association ( AeA): “ Defining the High- Tech Industry,” February
2003. The AeA’s guiding principle for selecting high- technology activities was that “ an
industry had to be a maker/ creator of technology, whether it be in the form of products,
communications, or services.” The AeA selected 49 six- digit NAICS industries.
• Carnegie Mellon University’s Center for Economic Development ( CED) and the State
Science & Technology Institute ( SSTi): “ Technology Industries and Occupations for NAICS
Industry Data,” March 2004 ( authors Jerry Paytas and Dan Berglund). Three overlapping lists
of six- digit NAICS industries were created. The first list was based on “ technology
employers” — those industries in which the share of science and engineering occupations
was at least triple the national average. The second list of “ primary technology generators”
was based on each of two measures being greater than the national average: R& D
expenditures per employee and the proportion of full- time- equivalent R& D scientists and
engineers in the workforce. Those industries in which only one of the two measures exceeded
the national average were included on the third list of “ secondary technology generators.”
An inconsistency exists across these three sources: the BLS list is at the four- digit
industry group level while the other two sources used the six- digit industry level. The importance
of the decision to use industry groups or industries is lessened by several of the high- technology
industry groups on the BLS list consisting of only one industry. For this study of Arizona high
technology, the issue of data availability was the primary factor in the decision to define high
technology primarily at the industry group level: the data disclosure problem is more severe at
the industry level. In addition, in most of the high- tech industry groups, most of the industries
also are high tech. However, the use of industry groups necessarily results in some not very high-tech
industries being included. Generally, these are not major employers. In addition to the
4
industry groups, a few high- tech industries within a generally not high- tech industry group also
were included in the definition of high technology used in this study.
Each of the “ level 1” industry groups defined by the BLS was included in this study of
Arizona’s high- technology activities. After updating the BLS list to the 2007 NAICS, this list
consisted of 12 industry groups. In each of these 12 industry groups, most industries also were
included in the first list developed by the CED/ SSTi, with the majority of these industries also
appearing in the second list. In 10 of the 12 groups, at least one industry was included in the AeA
list. In addition, a BLS “ level 2” industry group was included in the definition of Arizona’s high-technology
activities if the majority of industries within the group also were included in at least
one of CED/ SSTi lists and in the AeA listing. Only one industry group was added on this basis.
If a minority of industries within a BLS level 2 industry group were included in the AeA and
CED/ SSTi listings, then the industries rather than the industry group were added to the definition
of Arizona’s high- technology activities. Three six- digit industries were selected on this basis.
The full list of high- technology industry groups and industries used in this report are
shown in Table 1. The list has been subdivided into manufacturing activities ( seven industry
groups and three industries) and service activities ( six industry groups). Employment in 2005 is
included in the table to provide a measure of the relative size of these NAICS industry groups
and industries. Very considerable differences in size are present across the 16 high- tech
categories.
When the initial study of Arizona’s high- technology activities was undertaken in 2003,
nearly all of the available definitions of high technology were based on the SIC. Because the SIC
did not identify some of the newer technologies, and since NAICS categories only imperfectly
could be matched to the SIC definition, the list of NAICS categories used in the 2003 study now
are viewed as suboptimal to use. Further, because of the limitations of the SIC, it is not possible
to translate the new NAICS definition of high technology back to the SIC. Since detailed
industrial data prior to 1998 only are available by the SIC, the revised definition of high
technology cannot be applied to data before 1998.
The list of high- technology activities in Table 1 differs from the list compiled for the
initial version of the Arizona high- technology study completed in 2003. The revised definition is
somewhat narrower, dropping some ( mostly small) NAICS categories from the list. The
manufacturing categories deleted were 325992 photographic film, 333313 office machinery,
3346 magnetic and optical media, and 3391 medical equipment and supplies. Service categories
deleted were 51222 record production and distribution, 517 ( other than 5179)
telecommunications, 54162 environmental consulting, 54169 other scientific and technical
consulting, and 811212 computer and office machine repair.
Applying the original definition of high technology, 6.3 percent of the national nonfarm
private- sector employment in 2005 was high tech. Using the revised definition, the high- tech
share was 4.7 percent. The Arizona shares were 6.6 percent using the original definition and 5.4
percent using the revised definition. Thus, while the revised definition is narrower, Arizona
compares more favorably under this definition relative to the national average — the high- tech
sectoral share in Arizona was 13 percent higher than the national average using the revised
definition and 4 percent above average using the original definition.
5
TABLE 1
DEFINITION OF HIGH TECHNOLOGY
Using North American Industry Classification System
Employment, 2005
NAICS NAICS Title Arizona United States
Manufacturing
3254 Pharmaceutical and Medicine 1,613 247,847
3341 Computer and Peripheral Equipment 743E 107,020
3342 Communications Equipment 1,294E 139,178
3343 Audio and Video Equipment 348E 20,733
3344 Semiconductor and Other Electronic Component 17,129 362,182
3345 Navigational, Measuring, Electromedical & Control Instruments 9,286 396,461
3364 Aerospace Product and Parts 21,949 387,188
333295 Semiconductor Machinery 1,177 25,584
333314 Optical Instrument and Lens 165E 16,380
333315 Photographic and Photocopying Equipment 85E 7,857
Manufacturing Subtotal 53,789 1,710,430
Services
5112 Software Publishers 5,384 327,642
5179 Other Telecommunications 218 9,169
5182 Data Processing, Hosting and Related 8,314 379,412
5413 Architectural, Engineering and Related 24,896 1,297,776
5415 Computer Systems Design and Related 18,454 1,131,837
5417 Scientific Research and Development 4,582 660,520
Services Subtotal 61,848 3,806,356
High- Technology Total 115,637 5,516,786
E: Estimated — data were not released due to federal disclosure restrictions.
Source: The list of NAICS categories was derived from the sources described in the text. The
employment data are from the U. S. Department of Commerce, Census Bureau, County Business
Patterns, 2005.
DATA
County Business Patterns, an annual product of the U. S. Bureau of the Census, is the
only source of detailed industrial data for states and counties. It excludes government and a few
private- sector activities ( such as crop and animal production and rail transportation). Data by
NAICS are available from 1998 through 2005. The number of establishments, employment, and
payroll are reported for the full detail of the NAICS. In addition, a frequency distribution of the
number of establishments by employment size ( less than 5, 5 to 9, 10 to 19, 20 to 49, 50 to 99,
100 to 249, 250 to 499, 500 to 999, and 1,000 or more) is provided.
The employment and payroll data frequently are withheld to avoid violating federal
disclosure laws, which are designed to protect the privacy of individuals and companies. If too
few establishments are present in a NAICS category, or if one establishment dominates, the
employment and payroll data are not released. Generally, undisclosed data are most numerous at
the industry level and in counties and states with few employers. However, the problem can be
severe even at the industry group level in relatively populous states. For example, as seen in
Table 1, data were withheld in Arizona in 2005 for three of 13 industry groups and two of three
industries.
6
Undisclosed employment data were estimated for this project based on the frequency
distribution of establishments by employment size and average employment by sector for each
employment- size category by state. Employment was estimated for Arizona for each of the eight
years from 1998 through 2005. Because estimating undisclosed data is very time- consuming,
estimates for other states and Arizona counties were limited to 1998, 2001 and 2005.
Employment is the primary indicator used in this report to measure high- technology
activities. Conceptually, a dollar measure provides a superior indicator of economic activity, but
estimating undisclosed payroll data can result in substantial inaccuracies. While the number of
establishments is not withheld, this is a simplistic measure that says little about economic
activity.
In order to compare geographic areas of differing size, the “ location quotient” was
determined for each high- technology industrial category in each geographic area. The location
quotient for each industrial category was calculated as per capita employment ( employment
divided by population) in each local area ( state or county) divided by the national average per
capita employment. A location quotient of more than 1 indicates a concentration of activity
greater than the national average.
Using the location quotient and employment, “ excess employment” was calculated. The
excess is the difference in the actual employment and the employment that would have existed if
the local area’s location quotient had been equal to 1.
HIGH TECHNOLOGY IN ARIZONA AND THE NATION
Three levels of detail are presented for high- technology activities, as shown in Table 1:
( 1) the detailed categories ( industry groups and industries), ( 2) subtotals of the manufacturing
and service categories, and ( 3) the overall high- tech total.
Total
Based on the revised definition of high technology, approximately 115,625 high- tech jobs
were present in Arizona in 2005. High- technology employment was down approximately 17,000
( 13 percent) from the peak reached in 2000. Nationally, high- technology employment also
declined, but the percentage change was less than in Arizona. Thus, the state’s share of the
nation’s high- technology employment dropped from 2.34 percent in 2000 to 2.10 percent in
2005.
Despite the decrease in employment between 2000 and 2005, the number of high-technology
establishments in Arizona continued to rise, going up 16 percent over the five years.
The national gain in high- tech establishments was only half as fast, with the state’s share of the
nation’s high- technology establishments increasing from 1.79 percent in 2000 to 1.93 percent in
2005.
The average high- technology establishment size in Arizona in 2005 was 21.6 employees,
greater than the 16.4 average of the entire nonfarm private sector. While the overall
establishment size has not changed much over time, the high- technology average fell from a high
of 28.8 in 2000. Nationally, the high- technology establishment size did not fall as much, from 22
to 20, but it remained less than in Arizona in 2005.
As a share of nonfarm private- sector employment counted in County Business Patterns,
high- technology activities in Arizona accounted for 5.4 percent of the state’s employment and
4.1 percent of its establishments in 2005. While the high- tech share of establishments was
slightly higher than in the late 1990s, the high- tech share of employment was down considerably.
7
The peak employment share was 6.9 percent in 2000. Nationally, the shares were lower in 2005
than in Arizona: high- tech employment accounted for 4.7 percent of the nonfarm private- sector
total; the high- tech share of establishments was 3.7 percent. However, the high- tech employment
share was hardly lower than in the past.
Due to employment and payroll data being withheld from several high- tech NAICS
categories in Arizona, it is not possible to calculate the average wage for all of high technology.
For those high- tech categories with available data, average payroll per employee in 2005 was
approximately $ 64,000 — 6 percent less than the national average for the same high- tech
categories, but 93 percent higher than the overall average wage in Arizona. Nationally, the
average wage in high technology was 80 percent higher than the overall average in 2005.
The annual high- technology location quotient calculated for Arizona provides an easy
means of comparing Arizona to the national average. As seen in Chart 1, Arizona’s high-technology
employment per capita has declined over time relative to the national average. The
location quotient in 2005 was just 1.04 — per capita high- tech employment in Arizona was only
4 percent higher than the national average. It had been 28 percent above the national average in
2000.
Excess high- technology employment in Arizona was approximately 4,900 in 2005, the
least of the eight- year period. The excess was more than 20,000 annually through 2002.
As seen in Chart 1, Arizona’s high- technology decline relative to the national average has
been ongoing since at least 1990. Thus, while it was accurate in the past to describe Arizona as a
high- technology center, such a description no longer is accurate.
CHART 1
TOTAL HIGH- TECHNOLOGY LOCATION QUOTIENTS
IN ARIZONA FROM 1990 THROUGH 2005
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Location Quotient
Original SIC Definition Revised NAICS Definition
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County
Business Patterns, 1990 through 2005.
8
Manufacturing versus Services
Less than half ( 47 percent) of the high- technology jobs in Arizona in 2005 were in
manufacturing industries. Manufacturing’s share had been 63 percent in 1998. Nationally, only
31 percent of the high- tech jobs were in manufacturing in 2005, down from 46 percent in 1998.
Arizona accounted for 3.1 percent of the nation’s high- tech manufacturing jobs in 2005,
compared to only 1.6 percent of the high- tech service jobs.
Less than 10 percent of the high- technology establishments in 2005, nationally and in
Arizona, were in the manufacturing sector. Thus, the average establishment size was much larger
in high- tech manufacturing than in high- tech services.
Of those high- technology manufacturing categories with available payroll data, Arizona’s
payroll per employee exceeded the national average by 10 percent in 2005. ( While payroll was
not disclosed for five of 10 manufacturing categories, estimated employment in these
undisclosed categories accounted for only 5 percent of the manufacturing total.) In Arizona,
payroll per employee in high- tech services was considerably lower than in high- tech
manufacturing, but nationally, the average high- tech wage was a little higher in services than in
manufacturing. Thus, the average wage in high- tech services in Arizona was 16 percent less than
the national average.
The high- technology manufacturing location quotient was substantially higher than 1 in
each year from 1998 through 2005 ( see Chart 2). However, except for a jump in 2000, the
location quotient has slipped over time. In contrast, the high- tech services location quotient was
considerably less than 1 in each year. Other than a rise in 2002, it has declined slightly over time.
High- technology manufacturing provided excess employment of nearly 20,000 in 2005,
the lowest figure of the eight- year period. The excess was more than 30,000 in 2000 and 2001. In
contrast, per capita employment in Arizona in high- technology services was below the national
average in 2005. This shortage of jobs offset most of the excess manufacturing employment.
CHART 2
HIGH- TECHNOLOGY MANUFACTURING AND SERVICES LOCATION QUOTIENTS
IN ARIZONA FROM 1998 THROUGH 2005
0.75
1.00
1.25
1.50
1.75
2.00
1998 1999 2000 2001 2002 2003 2004 2005
Location Quotient
Manufacturing Services Total
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County
Business Patterns, 1998 through 2005.
9
Detailed Categories
Based on employment, the largest high- technology category in Arizona in 2005 was
architectural, engineering and related services, with about 24,900 employees ( see Table 2).
Aerospace product and parts manufacturing was second largest, followed by computer systems
design and related services. Semiconductor and other electronic component manufacturing,
which had been the largest high- technology employer as recently as 2001, ranked fourth in 2005.
More than 70 percent of the state’s high- tech employment was in these four categories in 2005;
employment was much less ( less than 1,000) in five of the 16 high- tech categories.
Relative to the national average, two high- technology categories stand out: in 2005,
Arizona accounted for 5.7 percent of the nation’s aerospace manufacturing jobs and for 4.7
percent of the semiconductor and other electronic component manufacturing employment. Each
of these categories provided substantial employment nationally and in Arizona. Arizona’s share
of the nation’s employment also was quite high in the semiconductor machinery manufacturing
industry, but employment in this industry was less than a tenth of that in the aerospace and
electronics industry groups.
Of those high- technology categories with disclosed payroll, average payroll per employee
in 2005 was highest in Arizona in aerospace at approximately $ 91,950 — 36 percent higher than
the U. S. average for this category. The Arizona average was $ 70,100 in instruments, 8 percent
more than the national average. In each of the other categories, the Arizona average was less than
the national average, by at least 10 percent in eight categories.
Arizona’s location quotient exceeded 1 in six of 16 high- technology categories in 2005
( see Chart 3). The highest figure ( 2.82) was in the aerospace category. While lower than from
2000 through 2004, the 2005 location quotient remained higher than in 1998 and 1999. The
second- highest location quotient ( 2.36) was in the semiconductor and electronic component
category, but the 2005 figure was the lowest in this category in the eight- year period from 1998
through 2005. The semiconductor machinery industry had nearly as high a location quotient; its
figure was higher in 2004 and 2005 than in earlier years.
The other three high- technology categories in Arizona with a location quotient greater
than 1 in 2005 had a figure less than 1.2. The location quotient in the instruments category has
been erratic over time, with the 2005 value of 1.17 the second lowest of the eight years ( see
Chart 4). The data processing category had a location quotient of 1.09 in 2005. Following a
substantial gain in 2001, the figure fell in 2004, but has remained higher than in the late 1990s.
The very small other telecommunications category also had a location quotient greater than 1.
Four high- technology categories in Arizona had a location quotient in 2005 less than 1
but more than 0.8: engineering services, audio and visual equipment, software, and computer
design. Of these, the 2005 location quotient was not much different than the historical figures
except in software, which experienced a large drop in 2003. In each of the other six categories,
the 2005 location quotient was less than 0.55. Among these is the scientific research and
development category, which was a major employer nationally.
The aerospace category provided excess employment of 14,175 in 2005 in Arizona. The
semiconductor and electronic component category produced an excess of about 9,850, but this
was substantially less than the excesses through 2001. The next- largest excess was 1,325 in the
instruments category. In the research and development category, Arizona would have needed
8,675 more jobs just to equal the national figure for per capita employment. Sizable shortfalls
also were present in the computer design and pharmaceuticals categories.
10
TABLE 2
MEASURES OF HIGH TECHNOLOGY BY CATEGORY IN ARIZONA IN 2005
( 1) ( 2) ( 3) ( 4) ( 5)
# Estab Empl Payroll Empl/ Estab Pay/ Empl
Manufacturing
Pharmaceutical and Medicine 31 1,613 $ 19,824 52.0 $ 49,161
Computer and Peripheral Equipment 33 743E na 24.4 na
Communications Equipment 32 1,294E na 38.9 na
Audio and Video Equipment 8 348E na 43.5 na
Semiconductor and Other Electronic Component 136 17,129 207,810 125.9 48,528
Navigational, Measuring, Electromedical & Control Instruments 101 9,286 162,741 91.9 70,102
Aerospace Product and Parts 75 21,949 504,494 292.7 91,939
Semiconductor Machinery 16 1,177 18,179 73.6 61,781
Optical Instrument and Lens 10 165E na 17.0 na
Photographic and Photocopying Equipment 9 85E na 10.2 na
Manufacturing Subtotal 451 53,789E na 119.3 na
Services
Software Publishers 147 5,384 97,282 36.6 72,275
Other Telecommunications 10 218 2,305 21.8 42,294
Data Processing, Hosting and Related 286 8,314 100,079 29.1 48,150
Architectural, Engineering and Related 2,597 24,896 294,205 9.6 47,269
Computer Systems Design and Related 1,634 18,454 315,235 11.3 68,329
Scientific Research and Development 236 4,582 85,678 19.4 74,795
Services Subtotal 4,910 61,848 894,784 12.6 57,870
High- Technology Total 5,361 115,637 na 21.6 na
Notes:
( 1) Number of establishments.
( 2) Employment is expressed as of the week including March 12 and includes part- time employees.
( 3) Payroll is for the first quarter and is in thousands.
( 4) Employment per establishment.
( 5) Payroll per employee is calculated as first quarter payroll divided by employment, times four.
E ( estimated) and na ( not available) — data were not released due to federal disclosure restrictions.
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County Business Patterns, 2005.
11
CHART 3
HIGH- TECHNOLOGY LOCATION QUOTIENTS BY CATEGORY IN ARIZONA IN 2005
Categories Listed in Order of Employment in Arizona
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Photographic and Photocopying Equipment
Optical Instrument and Lens
Other Telecommunications
Audio and Video Equipment
Computer Equipment
Semiconductor Machinery
Communications Equipment
Pharmaceutical and Medicine
Scientific Research and Development
Software Publishers
Data Processing, Hosting and Related
Navigational & Control Instruments
Semiconductor and Other Electronic
Computer Systems Design and Related
Aerospace Product and Parts
Architectural, Engineering and Related
Location Quotient
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County
Business Patterns, 2005.
HIGH- TECHNOLOGY IN ARIZONA COMPARED TO SELECTED STATES IN 2005
County Business Patterns data for 2005 were examined for key high- technology activities
in all states ( the large quantity of withheld data precluded doing this analysis for all high- tech
activities in all states). Three factors based on the key activities and two other factors were used
to select comparison states:
• A strong overall presence in the key high- technology activities.
• A strong presence in computer and electronic product manufacturing ( NAICS 334), an
important subsector in Arizona.
• Strength in aerospace product and parts manufacturing ( NAICS 3364), another important
high- technology activity in Arizona.
• A location in the West.
• A moderate- to- large state based on population.
The 10 states that scored the highest were selected as comparison states: California, Colorado,
Connecticut, Idaho, Massachusetts, New Mexico, Oregon, Texas, Utah, and Washington.
Arizona ranked toward the bottom of the 11 states ( 10 comparison states and Arizona) in
the overall measure of high technology. As seen in Chart 5, Arizona ranked ninth, above only
Texas and New Mexico. Massachusetts had by far the highest location quotient based on this
definition of high technology. Arizona ranked eighth in the high- technology manufacturing
12
CHART 4
HIGH- TECHNOLOGY LOCATION QUOTIENTS FOR SELECTED CATEGORIES
IN ARIZONA FROM 1998 THROUGH 2005
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
1998 1999 2000 2001 2002 2003 2004 2005
Location Quotient
Aerospace Electronics Instruments
Engineering Software
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1998 1999 2000 2001 2002 2003 2004 2005
Location Quotient
Communications Data Processing Computer Design
R& D Pharmaceuticals
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County
Business Patterns, 1998 through 2005.
13
CHART 5
TOTAL HIGH- TECHNOLOGY LOCATION QUOTIENTS FOR SELECTED STATES IN 2005
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
MA WA CO CT CA ID UT OR AZ TX NM
Location Quotient
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County
Business Patterns, 2005.
measure ( see Table 3), above Colorado as well as Texas and New Mexico. Only New Mexico
had a lower location quotient in the high- technology services measure.
Arizona ranked third among the 11 states in location quotient in the aerospace
manufacturing industry group, behind Connecticut and Washington. Arizona also was third
highest in the small categories of photographic and photocopying equipment manufacturing
( despite a location quotient of only 0.54) and other telecommunications. Arizona’s location
quotient was fourth highest in the semiconductor and other electronic component industry group,
less than Idaho, Oregon and New Mexico. In the semiconductor machinery manufacturing
industry, the other category in which Arizona had a high location quotient, the state ranked only
sixth.
CHANGES IN HIGH TECHNOLOGY BETWEEN 2001 AND 2005
The 2001- through- 2005 period is highlighted for two reasons: ( 1) the prior high-technology
study used data through 2001, and ( 2) the latest recession ended in 2001. As seen in
Table 4, high- technology employment in Arizona dropped 12 percent between 2001 and 2005,
but the number of high- tech establishments rose 14 percent. This contrast partially resulted from
the varied performance of high- tech manufacturing and high- tech services. High- tech
manufacturing experienced declines in establishments and employment, with a sizable drop of 28
percent in employment. However, high- tech services employment rose 8 percent. Average
establishment size dropped in both manufacturing and services, though by more in
manufacturing. Payroll per employee in high- tech services rose a little after adjusting for
inflation; most of the high- tech manufacturing categories had missing data in 2001 and/ or 2005.
Arizona’s high- technology location quotient fell from 1.20 in 2001 to 1.04 in 2005. Only
one of the 10 comparison states ( Colorado) had a larger decrease. High- tech manufacturing and
14
TABLE 3
HIGH- TECHNOLOGY LOCATION QUOTIENTS BY CATEGORY FOR SELECTED STATES IN 2005
AZ CA CO CT ID MA NM OR TX UT WA
Manufacturing
Pharmaceutical and Medicine 0.32 1.46 0.80 0.31 0.46 1.77 0.04 0.22 0.32 1.35 0.25
Computer and Peripheral Equipment 0.35 1.42 1.12 0.29 6.95 1.49 0.05 5.35 1.21 0.42 1.95
Communications Equipment 0.46 2.54 0.77 1.35 0.67 1.84 0.47 1.04 1.16 1.51 0.62
Audio and Video Equipment 0.87 1.91 0.30 0.56 0.00 1.41 1.74 1.21 0.21 0.61 1.78
Semiconductor and Other Electronic Component 2.36 1.74 1.18 1.08 5.60 1.95 2.63 2.67 1.40 0.98 0.78
Navigational, Measuring, Electromedical & Control Instruments 1.17 1.55 1.56 2.00 0.19 3.66 0.93 1.30 0.97 2.65 1.14
Aerospace Product and Parts 2.82 1.61 1.27 6.29 0.06 0.55 0.40 0.62 1.32 1.77 6.69
Semiconductor Machinery 2.29 2.60 0.45 2.51 1.51 6.51 0.42 5.64 2.75 0.07 0.06
Optical Instrument and Lens 0.50 2.19 3.42 0.65 0.00 5.28 1.66 3.82 0.17 0.01 0.45
Photographic and Photocopying Equipment 0.54 2.48 1.63 0.38 0.21 0.29 0.00 0.16 0.18 0.03 0.20
Manufacturing Subtotal 1.57 1.69 1.20 2.34 1.82 2.05 0.95 1.60 1.08 1.58 2.18
Services
Software Publishers 0.82 2.13 1.90 0.71 0.31 4.00 0.12 1.43 0.87 2.22 5.61
Other Telecommunications 1.18 0.90 2.44 0.13 0.07 2.47 0.32 0.12 1.01 1.08 0.51
Data Processing, Hosting and Related 1.09 0.83 1.48 0.81 0.53 2.79 0.21 0.93 1.48 1.83 0.86
Architectural, Engineering and Related 0.96 1.08 1.77 0.84 1.65 1.43 1.11 0.85 1.06 0.88 1.12
Computer Systems Design and Related 0.81 1.18 1.61 1.12 0.34 1.85 0.61 0.68 0.91 0.88 0.94
Scientific Research and Development 0.35 1.40 1.18 1.38 1.46 2.74 0.92 0.63 0.67 0.66 1.29
Services Subtotal 0.81 1.23 1.61 1.00 1.00 2.14 0.75 0.82 0.97 1.05 1.46
High- Technology Total 1.04 1.37 1.48 1.42 1.25 2.12 0.81 1.06 1.01 1.21 1.68
Note: Location quotients of 1.10 or higher are in bold.
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County Business Patterns, 2005.
15
TABLE 4
MEASURES OF CHANGES IN HIGH TECHNOLOGY BY CATEGORY IN ARIZONA FROM 2001 TO 2005
( 1) ( 2) ( 3) ( 4) ( 5)
# Estab Empl Payroll Empl/ Estab Pay/ Empl
Manufacturing
Pharmaceutical and Medicine 15% 75% 71% 52% - 2%
Computer and Peripheral Equipment - 33 - 34E na - 2 na
Communications Equipment - 18 - 73E na - 67 na
Audio and Video Equipment - 11 - 26E na - 13 na
Semiconductor and Other Electronic Component - 9 - 44 - 57 - 38 - 24
Navigational, Measuring, Electromedical & Control Instruments 20 0 2 - 17 3
Aerospace Product and Parts 14 - 14 9 - 25 28
Semiconductor Machinery 23 - 8E na - 25 na
Optical Instrument and Lens - 41 - 55E na - 24 na
Photographic and Photocopying Equipment - 25 - 41E na - 21 na
Manufacturing Subtotal - 3 - 28E na - 25 na
Services
Software Publishers - 25 - 9 - 5 22 4
Other Telecommunications - 44 - 14 17 55 36
Data Processing, Hosting and Related 54 - 6 - 8 - 39 - 3
Architectural, Engineering and Related 20 7 7 - 11 0
Computer Systems Design and Related 12 13 19 2 5
Scientific Research and Development 12 53 89 36 23
Services Subtotal 16 8 12 - 7 4
High- Technology Total 14 - 12E na - 23 na
Notes:
( 1) Number of establishments.
( 2) Employment is expressed as of the week including March 12 and includes part- time employees.
( 3) Payroll is for the first quarter. The percent change is inflation adjusted, using the Gross Domestic Product Implicit Price Deflator.
( 4) Employment per establishment.
( 5) Payroll per employee is calculated as first quarter payroll divided by employment, times four. The percent change is inflation adjusted, using
the Gross Domestic Product Implicit Price Deflator.
E ( estimated) and na ( not available) — data were not released due to federal disclosure restrictions.
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County Business Patterns, 2001 and 2005.
16
high- tech services each had a decrease in location quotient in Arizona. Two states
( Massachusetts and Washington) experienced larger drops in manufacturing, while California
and Colorado had larger decreases in services.
Despite the overall decline in the high- technology location quotient in Arizona, seven of
the 16 high- technology categories experienced an increase in location quotient between 2001 and
2005. Two of the gains were significant, but both were in very small categories: semiconductor
machinery and other telecommunications.
The largest decrease in location quotient occurred in the moderately sized
communications equipment category. Only one of the comparison states had a larger drop. A
large drop in 2002 continued the downslide of this high- tech category in Arizona, but the
location quotient has been steady since 2002 at less than 0.5.
A further decrease in location quotient occurred in the semiconductor and electronic
component category between 2001 and 2005. However, the 2005 value in Arizona was the same
as in 2002. The 2001- to- 2005 decline was larger than in each of the comparison states.
A decline in location quotient also was measured in the aerospace category in Arizona,
but the 2005 figure remained higher than those of the late 1990s. Only Washington had a larger
drop between 2001 and 2005.
The data processing category had unusually high location quotients from 2001 through
2003. Thus, while a large decline occurred between 2001 and 2005, the 2005 location quotient of
1.09 remained higher than the values of the late 1990s. A large decrease occurred in the very
small optical category, but all of the drop was in 2002. Little change in location quotient
occurred in the other high- technology categories between 2001 and 2005.
HIGH- TECHNOLOGY IN ARIZONA COUNTIES
High- technology employment in Arizona is heavily concentrated in the state’s two highly
populous counties: Maricopa and Pima ( see Table 5). Seventy- three percent of the high- tech
employment was in Maricopa County in 2005, compared to the county’s 61 percent share of the
state’s residents; the location quotient was 1.25. The concentration was stronger in Pima County,
with 22 percent of the high- tech workers, compared to 15.5 percent of the residents; the location
quotient was 1.47. Of the other 13 counties, only Cochise had a high- tech employment share
close to its population share. Its location quotient was 0.92 — the next- highest figure was 0.27 in
Coconino County.
Pima County was particularly strong in high- technology manufacturing, accounting for
30 percent of the state’s employment in 2005; its location quotient was 2.97, compared to 1.76 in
Maricopa County. The highest location quotient in high- tech services was in Cochise County at
1.31. Maricopa County’s figure was barely greater than 1, but the location quotient in Pima
County was less than 0.8.
Of the 16 high- technology categories, Maricopa County’s share of the state’s
employment exceeded its population share in 12. More than 90 percent of the state’s
employment was in Maricopa County in four categories, including the sizable categories of
semiconductor and electronic component manufacturing ( which had a location quotient of 3.55),
and data processing ( a location quotient of 1.62). The location quotient exceeded 2 in two other
manufacturing categories: aerospace products and semiconductor machinery ( see Table 6).
Pima County’s share of the state’s high- technology employment was greater than its
population share in seven of the high- technology categories. Most notable was its 53 percent
share and 9.57 location quotient in the sizable aerospace products category. Other categories
17
TABLE 5
HIGH- TECHNOLOGY EMPLOYMENT BY CATEGORY AND COUNTY IN 2005
Counties
AZ Ap Coch Coco Gila Grah Gre LPaz Mar Moh Nava Pima Pinal SC Yava Yum
Manufacturing
Pharmaceutical and Medicine 1,613 0 0 28 0 0 0 0 884 2 2 688 0 0 9 0
Computer Equipment 743 6 647 2 88
Communications Equipment 1,294 1,191 31 2 70
Audio and Video Equipment 348 249 99
Semiconductor and Other Electronic 17,129 39 35 73 8 15,759 68 1,102 2 14 30
Navigational & Control Instruments 9,286 2 2 6,825 2 12 2,128 102 55 158
Aerospace Product and Parts 21,949 2 2 13 10,161 104 11,560 7 100
Semiconductor Machinery 1,177 1,148 29
Optical Instrument and Lens 165 3 6 20 137
Photographic & Photocopying Equip 85 74 9 3
Manufacturing Subtotal 53,789 39 37 114 10 13 0 0 36,943 198 14 15,871 106 76 367 3
Services
Software Publishers 5,384 0 0 0 0 0 0 0 3,698 0 7 1,643 0 2 19 0
Other Telecommunications 218 0 34 0 0 0 0 0 182 0 0 2 0 0 0 0
Data Processing and Related 8,314 0 13 2 0 0 0 0 7,527 5 0 685 23 2 44 10
Architectural and Engineering 24,896 5 821 236 68 25 0 13 19,225 288 75 3,292 103 12 371 350
Computer Systems Design 18,454 3 1,104 171 3 0 0 0 14,530 35 3 2,209 20 13 95 20
Scientific Research & Development 4,582 1 146 95 1 0 0 0 2,719 4 0 1,574 23 8 3 7
Services Subtotal 61,848 9 2,118 504 72 25 0 13 47,881 332 85 9,405 169 37 532 387
High- Technology Total 115,637 48 2,155 618 82 38 0 13 84,825 530 99 25,276 275 113 899 390
Notes:
Employment is expressed as of the week of March 12, 2005 and includes part- time employees. Many of the employment figures were estimated.
Counties do not add to state due to some establishments not being assigned to any county.
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County Business Patterns, 2005.
18
TABLE 6
HIGH- TECHNOLOGY LOCATION QUOTIENTS BY CATEGORY AND COUNTY IN 2005
Counties
AZ Ap Coch Coco Gila Grah Gre LPaz Mar Moh Nava Pima Pinal SC Yava Yum
Manufacturing
Pharmaceutical and Medicine 0.32 0.00 0.00 0.27 0.00 0.00 0.00 0.00 0.29 0.01 0.02 0.89 0.00 0.00 0.05 0.00
Computer Equipment 0.35 0.00 0.00 0.13 0.00 0.00 0.00 0.00 0.49 0.03 0.00 0.26 0.00 0.00 0.00 0.00
Communications Equipment 0.46 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.70 0.00 0.00 0.07 0.02 0.00 0.75 0.00
Audio and Video Equipment 0.84 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.98 0.00 0.00 1.53 0.00 0.00 0.00 0.00
Semiconductor and Other Electronic 2.36 0.46 0.23 0.48 0.13 0.00 0.00 0.00 3.55 0.30 0.00 0.98 0.01 0.27 0.12 0.00
Navigational & Control Instruments 1.17 0.00 0.01 0.01 0.00 0.00 0.00 0.00 1.40 0.01 0.08 1.72 0.32 0.98 0.59 0.00
Aerospace Product and Parts 2.82 0.00 0.00 0.01 0.03 0.30 0.00 0.00 2.14 0.43 0.00 9.57 0.00 0.13 0.39 0.00
Semiconductor Machinery 2.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.66 0.00 0.00 0.36 0.00 0.00 0.00 0.00
Optical Instrument and Lens 0.50 0.00 0.00 0.44 0.00 0.00 0.00 0.00 0.03 1.94 0.00 2.67 0.00 0.00 0.00 0.00
Photographic & Photocopying Equip 0.54 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.76 0.00 0.00 0.36 0.00 0.00 0.00 0.62
Manufacturing Subtotal 1.57 0.10 0.05 0.16 0.03 0.07 0.00 0.00 1.76 0.18 0.02 2.97 0.08 0.31 0.32 0.00
Services
Software Publishers 0.82 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.92 0.00 0.06 1.61 0.00 0.04 0.09 0.00
Other Telecommunications 1.18 0.00 8.72 0.00 0.00 0.00 0.00 0.00 1.62 0.00 0.00 0.07 0.00 0.00 0.00 0.00
Data Processing and Related 1.09 0.00 0.08 0.01 0.00 0.00 0.00 0.00 1.62 0.02 0.00 0.58 0.07 0.04 0.17 0.04
Architectural and Engineering 0.96 0.02 1.49 0.44 0.30 0.17 0.00 0.15 1.21 0.35 0.16 0.81 0.10 0.07 0.43 0.44
Computer Systems Design 0.81 0.01 2.29 0.36 0.02 0.00 0.00 0.00 1.05 0.05 0.01 0.63 0.02 0.08 0.13 0.03
Scientific Research & Development 0.35 0.01 0.52 0.34 0.01 0.00 0.00 0.00 0.34 0.01 0.00 0.76 0.04 0.09 0.01 0.02
Services Subtotal 0.81 0.01 1.31 0.32 0.11 0.06 0.00 0.05 1.03 0.14 0.06 0.79 0.05 0.07 0.21 0.17
High- Technology Total 1.04 0.04 0.92 0.27 0.09 0.06 0.00 0.03 1.25 0.15 0.05 1.47 0.06 0.14 0.24 0.12
Note: Location quotients of 1.10 or higher are in bold.
Source: Calculated from U. S. Department of Commerce, Bureau of the Census, County Business Patterns, 2005.
19
with a location quotient greater than 1.6 were optical instruments, navigational and control
instruments, and software publishers.
Little high- technology employment was located in the other 13 counties. While more
than 23 percent of the state’s residents live in these counties, the 13 counties accounted for less
than 5 percent of the state’s high- technology employment in 2005. The share was less than 20
percent in each category and exceeded 10 percent only in the small optical instruments and other
telecommunications categories.
Of the 16 high- technology categories in the 13 less populous counties, only four of 208
had a location quotient greater than 1 in 2005. One was the small optical instruments category in
Mohave County. The other three were in service categories in Cochise County, largely the result
of services provided to Fort Huachuca. Two of these categories had many employees nationally
and in Arizona: computer systems design ( a location quotient of 2.29) and engineering ( a
location quotient of 1.49).
The decline in the state’s high- technology location quotient between 2001 and 2005
resulted from drops in Pima County and Maricopa County. Both counties had a significant
decline in high- tech manufacturing — though the drop was much larger in Maricopa County than
Pima County — and a minor decrease in high- tech services. The location quotients in the other
counties did not change much, with more counties posting an increase than a decrease.
Among the manufacturing categories, the state’s decline in aerospace was entirely in
Maricopa County; the location quotient in Pima County rose between 2001 and 2005. The large
loss in the semiconductor and electronic component category mostly occurred in Maricopa
County, though Pima County’s location quotient also fell. In the navigational and control
instruments category, the location quotient rose in Pima County, but slipped in Maricopa County.
Among the smaller categories, the pharmaceuticals location quotient rose in Pima County and
was little changed in Maricopa County, the communications equipment figure fell in both
counties and by a large amount in Maricopa County, but the semiconductor machinery value
jumped in Maricopa County while falling in Pima County.
In the services categories, the decrease in the state’s location quotient in data processing
was entirely in Maricopa County. However, Pima County was responsible for the decline in the
research and development category.
ECONOMIC IMPACT OF HIGH TECHNOLOGY IN ARIZONA
A high proportion of the goods and services produced by high- technology activities are
sold to consumers from outside the state. Thus, these activities import monies into Arizona that
would not be present if these activities were not physically located in the state. In contrast, most
economic activities primarily serve local residents. Sales by such local support activities thus
largely represent a recycling of monies already present in the local economy.
Economic impact analysis traces the full impact, direct and indirect, of an economic
activity on jobs and incomes in a local economy. An economic activity directly affects an
economy by employing workers and paying income to workers and owners. Indirect effects arise
when goods and services are purchased from other local businesses, when these suppliers place
upstream demands on other producers, when workers either directly or indirectly associated with
the operations spend a portion of their incomes in the local economy, and when governments
spend new tax revenues. In the end, the cumulative changes in jobs and incomes are a multiple of
the initial direct effects.
20
Economic impacts were estimated using the Arizona module of IMPLAN, an input-output
model developed and maintained by the Minnesota IMPLAN Group, Inc. The specific
model used was based on IMPLAN’s 2004 national economic database. In building the model,
trade flows were calculated using IMPLAN’s “ regional purchase coefficients,” which are
econometrically derived estimates of the percentage of demand for a specific commodity that is
satisfied by local producers. Type SAM ( Social Accounting Matrix) multipliers were used with a
maximum amount of spending assumed to be recycled. Leakages from the Arizona economy
arise from import purchases and saving.
IMPLAN provides estimates of the impact of an activity on local employment, employee
compensation ( earnings), and value added. Employment consists of both full- and part- time jobs.
Employee compensation includes wages, salaries, and benefits. Value added is the sum of
employee compensation, proprietor income, property income, and indirect business taxes. An
activity’s contribution to gross state product can be measured by its value added.
The economic impacts estimated for each high- technology industry were based on and
driven by that industry’s total employment. The impacts represent the gross contribution an
industry makes to the local economy, not the amount of economic activity that is supported by
purchases from out- of- state funds.
County Business Patterns only includes wage and salary employees and excludes certain
economic activities, particularly in the public sector. Thus, high- technology employment in
Arizona in 2005 was 5.4 percent of the County Business Patterns total. In contrast, the same
high- tech employment figure was only 3.8 percent of the IMPLAN total, which includes all
economic activities and proprietors as well as wage and salary employees.
Employment
While high- technology’s direct share of the state’s total employment was only 3.8
percent in 2005, its indirect share was 6.0 percent. Thus, when both direct and indirect effects are
considered, high- technology activities accounted for more than twice as many jobs as measured
directly ( see Table 7), contributing to approximately 10 percent of the total employment in
Arizona in 2005. In terms of the full economic impact, the high- tech categories most important
to Arizona’s employment were semiconductor and electronic components ( accounting for 2.1
percent of employment), aerospace products ( 1.9 percent), and architectural and engineering
services ( 1.6 percent).
The overall employment multiplier for Arizona’s high- technology activities was 2.6 in
2005, meaning that each high- technology job supports an additional 1.6 jobs. Employment
multipliers are highest in categories with high earnings per worker and high interindustry
purchases per worker. Generally, multipliers for manufacturing categories are higher than those
of service categories; the overall high- tech manufacturing multiplier was 3.5, compared to 2.0 for
high- tech services.
The employment multipliers ranged widely across Arizona’s 16 high- technology
categories. The highest figure was in the computer and peripheral equipment category at 6.1.
Three other manufacturing categories had employment multipliers of between 4 and 5. The
semiconductor and electronic components multiplier was 3.7, but the aerospace products
multiplier was only 2.7. Employment multipliers were less than 2 in scientific research and
development and in computer systems design.
21
TABLE 7
ECONOMIC IMPACT OF HIGH- TECHNOLOGY ACTIVITIES ON THE ARIZONA ECONOMY IN 2005
Direct Effects Total Effects
Employment
Value Added
Employee
Compensation
Employment
Value Added
Employee
Compensation
Manufacturing
Pharmaceutical and Medicine 1,613 $ 357,155 $ 116,863 7,829 $ 830,151 $ 358,611
Computer and Peripheral Equipment 743 69,822 77,106 4,503 365,606 248,450
Communications Equipment 1,294 108,148 100,865 4,580 353,758 236,303
Audio and Video Equipment 348 18,988 17,738 1,499 99,172 63,710
Semiconductor and Other Electronic Component 17,129 2,090,364 1,690,555 63,730 5,385,903 3,481,489
Navigational, Measuring & Control Instruments 9,286 971,003 925,426 27,412 2,243,309 1,621,830
Aerospace Product and Parts 21,949 2,347,355 1,977,909 58,802 4,923,024 3,410,926
Semiconductor Machinery 1,177 183,144 122,597 4,867 445,042 264,338
Optical Instrument and Lens 165 10,532 8,796 362 24,349 16,173
Photographic and Photocopying Equipment 85 9,747 6,454 296 25,632 14,912
Manufacturing Subtotal 53,789 6,166,256 5,044,308 173,880 14,695,946 9,716,743
Services
Software Publishers 5,384 670,825 351,873 16,433 1,354,981 713,570
Other Telecommunications 218 33,793 11,938 579 59,842 24,647
Data Processing, Hosting and Related 8,314 646,305 429,940 20,050 1,356,829 810,911
Architectural, Engineering and Related 24,896 1,542,839 1,144,262 49,283 3,021,148 1,919,718
Computer Systems Design and Related 18,454 968,121 901,203 30,941 1,721,543 1,284,952
Scientific Research and Development 4,582 254,516 213,545 8,374 494,052 333,748
Services Subtotal 61,848 4,116,398 3,052,759 125,660 8,008,395 5,087,546
High- Technology Total 115,637 10,282,654 8,097,066 299,540 22,704,341 14,804,289
Note: Dollar values are in thousands.
Source: Calculated from IMPLAN.
22
Value Added
The direct value added ( gross state product) of high technology was $ 10.3 billion,
according to the IMPLAN model. At 5.1 percent, high- tech’s share of the state’s total value
added was higher than its share of employment, a reflection particularly of the high wages
associated with high technology. The share of the total value added coming from high- tech’s
direct and indirect effects ( 11.4 percent) was more than twice as large as the direct share. Two
high- tech categories accounted for much larger amounts of direct and indirect value added than
the other categories: semiconductors and electronic components ( 2.7 percent of the total), and
aerospace products ( 2.5 percent).
The value- added multiplier for high- technology activities as a whole was 2.2 in 2005.
Value- added multipliers tend to be highest in categories that place heavy demands on local
suppliers in other industries and where earnings account for a large share of value added. Labor
intensity is important because in regional input- output models labor income is assumed to be
recycled within the local economy while capital income is not. The high- tech manufacturing
multiplier was 2.6 while the services figure was 1.9. Two categories had high value- added
multipliers at 5.2: computer equipment, and audio and visual equipment. The next- highest
multiplier was 3.3; in most high- tech categories, the figure was between 1.8 and 2.6.
Employee Compensation
High technology’s direct share of employee compensation was 7.2 percent, higher than
each of the shares of employment and value added. Including indirect effects, high- tech’s share
was less than twice as much as the direct share at 13.2 percent. Again, semiconductors and
electronic components and aerospace products had the highest values, each accounting for 3.1
percent of the state’s total.
High- technology activities in Arizona had an overall earnings multiplier of 1.8 in 2005.
Earnings multipliers are highest in industries with large interindustry purchases per dollar of
earnings. The multiplier was 2.3 for high- tech manufacturing and 1.7 for services. Three
categories had earnings multipliers of more than 3: audio and visual equipment, computer
equipment, and pharmaceuticals and medicines. Most high- tech categories had compensation
multipliers between 1.6 and 2.3. Computer systems design had the lowest multiplier at 1.4.
