State tech growth measured in government report

By John Duchemin
Advertiser Staff Writer

A new government report charts the growth of the state's technology sector through the turn of the millennium, but also demonstrates the difficulty of measuring that small but increasingly prominent sector of Hawai'i's economy.

The private technology sector — a mix of biotechnology, software development, telecommunications and other firms — grew to an 880-firm, 12,400-employee industry that paid $583 million in wages in 1999, according to the state Department of Business, Economic Development and Tourism in a report issued yesterday.

The tech sector's job growth of 17.3 percent outpaced overall private-sector employment, which increased 0.4 percent over the same three years. Wage growth and average wage levels were also higher than the private-sector averages, the state reported.

State economists said the growth is a good sign for the technology industry, but acknowledged that the statistics are incomplete, prone to volatility and relatively old because they don't include 2000 numbers.

The numbers exclude key segments of the Hawai'i tech industry: university institutes, hospitals, and military-sponsored projects and contractors, among others. Sole proprietors and contract workers are also not included in the job data. The state economists must exclude those sectors because they are not reported in federal Department of Labor unemployment insurance data, which was used to generate the statistics.

By not including 2000 — a year in which many local technology firms saw rapid expansion — the data also likely under-reports the size of the tech industry, said Pearl Imada Iboshi, economic research director for DBEDT. The report will be updated after the Department of Labor releases revised 2000 employment numbers in August or September, state officials said.

Because the tech sector is relatively small — the technology jobs reported by DBEDT were 2.9 percent of the state private-sector total in 1999 — the numbers are prone to volatility. For example, the state reported that the biotechnology sector grew 395 percent between 1996 and 1999 — from 122 to 604 jobs, a number that could easily fluctuate in the future. And the state changed its reporting methodology after a similar report last spring, so previously reported numbers don't match up with the latest statistics, said Robert Shore, a DBEDT economist.

Despite the reporting difficulties, the numbers bode well for the tech industry, Imada Iboshi said.

"I think this is a sign that there has been solid, consistent growth in the sector, not just a one-year jump," she said.

Among the state's findings:

• The number of technology firms grew to 880 in 1999, up from 740 in 1996.
• High-tech employment grew to 12,400, up from 10,600.
• Total wages paid to technology workers grew 34 percent to $582.5 million, up from $434.7 million.
• The information technology sector, which includes software development, Internet service providers and computer systems management, was a growth leader. Infotech jobs grew 50 percent to 3,600 in 1999, up from 2,400 in 1996. Meanwhile, the average annual wage leaped to $52,600, up 28 percent from $41,000.
• Overall average wages for tech workers grew 14.1 percent to $46,900, up from $41,100 in 1996. For the private sector as a whole, average wages rose to $28,200, up 7.6 percent from $26,200.