Written by Technically Media CEO Chris Wink, Technical.ly’s Culture Builder newsletter features tips on growing powerful teams and dynamic workplaces. Below is the latest edition we published. Sign up to get the next one.
Most usually, the undercurrent of the conversation is that in the future, everyone will use laptops to create software that will be hosted in the cloud. Everyone will be rich and the trash will collect itself — which is why policymakers and strategists clumsily hawk their cities as places for the brilliant to write code and sip lattes.
We’ve lost the thread. Tech jobs really do matter, but it’s imperative to consider why.
Thinking of jobs simply as either high wage or low wage is the wrong way to build a long-term economic strategy, argued Alan Binder 15 years ago in his influential research on offshoring, since earnings are highly determined by short-term factors. Better to think in terms of jobs that can be done via an internet connection, and those that need to be done in person. This has been called “The New Division of Labor.”
Economists describe this divide between internet-enabled jobs and local or in-person ones by calling them “tradable” or “non-tradable” — jobs that can be easily done from anywhere are tradable, the opposite of those that must remain physically tied.
Thus, a call center operator and a software engineer are both “tradable jobs,” regardless of the currently wide gap in their average earnings. As a recent four-part series by Technical.ly demonstrated, more companies are hiring internationally for both role types. On the flip side, trash collectors, carpenters and surgeons are all called “non-tradable” or local jobs, despite their own differences in average earnings.
If many of today’s so-called “tech jobs” are “tradable,” why are they still so coveted?
For two reasons, actually: the income gains from globally competitive jobs and, less obviously, “the local jobs that are supported by that income generation,” according to a recent report from the Bay Area Council Economic Institute. That report, which is an update on a more comprehensive assessment from 2012, estimates that every “high-tech worker” supports another 4.4 local, or “non-tradable” jobs — those trash collectors, carpenters and surgeons of the world.
Software engineers have been forced to become wildly more efficient in 2022 than they were in 1992. That’s expected to continue.
How can high-tech jobs have such an outsized impact?
For one, they’re especially well paid — according to a Technical.ly assessment from earlier this year, tech jobs have grown as a share of high-income earners in each of a dozen US cities we evaluated. Those jobs are well paid because they tend to be highly productive — a scientist, software engineer and data scientist can typically do a job once and have their work used again and again, but a carpenter really can only frame one house at a time. High-tech skills are also in relatively short supply, so demand for them is high.
Another reason high-tech jobs tend to be well paid is exactly because they can be done elsewhere: They’re globally competitive. The software engineer paid $150,000 in Baltimore must be twice as valuable as the one paid $75,000 in Belarus. Competition tends to make professionals continuously sharpen their skills. Skill sharpening is a kind of innovation, which is a way to describe productivity gains, which is how we tabulate economic growth.
Economic output per worker in “tradable” jobs increased an inflation-adjusted 37% faster between 2000 and 2019 than the rest of the economy, according to that Bay Area Council Economic Institute report. In 1990, those jobs accounted for 29% of US economic output, and now it’s nearly two-thirds. Of all the “tradable” jobs, high-tech roles were the major drivers of those trends.
Put another way, software engineers have been forced to become wildly more efficient in 2022 than they were in 1992 — far more than carpenters. That’s expected to continue. In 2019, nearly three-quarters of all private sector research and development was in “high-tech,” despite representing only 2.7% of private-sector employment, which we’d expect to result in further efficiency.
This is an example of the “superstar” labor markets famously outlined in the 1990s by economists Sherwin Rosen and Robert Frank. When the transaction costs to do business internationally shrink, salaries for the most valuable jobs that can be done anywhere will be bid up by increasingly advanced professionals. In contrast, it’s still difficult for someone in Mexico, China or the Ukraine to handle trash collection, carpentry or surgery here in the United States — though we still aim to become more efficient in those ways, too. The right “future of work” mix requires a balance of both tech work and the local jobs that make any place home, all while emerging technologies disrupt both.
As Barbara Garson wrote in “Electronic Sweatshop,” her provocative 1989 book: “Extraordinary human ingenuity has been used to eliminate the need for human ingenuity.”
Despite news of layoffs, tech jobs are resilient amid economic slowdowns, and good thing. Cities need to attract tech workers not just because they are economic winners but because they’ll play an outsized role in supporting and shaping wherever they live — if we can keep them.