This 11th annual edition of AeA’s flagship publication, Cyberstates, examines the high-technology industry in all 50 states, the District of Columbia, and Puerto Rico.  It provides new 2007 national data on tech employment and venture capital investments.  It also includes the latest data on high-tech wages, establishments, payroll, and research and development (R&D) expenditures.

For the second consecutive year, we did not include international trade data in this report.  A forthcoming AeA report entitled Trade in the Cyberstates 2008 will highlight the importance of high-tech trade to the nation, particularly technology exports from all 50 states, the District of Columbia, and Puerto Rico.

The high-tech industry added jobs to the U.S. economy for the third year in a row.  Tech industry employment totaled 5.9 million, after adding 91,400 jobs in 2007.  This is on top of job gains of 139,000 in 2006 and 87,400 in 2005.

This is the fourth straight year of employment gains in the tech industry’s two strongest sectors --- software services (+82,600) and engineering and tech services (+45,800).  The downside is that growth in these sectors was slower than last year; and the other two tech sectors, high-tech manufacturing and communications services, both saw net employment losses in 2007.

Cyberstates 2008 relies on data from the U.S. Bureau of Labor Statistics (BLS).  At the national level, employment data are available for 2007.  State employment and national and state wage, establishment, and payroll data are for 2006.  Unfortunately, state specific data from BLS lag by nine months.  All data are the most recent available at the time of publication.

Forty-eight cyberstates experienced net job growth in 2006.  The largest gains occurred in California (+21,400), Texas (+13,700), Virginia (+9,800), New Jersey (+8,500), and New Mexico (+6,700).  On a percentage basis, New Mexico saw the fastest job growth in 2006 at 16 percent.

Virginia continued to lead the nation with the highest concentration of tech workers, with 91 of every 1,000 private sector workers employed in the tech industry.  Massachusetts and Colorado had the next highest concentrations of tech industry workers.

The high-tech industry employs highly educated workers and pays them well --- 87 percent more than the average private sector worker nationwide.  Forty-seven cyberstates had wage differentials higher than 50 percent and four cyberstates had differentials higher than 100 percent.

Venture capitalists invested nearly $17 billion in the tech industry in 2007, a six percent rise over 2006.  Technology companies spent $75 billion on R&D in 2005, the most recent year that data are available, representing 37 percent of all industrial R&D.

Although the U.S. tech industry continues to add jobs, AeA is concerned that future growth is being jeopardized unless the United States prepares itself for a vastly more competitive global marketplace.  In March 2007, AeA released the report, We Are Still Losing the Competitive Advantage: Now Is the Time To Act, building on a similar report we released in 2005.  Both reports warned of an impending slide in U.S. global competitiveness, caused by negligence on the part of our political leaders to adequately invest in scientific research, improve our education system, and allow the best and brightest from around the world to work in the United States.

The tech industry has long demonstrated its ability to drive the economy.  But it will continue to do so only if we as a country address unprecedented global competitiveness challenges as nations around the world open their markets to trade, embrace technology, and invest in research and education.

If Americans are to compete in a global economy that is knowledge-based and driven by technology, the U.S. education system needs to improve dramatically.  Recent international tests show that American 15-year-olds ranked 17th in science and 24th in math compared to their peers in other developed countries.  Skilled workers are critical to the technology industry, and the United States needs to ensure that the American education system from K-12 to our colleges and universities produces enough scientists and engineers to support an industry that is so crucial to our economic prosperity.

Additionally, U.S. federal R&D funding has faltered.  Federal research generated numerous technological breakthroughs in the 20th century, from the Internet to the MRI scanner to GPS --- to name just a few.  The tech industry’s extraordinary success was built in large part on R&D investments from 20 to 30 years ago.  But as a percentage of the economy, federal investments in R&D have declined from their peak in the mid-1980s.  Meanwhile, Congress has let the R&D tax credit lapse, in effect, discouraging companies from investing in future innovation in the United States.  Other countries, including China, have more attractive R&D tax credits, some even permanent.

Lastly, we need to support high-skilled immigration.  Tech companies need to be able to recruit the best and the brightest from around the world.  Given the poor state of our education system and the lack of American kids pursuing careers in science and engineering, high-skilled immigration is a critical safety valve for high-tech companies.  Half of all U.S. graduate degrees in engineering go to foreign nationals.  Yet these people often have to leave the country as soon as they graduate because they can't get a visa to stay.  These talented individuals do not come here and take American jobs; they create thousands of jobs by developing intellectual property, spawning innovation, and founding companies.

AeA was proud to have been instrumental in promoting legislation that became the America Competes Act, which overwhelmingly passed through Congress and was signed into law in August 2007.  This Act addresses many of the issues raised here.  The bill only authorized these measures, but no funding was provided for this legislation.  We call on policymakers to fully fund the America Competes Act in 2008.

Christopher W. Hansen
President and CEO
AeA, Advancing the Business of Technology

Chris Hansen, President & CEO, AeA is interviewed on FOX Business about Cyberstates 2008, High-Skilled Visa Reform, STEM Education, and U.S. Competitiveness on April 2.  Hansen asks Congress to fund the America Competes Act.