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JUST HOW BIG IS HIGH TECH?

How big is the high-tech sector, and how fast is it growing? The government's economic statistics, it seems, are still stuck back in the days when smokestack industries ruled supreme. But an analysis by BUSINESS WEEK shows the importance of high tech to the economy.

Take the job market first. According to BUSINESS WEEK's calculations, there are 9.1 million workers in the high-tech sector (table). In part, this total is based on the government's published numbers, which provide data on employment in such industries as software and semiconductors.

But the jobs within the high-tech industries are not the whole story. These days, most companies, from airlines to steelmakers, employ large numbers of programmers, network technicians, and other high-tech personnel. To count these workers, BUSINESS WEEK analyzed unpublished data from the Current Population Survey, the government's main source for employment figures. Adding these workers boosts the total by some 60%.

DOWNSIDE. The same calculation shows that the number of high-tech jobs rose by 4.9% in 1996, vs. a 2% increase in the rest of the economy. Wages also grew faster in high tech, according to our analysis of published and unpublished government data. The combination of more jobs and rising pay leads to the conclusion that high-tech jobs contributed roughly 20% to 25% of the growth in real wages and incomes in 1996.

On the output side, high tech's contribution to GDP totaled $420 billion in 1996, up 15% from 1995 (table). These figures are based on BUSINESS WEEK's new inflation-adjusted data series for high tech using the Commerce Dept.'s chain-weighting procedure. (Increases in computing power are captured by the inflation adjustment.)

But there's a downside to high tech's new preeminence. Anyone who is familiar with Silicon Valley knows that computers and related industries are given to booms and busts. To reveal this volatility, we constructed a data series showing high-tech spending without any adjustment for inflation or for increases in computer power. This ''nominal'' series is the number of dollars flowing through high-tech companies, measuring the resources they have to hire workers and to purchase goods. Nominal growth exhibited wide swings in the 1980s and early 1990s, including 1989 through 1991, when high-tech spending lagged behind other sectors.

This analysis demonstrates just how different the past few years are from what went before. From 1983 to 1993, nominal high-tech spending rose no faster than overall GDP. Only since 1993 has high tech accelerated far ahead of the rest of the economy, making it large enough to be the prime mover of the business cycle.

By Michael J. Mandel in New York


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Updated June 15, 1997 by bwwebmaster
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