Technology Innovation Clusters are the KEY Drivers of San Diego's Regional Economic Growth
Kelly Cunningham, NATIONAL UNIVERSITY SYSTEM INSTITUTE FOR POLICY RESEARCH
Thursday, August 27, 2015
Comparing other major metropolitan areas across the nation reveals how strongly and diversely concentrated San Diego’s tech economy has become. According to Kelly Cunningham, economist and senior fellow for the National University System Institute for Policy Research, “Among the 25 largest metro areas in the nation, San Diego stands alone as the most diverse technologically concentrated region.” In a comparison of eight general sectors of technology employment defined by NAICS categories of industry, only San Diego had seven technology concentrated sectors. San Francisco and Seattle follow with five sectors each.
According to Cunningham, “San Diego’s significant diversity and strength among technology endeavors is a powerful force driving the regional economy. Technical diversity is particularly advantageous as technologies converge. For example, the merging of telecommunications with biomed diagnostic equipment and computer and electronic monitoring systems has immense possibilities and advantages with each technology cluster having strong concentrations in San Diego. This regional diversity provides immense strengths and possibilities of further innovation and growth.”
As of 2014, technology companies account for 6.9 percent of San Diego employers, 11.1 percent of payroll jobs, and 22 percent of total wages. The average wage of workers employed by technology companies is $114,300, 2.3 times higher than the average of non-tech San Diego companies at $49,700.
Technology sectors lead not only in proportion of jobs added, but relative number of companies created and total payroll wage gains. Tech company payrolls increased 7.1 percent in 2014, higher than the overall increase of 5.2 percent; excluding tech sectors, payrolls otherwise increased 4.7 percent.
The number of tech businesses rose 7.3 percent between 2013 and 2014, while payroll jobs increased only 2.7 percent. This reflects the start-up nature of the local tech economy as new companies generally begin with fewer employees. In comparison, establishments overall in San Diego increased 1.3 percent while employment rose 2.6 percent.
Technology industries directly account for 12 percent of San Diego’s gross domestic product (GDP), but the total impact derived from all economic activity generated rises to 22 percent. This includes direct, indirect and induced effects impacting 364,600 jobs, or 27 percent of San Diego’s total employment base depend upon tech based businesses, their spending and payrolls.
“Scientific research and development services” are the single most valuable sector of San Diego’s technology-driven industries. This primarily encompasses biotechnology and pharmaceuticals efforts, but parts of computer/electronics, software, and defense industries as well. Altogether San Diego’s R&D sciences generated $9.0 billion directly in sales, $7.4 billion of economic value, and 31,200 jobs with $6.2 billion payrolls. Wireless telecommunications is second with $5.7 billion in sales and $3.0 billion economic impact.
Combining biotechnology and pharmaceuticals with biomedical device sectors shows these sectors have emerged as San Diego’s leading technology industry. Over the past decade, steady growth of jobs among biotech endeavors led to this sector rising above communications, software and defense/transportation.
Technology employment concentration is highest for physical, engineering and biological research (NAICS: 54171) with San Diego the 4th largest number of these workers in the nation. Furthermore, with annual average wage of $176,824, the concentration of payroll wages is highest in the nation.
San Diego’s technology industries, economic impact, employment, and national rankings are summarized in the National University System Institute for Policy Research September 2015 edition of the San Diego Economic Ledger.