Information and Technology Sector

Economics 309 -- Humboldt County Wealth Indicators Project 2001

Alicia Wagner

Sources:

Anita Alexander, EDD Labor Analyst: California Development Department Data, http://www.edd.cahwnet.gov/eddhome.htm

James Nelson, President, Redwood Technology Consortium

Bureau of Economic Analyses, http://www.bea.doc.gov/bea/regional/data.htm

Definitions of SIC groupings:

7371: Computer Programming Services

7372: Prepackaged Software

7373: Computer Integrated Systems Design (CAD, CAE, Office Automation, etc.)

7374: Computer Processing and Data Preparation and Processing Services

7375: Information Retrieval Services (Credit Reporting etc.)

*7376: Computer Facilities Management Services

*7377: Computer Rental and Leasing

*7378: Computer Maintenance and Repair

7379: Other Computer Related Services (Consultants, data bases, conversion services)

*As of 1999 not present in Humboldt County

How are we doing?

Humboldt County has seen a tremendous increase in the presence of the Information and Technology industry cluster. The county has increased not only in the number of companies producing in this cluster, but also in the number of people that these companies employ and the total amount of payroll that is being paid out to this workforce.

There has been an increase in the number of Information and Technology companies from 1991, our base year, to 1999, with 2000 data not available. The number of companies increased by 100%, from 13 to 26. The majority of this increase was seen within the same SIC classifications. The two largest types of information and technology companies in Humboldt County are those specifically oriented at computer programming, and those that cannot be classified elsewhere, such as consultancy-based companies, data base work, and conversion services. However, we have seen the introduction of a new type of company, which involves work in information retrieval (such as credit reporting).

The number of people employed by these companies is where we can see the growth in the industry. While as of 1999 the number employed by this cluster was still only 0.2% of the total number of people employed in Humboldt County, we saw an increase in employment of 364.0% from 1991 to 1999. From 1991 to 1998 there was an increase in employment of 293.8%. Compare this to the general growth of employment in Humboldt County of 10.8%, and only 9.8% for the state of California.

As is obvious from the fact that employment has increased so much in this cluster, we can also see that total payroll has increased. From 1991 to 1999, total payroll increased by a little over 4 million dollars. While this is only about 0.02% of the total personal income for Humboldt County, it is still 4 million dollars that is being injected into the local economy.

While between 1991 and 1998 there was actually a decrease in the per capita earnings of workers for this industry, we can still see that these earnings have exceeded the average for Humboldt County in every year between 1991 and 1998 (1999 Humboldt County information is not available). These are desirable and livable wages for workers in Humboldt County. Perhaps the decrease in wages previously mentioned can be attributed to the large increase in number of workers being hired. Wages increased significantly from 1998 to 1999 (although still not back to 1991 levels), and this could signify the fact that perhaps wages are finally catching up to the number of people employed.

James Nelson of the Redwood Technology Consortium (RTC) would argue that this industry is even larger in Humboldt County than the data would suggest. This is because of the way that the industry cluster information is collected. For one, many IT consultants are self-employed. Therefore they are not taken into account when the data is put together. While this does not have much of an effect on the data for employment, it would affect figures such as payroll (which the entrepreneurs would be paying to themselves) and the number of businesses in general. Another aspect would be the data for employment: not all of the people employed within what can be considered IT are counted under the SIC codes for the Information and Technology cluster. For example, tech support workers could be classified as ìphone workersî under another SIC classification.

Despite these challenges, this cluster is indeed growing in Humboldt County. We have seen increases in the number of companies, the number of people employed, and the amount of payroll being paid out. All of these quantities exceed figures for Humboldt County as a whole.

Why is this important?

S. Viederman defined sustainability as "...a community's control and prudent use of all forms of capital... to ensure, to the degree possible, that present and future generations can attain a high degree of economic security and achieve democracy while maintaining the integrity of the ecological systems upon which all production depends." The information and technology industry cluster is important in that it can satisfy every one of the factors for Humboldt County. As James Nelson said, "As our IT sector emerges it should have a strong positive impact on our economy, our environment, and our community." These are the three pillars of sustainability.

This cluster is obviously seen as an important contributor to the economy of Humboldt County. The increases in payroll and profit that are occurring can only better the economy of this county: as people are paid most of that money will move back in to the economy in the form of taxes, monies paid in the retail industry, and real estate, says James Nelson.

The introduction of new industries has proved to be beneficial to most economies, because diversifying them only helps when other industries fail. The wages paid in this industry cluster are also on average higher, which will contribute to the well being of the workers in this cluster.

The workforce that is associated with this cluster is also, on average, educated on a higher level than the average citizen. Bringing in people that will work for this industry, or, encouraging locals to train for this type of work, can increase the level of education of the county. With this higher level of education we can see a building of social and human capital, which, hopefully, will increase the democratic processes of the people in this county. We already have higher than average levels of participation in this county, but perhaps with an increase of inhabitants that have been formally educated we can see an even higher increase.

What might change as this industry cluster grows in Humboldt County is a change in local culture. If we see many "outsiders" moving in, perhaps much of the culture that the North Coast prides itself on will change. For years the North Coast has based itself around mentalities that are special to smaller communities, mentalities that offer much social cohesion. This will change as more people move here. However, once locals see what the industry has to offer (most of all jobs to support the loss in other industries) they might be accepting of a new culture to complement the already existing ones.

The third pillar of sustainability involves the survival and integrity of the natural environment. This sector has the ability to be one of the most environmentally friendly. As James Nelson said, these jobs pay living wages, they do not rely on natural resources, and they rarely generate toxic byproducts. This sector has the ability to help lower the use of natural resources such as paper products. While it has not been so successful in other areas of the country, perhaps with the culture of the North Coast we can see these practices being adopted better here than elsewhere.

The North Coast, in both its natural environment and its local culture, has so much to offer to people moving here. That is the reason why previous IT start-ups have moved here and why others have stayed, and they will be the reasons why more people will move here if Humboldt County can overcome its obstacles.

It is important to make sure that Humboldt County does not become another Silicon Valley. What was once a beautiful natural environment and local culture has changed significantly into something very different. While not all aspects of that change are bad, we do not want to see the bad things, such as urban sprawl, occur here. But perhaps we can learn from what happened to the Silicon Valley. It is surely not a reason to hide and discourage more companies to move here, or to hinder our locals in starting their own companies.

According to James Nelson, there are barriers that Humboldt County has to get over before the IT sector can expand in Humboldt County. The largest one is the fact that we do not have fiber optic links for the IT to make use of. We need something with a large bandwidth, and not the microwave transmission that are now existent, if we are to be competitive with the rest of the US. We also have a lack of local venture capital. Banks that would normally lend to new businesses for things such as farm machinery will not lend to companies or people that want to start Information and Technology companies. Another thing that Humboldt County needs to work on is the fact that we lack a qualified workforce. According to Nelson, these companies have a very low labor pool to choose from. One more thing that is a barrier to this cluster is "the lack of public awareness that the tech industry is alive, well, and truly our best hope for clean living wage jobs and a prosperous future."