Fact of the Week: A 10 Percent Increase in Tech Employment Increases a City's Wages for Other Jobs

Caleb Foote August 13, 2018
August 13, 2018

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A 10 percent increase in tech employment increases a city’s real wages for other jobs by 0.7 percent.

Source: Thomas Kemeny and Taner Osman, “The Wider Impacts of High-Technology Employment: Evidence from U.S. Cities” (Working Paper 89, Centre for Globalisation Research, School of Business and Management, Queen Mary, University of London, 2018).

Commentary: With proposals to ban everything from private cafeterias to electric scooters, cities like San Francisco have been lashing out at tech workers, because the popular perception has been that they drive up prices of everything, especially housing, for everyone else around them. But to the extent that these cost-of-living increases are real and intrinsic to the tech sector, they are more than outweighed by the improved wages the tech industry generates. According to a new study of hundreds of U.S. cities from 2000 to 2015, workers in industries that don’t face significant competition outside of their regions saw their wages rise by 0.7 percent for every 10 percent increase in tech employment, adjusting for any changes in the local cost of living.

While this effect might seem small, the gains have been both broadly distributed and dramatic in many areas. Three-quarters of the cities saw tech employment increase by at least 7 percent in that period, and one-quarter saw increases of more than 50 percent. The effect of tech employment is larger for jobs that require more education, but it is consistently positive, representing a 0.2 percent increase in real wages for jobs that require the least education for every 10 percent increase in tech employment. So, while it’s true that high-paying innovative jobs can drive up prices, this is more than outweighed by the increased spending and thus business opportunities that skilled workers bring to the regions where they live.