August 1998
- On this page:
- State of Technology
- From the Comptroller: The Knowledge Business
- System Allows On-Line Filing of Some Tax Returns
- Wanted: Technical Pros
- On Page 2:
- Tech Workers for Tomorrow
- High-Tech Training Ground
- Eye on TI
- Vital Science
- Silicon Army
- Texas stats -- Fiscal and economic data
State of Technology
Diverse high-tech businesses
reshape the Texas EconomyThe growing importance of high technology in the Texas economy may not be apparent to the average Texan. After all, you don't see microchips grazing along the highway like cattle or planted in neat rows like cotton. Telecommunications satellites don't dot the West Texas horizon the way oil derricks did in the past.
And yet, high technology has emerged as one of the main engines of economic growth in Texas and likely will become more dominant in the next century.
While the oil and gas industry is still critical for Texas, high-tech businesses have surpassed that industry in providing jobs for state residents. Electronic equipment and parts, computers and scientific instruments account for one-third of the value of all goods shipped out of the state, according to an estimate by Texas Instruments. Texas leads the U.S. in semiconductor manufacturing capacity and is the world's third largest producer of personal computers.
Texas' moderate cost of living, its large pool of scientists, engineers and highly skilled workers, its access to global distribution and transportation networks and its support for research through universities and industry consortia have provided a climate in which high-tech businesses are flourishing.
Big picture: How big is Texas' high-tech industry? The answer depends on how one defines high technology, and a common definition is elusive--even among industry experts.
The Comptroller's analysis considers five sectors as "core" high-tech industries: semiconductors and computers, communications, electrical and electronics manufacturing, defense technology and biotechnology. Two related fields, technical services and technology-intensive manufacturing--though not considered core high-tech industries--depend heavily on computerized processes and employ highly skilled workers.
All together, these industries employed 781,000 Texans in 1996, about 10% of the state's workforce. The five core high-tech sectors employed 454,000 Texans, nearly 6% of the Texas workforce.
In terms of wages paid and contributions to gross state product (GSP), however, these sectors have a much larger impact. In 1996, workers in the core high-tech industries earned annual salaries averaging $48,000--well above the $28,000 average for all Texas workers--and the combined payroll of these firms amounted to almost 10% of all wages paid in the state.
The total output of the core high-tech sectors represented about 8% of Texas' GSP in 1996. In comparison, the oil and gas industry--exploration and production, pipelines, refining and petrochemicals--provided about 11%.
Nearly 95% of Texas' high-tech jobs are located in metro areas. The Dallas-Fort Worth and Houston areas contain about two-thirds of these jobs, and Austin and San Antonio contain another 16%. Semiconductor and computer manufacturers tend to be highly concentrated in the large metro areas, while defense and technology-intensive manufacturers are more spread out.
Heart of high tech: Following sluggish growth in the early 1990s, core high-tech employment in Texas has surged over the past few years, adding more than 51,000 jobs from 1994 to 1996. The job growth rate in core high-tech businesses was twice the state's overall growth rate during that period. In 1996, employment in these high-tech sectors surpassed oil and gas employment in Texas.
Semiconductors and computers This largest core sector employed 169,000 workers in 1996. It is also the fastest growing core sector, having added 44,000 workers between 1990 and 1996, a 35% gain. The sector includes semiconductor, computer and office equipment manufacturing and computer-related services such as programming and software development. More than three-quarters of workers in this sector are located in Dallas, Harris and Travis counties.
Communications Manufacturers in this sector produce everything from telephones, modems, radios, pagers and televisions to broadcasting equipment, communications satellites and burglar alarms. The sector also includes providers of fax, email, paging and cellular phone services. Texas communications firms added 24,000 jobs between 1992 and 1996, bringing the statewide total to more than 120,000 jobs. The largest portion of jobs--about 48,000--is in Dallas County, many in Richardson's "Telecom Corridor."
Electrical and electronics This sector includes manufacturers of consumer electronics, electronic components and accessories, optical instruments, photographic equipment, industrial electronics and miscellaneous electrical equipment. Employment in the sector rose from 45,900 in 1992 to 51,500 in 1996. About 30,000 of these jobs--nearly 60% of the sector's total--are located in the Dallas-Fort Worth and Houston metro areas.
Defense Texas' high-tech defense industries include design and manufacture of missiles and aircraft, ordnance, defense electronics and accessories. More than half of the state's 62,500 jobs in this sector are in the Dallas-Fort Worth area. In recent years, defense has seen the largest decline of any high-tech sector. Texas firms have lost more than 30,000 jobs to military cutbacks since 1990, nearly all in missile and aircraft manufacturing.
Biotechnology These industries provide health-related goods and services, including vaccines and blood derivatives, pharmaceuticals, medical and dental laboratory services, X-ray and electromedical devices and physical and biological research. The nearly 50,000 workers in this sector are concentrated in Bexar, Harris, Dallas, Travis and Tarrant counties. In Bexar County, biotech employment grew nearly 30% from 1990 to 1996. Elsewhere, however, employment in this sector has fluctuated throughout the 1990s.
Close relatives: In addition to the above "core" industries, two other sectors swell the statewide employment related to high technology.
Technology-intensive manufacturing These manufacturers use computer- and instrument-intensive processes to make products that are not typically considered high-tech, such as chemicals, petroleum products and specialized machinery. Like defense, this sector has declined gradually throughout the 1990s, dropping to 197,000 workers in 1996 from a peak of 214,000 in 1991. Despite this dip, the sector remains an important contributor to Texas' economy. In 1996, the average wage in this sector was $60,000, the highest among high-tech industries.
Technical services This sector includes providers of engineering, architectural, surveying, management and public relations services, which employed 131,000 Texans in 1996, up 36% since 1990.
Wars to wafers: Following World War II, defense industries drove most high-tech employment and innovation in Texas. In the early stages of the high-tech boom, these industries lured highly skilled scientists and engineers to the state. Although defense still plays a large role, the state entered a new era of technology in 1958, when Texas Instruments engineer Jack Kilby created the world's first integrated circuit--an event that led to the creation of the modern computer industry.
In the 1980s, the formation of two major research consortia in Austin, MCC and Sematech, helped establish Texas as a leader in microprocessor manufacturing. As demand for personal computers (PCs) soared, Austin-based Dell Computer and Houston-based Compaq Computer grew to become two of the world's three largest PC manufacturers.
The petroleum industry also has become more technology-intensive in the past 20 years, using 3-D and 4-D seismic imagery, satellite communications and microchip-carrying drill bits to improve the efficiency of oil and gas prospecting and recovery.
Today's diverse high-tech businesses are subject to market fluctuations. A decade of rapid growth hit a stumbling block in the late 1990s as chipmaking plants closed and manufacturers such as National Semiconductor, Intel and Silicon Graphics announced layoffs. PC sales in the first quarter of 1997 slid to their lowest level since 1991, according to International Data Corp. In March 1998, Intel announced a delay in building its semiconductor plant in Fort Worth, now scheduled to open in 2002. Firms such as Compaq, Applied Materials and Motorola have also felt pressure from excessive PC inventories and sagging demand for computer chips.
Some observers blame the slowdown on the financial crisis in Asia, a vital high-tech market and manufacturing region. Others shrug it off as a cyclical downswing of the sort likely to affect any industry.
Other high-tech sectors, especially those related to the Internet, have remained hot. According to USA Today, nearly 40% of the venture capital funneled into Silicon Valley in 1997 was spent on Internet software firms. In April 1998, Vice President Gore announced plans for a souped-up version of the Internet--called Internet2--that will connect 120 universities at speeds 100 to 1,000 times faster than today's Internet. Companies have pledged more than $500 million to the project.
Labor issues: Controversy has grown over a reported shortage of high-tech workers in the U.S. The Information Technology Association of America reports as many as 350,000 unfilled programming, engineering and computer science jobs. Machinists, operators and technicians are also needed. Texas' state agencies have trouble filling high-tech positions, as they cannot match salaries offered in the private sector. Other observers contend there is no shortage, only a reluctance on the part of employers to retrain workers or to hire more experienced, higher-wage workers.
Industry groups have asked government and educational institutions to help them prepare more workers for high-tech jobs. They recommend boosting engineering and computer science programs at public universities to admit more students, while also increasing the limit on foreign high-tech workers allowed into the U.S.
Next big thing: While computer sales and manufacturing have slowed, the pace of innovation has not. More homes and businesses connect to the Internet every day, while corporations establish their own intranets--computer networks similar to the Internet but accessible only to a limited group of users. Voice-activated computer operating systems, Internet telephony and real-time audio and video are reshaping the World Wide Web, creating opportunities for entrepreneurs and high-tech workers.
Creation of "designer genes" through biotechnology has led to improvements in vegetables and livestock and may one day help prevent diseases such as osteoporosis, multiple sclerosis, cystic fibrosis and Alzheimer's.
Many experts predict that the high-tech industry will shift its focus from PCs to communications--that wireless and networking technologies will drive the industry in the future. High-definition television and other advances provide ground for expansion of Texas' high-tech industry well into the next century.
The challenge for the state is to continue to provide a business climate that will enable high-tech companies to thrive.
Contributing to this article:
Koren Sherrill and Greg Mt.Joy
From the Comptroller:
The Knowledge BusinessThese days, it's nearly impossible to get through a normal day without coming into contact with computers in some form. An industry that didn't even exist when most Baby Boomers were born has since penetrated every level of modern life.
High-tech products and services have not only improved Texans' lives but have provided livelihoods for hundreds of thousands. This issue of Fiscal Notes looks at the contributions of high-tech businesses to Texas and the opportunities and challenges they face.
Technology has been called "the crude oil of the Information Age." Texas is poised to play as important a role in the knowledge-based economy of the future as it has played in the natural resource-based economy of the past.
That won't happen, however, unless Texas can offer high-tech employers a large pool of technically adept workers. And industry has warned that Texas, along with other states, may not be producing enough highly skilled young workers to meet workforce demands in the 21st century.
Workforce training has been one of my top priorities since I took office as Comptroller in 1991. I bring it up often when I visit with business leaders across the state--unless they beat me to it.
In the past, Texas had dozens of employment programs but lacked a comprehensive workforce development policy and an integrated system for training Texans in skills the job market demanded. As a result, the state wasted millions of tax dollars while providing little real help for people who needed training.
Recommendations by my Texas Performance Review led to the consolidation of state employment and training programs under the Texas Workforce Commission. A key feature of the new system has been the formation of local workforce boards that focus on providing training that meets the specific needs of local employers.
To plug the high-tech "talent gap," the state and local boards must continue to work with private industry to make sure that students are learning all the skills they need at every level of Texas' public education system.
All the computer power in Texas cannot match the brain power of our young people. As economic value shifts from physical prowess to mental ability, Texas' human resources can place the state well ahead of the worldwide competition.
- John Sharp
Texas Comptroller of Public Accounts
System Allows On-Line Filing of Some Tax ReturnsThis fall, the Comptroller will begin accepting tax returns filed on the Internet through the agency's Webfile program. Businesses filing a short form 01-117 with no tax due for the report period, or long form 01-114 for businesses filing with zero sales at all outlets, may use the system.
As many as 75,000 returns are expected to come through the system each year. Likely users include wholesalers who accept resale certificates from all of their clients, and seasonal businesses that report quarterly but are open only part of the year, such as Christmas tree dealers.
Webfile will be available on the Window on State Government site, 24 hours a day, seven days a week. Technical support will be available during normal working hours at 1-800-531-5441, ext. 3-3630.
The system will allow businesses to file returns at their convenience and save postage. The Comptroller's Office can process tax return data directly into the agency's computer system, eliminating the possibility of errors while handling papers or entering data.
Webfile has built-in security measures designed to protect important information sent over the Internet. When entering the Webfile system, an applicant's World Wide Web browser is automatically checked to ensure the necessary encryption measures are in place.
When additional security measures become available to allow payment of taxes over the Internet, the Webfile system will be expanded to include filings and payments by Texas businesses.
Contributing to this article:
Greg Mt.Joy
Wanted: Technical Pros
High-tech employers grapple with
labor market imbalanceSay "high-tech worker" and most people envision a computer programmer developing software at a keyboard or a technician operating complex machinery in a semiconductor plant. Many other industries, however, employ highly skilled technical workers.
Recently, the demand for information technology (IT) workers has outstripped supply in many areas. High-tech businesses warn that this imbalance, if not corrected quickly, could hold back economic growth. Private employers are scrambling to fill the "skills gap" through various strategies, while government agencies struggle to retain experienced IT professionals in the face of frenzied salary competition.
Occupational focus: Occupational data make it possible to group employees by the kind of work they do--for example, programming a computer or overseeing a database's security. These data show different patterns from industry data, which group employees by the end product or service their company provides.
For example, occupational reports include computer programmers in the count of an area's high-tech workers whether they work for a large organization or are self-employed--an advantage when examining labor pool availability and other factors that influence local job markets. In contrast, industry reports usually tally all workers on a company's payroll--janitors along with systems analysts‹but omit outside consultants or contractors.
Supply and demand trends for technical skills are better understood if the analysis includes all workers, regardless of where they work. Competition for certain kinds of workers will depend on growth or shrinkage in other industries that need those same workers.
Core technology workers: A U.S. Department of Commerce study identified four kinds of jobs as "core" IT occupations: systems analysts, computer programmers, computer engineers and computer scientists.
In 1996, the latest year for which state-level figures are available, Texas had about 48,800 systems analysts and computer programmers, or 6% of the national total. Texas also had 6% of the nation's computer engineers, about 9,800.
Adding these workers to related occupations such as database administrators, computer support specialists, programmer aides and other computer scientists brings the Texas total to 94,500 workers in "core" IT occupations, third behind California's 203,300 and New York's 100,900. The U.S. total for these occupations in 1996 was about 1.5 million.
The average hourly wage for systems analysts and computer programmers in Texas in 1996 was $21.76, about 5% below the U.S. average. The highest average wages for these workers were in Illinois ($26.79) and New Jersey ($26.59). Computer engineers in Texas earned an average $26.87, about 4% above the U.S. figure.
Nationwide in 1996, computer and data processing services firms were the leading employers of computer programmers (employing 34% of all such workers), systems analysts (22%) and computer engineers (35%). About 4% of computer programmers and 7%-8% of systems analysts and computer engineers were self-employed.
The U.S. Department of Commerce projects that nationwide employment of core IT workers will climb to 2.6 million by 2006--76% above the 1996 level.
Related occupations: A broader look at high-tech occupations includes jobs such as electrical, electronic, chemical and petroleum engineers; electrical, biological, petroleum, chemical and health care technicians and technologists; and computer and data processing equipment operators and repairers.
Some 424,000 Texans held these types of jobs in 1996, or 7% of the U.S. total. Texas accounted for a much larger share of some occupations. For instance, Texas companies employed nearly half of the nation's petroleum engineers and technicians, 14% of electrical and electronic equipment mechanics, installers and repairers, and 13% of chemical equipment controllers and operators.
As might be expected, regional variations exist. Houston has the most petroleum engineers and technicians, while Austin has a higher concentration of computer software engineers. Computer programmer and systems analyst jobs are less concentrated because they work in a larger number of industries.
Labor market challenges: In many cities, high-tech firms have grown much faster than the pool of highly trained or specialized workers, creating short-term imbalances.
A 1997 survey by the Information Technology Association of America (ITAA) and Virginia Tech showed that 10% of positions in core IT occupations--programmers, systems analysts and computer engineers and scientists--were unfilled, leaving about three vacancies per company on average. ITAA President Harris Miller likens the shortage of skilled workers to "running out of iron ore in the middle of the second industrial revolution."
How long IT worker shortages might last--and how they might affect Texas--is hard to determine. A survey of Texas high-tech firms in late 1997 by the Eisenhower Leadership Development Program at Texas A&M University revealed a serious "talent gap" in the state. More than 60% of the responding companies said they were short of employees--primarily engineers, programmers and assemblers/machinists--and 31% called the lack of skilled workers their largest barrier to growth.
The U.S. General Accounting Office has cast doubt on the notion of a widespread shortage of technical workers by citing flaws in the methodology used in worker-shortage reports. Other labor economists say the problem can be described more accurately as localized mismatches between jobs and skills.
The Institute of Electrical and Electronics Engineers and many older workers discredit studies that report technical worker shortages, saying the problem may simply be a shortage of qualified younger workers. Older workers often command higher salaries and benefits and are less willing to work long hours and weekends. According to the U.S. Bureau of the Census, 80% of computer programmers and 72% of computer systems analysts and scientists in 1996 were 44 years of age or younger.
Filling the gap: The ITAA/Virginia Tech survey revealed that high-tech companies are aggressively trying to hire new workers by using billboards and other advertising campaigns, job fairs, coast-to-coast or even international scouting trips, and by offering stock options, recruiting bonuses, salary increases and other perquisites. Some high-tech companies have raided other firms for workers, driving up local wages in the process. Annual turnover rates for some firms, especially in the Silicon Valley, are as high as 30%.
The second most common strategy cited by survey respondents for addressing worker shortages was to retrain existing staff, whether internally or through an outside trainer. Also, more employers are teaming up with community colleges to develop courses that meet their labor force needs.
A four-year college degree is not the only entree to a job with a high-tech firm. Many entry-level positions can be filled by bright, motivated people trained at community colleges or proprietary schools. California high-tech firms are even going into middle schools to recruit students into high-tech fields, and firms in other states are training welfare recipients for high-tech jobs.
Using consultants or temporary workers was the third most often mentioned strategy for meeting personnel needs. As noted above, self-employed workers fill a significant portion of some core IT jobs. Nearly three-quarters of the firms in the ITAA/Virginia Tech survey said they often or sometimes used consultants or temporary high-tech employees.
Hiring recent immigrants was cited by a much smaller share (40%) of firms as a way to fill IT vacancies. Lately, however, this strategy has received much attention as Congress debated reauthorization of the H-1B program providing visas for skilled immigrants. High-tech firms have pressed the government to increase the number of technical workers allowed into the country each year, from the current limit of 65,000 to at least 90,000. Five companies in the Houston, Dallas-Fort Worth and Austin areas received 500 foreign worker visas in a recent six-month period. The supply of visas ran out in May 1998.
Some abuses of the H-1B program have been reported, such as U.S. workers being fired and replaced by lower-paid foreign workers. The U.S. Department of Labor has received about 300 such complaints. While foreign H-1B workers are considered temporary--allowed to stay for up to six years--some have been in the U.S. for years as students, and almost half eventually secure permanent residency.
Complicating factors: The Year 2000 (Y2K) problem may be exacerbating labor market woes and has been linked to the run-up in computer programmers' salaries.
Businesses and governments around the world are scrambling to change their coding systems to avoid massive computer failures on January 1, 2000. Many organizations have diverted skilled workers to solving Y2K problems and patching old programs. Y2K is also cited as one reason why management consulting and accounting firms have added 200,000 workers since 1996.
The cyclical nature of many high-tech industries also complicates the supply-demand equation. Volatile growth rates make it hard to project employment needs far into the future.
Not only high-tech workers are in short supply. National surveys show record percentages of small businesses having trouble filling job openings, while the largest firms are competing fiercely for business school graduates, sales clerks and less specialized workers.
Texas' low unemployment and strong economic growth are tightening local job markets for everything from substitute teachers to construction workers. Southeast Texas, where petrochemical firms are gearing up for increased worldwide demand, reports shortages of welders, pipefitters, electricians and other skilled workers.
Furthermore, industries that have traditionally been labor-intensive and "low-tech" are increasing their use of technology. For example, McDonald's announced this year that it is introducing new equipment and a computerized food-ordering system to revolutionize its food preparation techniques. Workers using this new technology will need to be more trained than in the past.
Government initiatives: Responding to claims of critical shortages of skilled technology workers, the federal government has announced efforts to help train more computer programmers. Initiatives include millions of dollars in grants for educational programs, creation of a nationwide job bank on the Internet and a campaign to glamorize computer-related professions.
In Texas, the Governor's Science and Technology Council has recommended expanding the Advanced Placement Incentive Program to help increase high school students' proficiency in math and science and implementing a high-tech curriculum for community colleges. For more on the steps Texas organizations are taking to increase the supply of technically skilled workers, see the following article.
Contributing to this article:
Eva DeLuna-Castro and
Tammy Fisher Jung
