Computer industries have been an important facet of the nation's current economic expansion. During the 1990s, the computer sector has added almost three-quarters of a million jobs across the country, creating high-paying new positions and spawning new opportunities for the American entrepreneur.Computers ; Federal Reserve District, 10th

Jason Henderson

English

Research Papers in Economics

An Emerging Computer
Sector in the Tenth District
By Jason Henderson
C
omputer industries have been an important
facet of the nation’s current economic expan-
sion. During the 1990s, the computer sector has
added almost three-quarters of a million jobs across
the country, creating high-paying new positions and
spawning new opportunities for the American
entrepreneur.
During the current expansion, the Tenth District
has seen its economy expand significantly as well.
But have the computer industries within the district
grown as fast as their counterparts nationwide?
This article takes a look at the computer sector
in the Tenth District. The article shows that not
only has the computer sector grown faster in the
district than in the nation as a whole, but the surge
of new jobs in the computer sector has driven the
economic expansions in many states and metropoli-
tan areas, spreading into the smaller corners of the
district. The computer sector has laid a solid foun-
dation for expansions in other industries and cre-
ated a host of new high-paying jobs. It is not
surprising that a September 1997 article in U.S.
News and World Report declared, “The cornfields
are rocking.”
What is the computer sector?
The computer sector consists of two parts:
manufacturing and services. Manufacturing plants
produce computer hardware and are grouped into
two broad product categories: whole computers and
accessories, and components. The whole computer
and accessories category includes production and
assembly of computers and the production of com-
puter accessories, such as keyboards and monitors.
Firms such as Gateway and Dell are commonly
known manufacturers of whole computers and
accessories.
1 Computer components are the inner
workings of the machine. Firms such as Intel,
which produce computer chips and circuit boards,
are grouped into the component category.
2
Computer service firms typically produce com-
puter programs for personal or business use or pro-
vide various computer services. Retail computer
stores such as CompUSA are computer service
firms. Data processing centers for airline reserva-
tions and consumer credit card customer service
can also be classified as computer services. Two of
the more widely known computer service firms are
Microsoft and Sega. Some of the people who work
in the computer service firms are computer pro-
grammers, technicians, and local area network
(LAN) administrators.
How rapidly has the district’s computer sector
grown?
The computer sector has been growing at a dra-
matic pace in the Tenth District. In fact, during the
current economic expansion, computer sector busi-
nesses in the Tenth District have outperformed their
counterparts in the rest of the nation. The number
of computer sector businesses rose 82 percent from
1990 to 1995, the most current year for which data
are available, compared with a 70 percent gain in
the nation (Chart 1).
3 This business growth led to
12
1 Firms producing whole computers are listed in Standard Indus-
trial Classification code 357.
2 Firms producing computer components are listed in Standard
Industrial Classification code 367.
3 Data is obtained from County Business Patterns data. Due to dis-
closure problems, employment in some states was given as a range by
Country Business Patterns data. Therefore, the average value within the
range was used as the actual employment number.roughly 40 percent more computer sector jobs
across the district during this time, while the
national gain was only about half that. The job
gains across the district were balanced, with growth
strong in both manufacturing and services.
Computer manufacturers added jobs in the dis-
trict at a robust pace during the 1990s despite a
general contraction in the nation as a whole. Dis-
trict manufacturers posted strong job growth of
roughly 15 percent during this period, as computer
components industries established a strong foothold
in the district economy (Chart 2). Unlike in the
nation as a whole, job gains at district component
manufacturers offset job losses at whole computer
and accessories manufacturers.
While computer manufacturers have registered
strong job gains, a booming computer service sec-
tor has helped create jobs at a rapid pace. Jobs at
computer service businesses in the district rose 61
percent in the 1990s, as the number of establish-
ments doubled (Chart 2). These gains outperformed
the 45 percent job growth in the nation. As out-
sourcing became a prominent business practice in
the 1990s, entrepreneurs established new firms to
handle businesses’ computer servicing needs. Lead-
ing the way in computer service growth in the dis-
trict have been freelance computer programming
and data processing firms. For instance, in Colo-
rado the number of jobs in freelance computer pro-
gramming tripled in the 1990s. The production of
prepackaged software also expanded tremendously
to meet business and personal demand.
Not only have computer sector firms provided
jobs in the district, but the jobs have been high-
paying ones, especially in service employment
(Chart 3). Annual wages for computer manufactur-
ing workers are higher than wages for other manu-
facturing workers in the district, and wages in
computer services are well above wages in other
service areas. Contrary to most service areas, com-
puter service wages are higher than computer
manufacturing wages.
All seven states of the district have shared in
the growth in the computer sector. Colorado engi-
neered the largest gain in the number of computer
sector jobs, due mainly to strong job gains in com-
puter services (Table 1). The gains were so large
that by 1995, four of every ten jobs in the district’s
13
Chart 1
Computer Sector Growth
1990-95
0
Percent change
70
50
40
0
Percent change
70
50
40
90 90
Establishments Employment
80 80
20 20 U.S.
Tenth
District
60 60
30 30
10 1014
Chart 2
Computer Sector Growth
Employment, 1990-95
10
0
Percent change
50
40
30
10
0
Percent change
50
40
30
70 70
Service Manufacturing
60 60
20 20
U.S.
Tenth
District
-10 -10
Chart 3
Average Annual Wages
Tenth District, 1995
15
0
Thousand dollars
35
30
25
15
0
Thousand dollars
35
30
25
45 45
Computer Computer
40 40
20 20
Services Manufacturing
10 10
5 5
Other Othercomputer sector were located in the state of Colo-
rado. New Mexico enjoyed the fastest job growth of
any district state in the 1990s, with jobs nearly dou-
bling, due to a sharp rise in computer component
manufacturing and solid gains in the service sector.
Oklahoma enjoyed the second-fastest job growth,
as computer services sparked a 50 percent gain in
computer sector growth. Gains were also robust in
Nebraska, Kansas, and Missouri, while growth in
Wyoming was more modest.
The high tech impact on district states
In addition to leading to strong job growth in
the computer sector of district cities, the strength in
the industry has served as a cornerstone for growth
in other industries as well. The Mountain states
emerged as a high tech corridor in the early 1990s.
Recently, in smaller metro areas of the district the
growing computer sector has set a solid foundation
for expansion in other related industries.
The high tech corridor that emerged in the
Mountain states of the district was made possible in
large part by growth in the computer sector. Begin-
ning in the early 1990s, the Denver metro area
began to see tremendous growth in computer sector
firms and other high tech industries. Since then,
firms such as Hewlett Packard and Sun Microsys-
tems have revitalized the Colorado economy, mak-
ing it one of the fastest growing states in the nation
during the 1990s. Albuquerque has also received a
boost from the computer sector, particularly from
computer component manufacturers. The early
1990s brought an influx of computer chip manufac-
turers into the Albuquerque area and allowed New
Mexico to become a leading employment-growth
state in the district during this time.
After establishing a solid foothold in the dis-
trict’s Mountain states, computer service firms have
now begun to spread to some of the smaller metro
areas of the district. Omaha has enjoyed large gains
in computer service jobs as numerous data process-
ing firms have expanded into the area. Tulsa and
Oklahoma City have seen a jump in computer serv-
ices jobs led by information service firms.
Computer sector growth has also laid a solid
foundation for expansion of other related industries
that require vast amounts of computer servicing.
Banks and other financial institutions have
15
Table 1
Computer Sector Growth, 1990-95
Tenth District States
Share of 1995 district
employment
Computer sector growth
Establishment Employment
District 100.0 82.1 38.8
Colorado 42.1 111.7 35.2
Kansas 6.4 47.2 28.1
Missouri 20.6 67.7 28.6
Nebraska 12.0 73.2 42.9
New Mexico 8.4 75.1 93.3
Oklahoma 10.0 67.9 49.5
Wyoming .6 125.0 11.1expanded as the demand for data processing has
increased. In Omaha, for example, First Data
Resources has created a large amount of data proc-
essing jobs. Data processing centers associated with
the banking industry have also generated numerous
jobs in other parts of the district. Moreover, tele-
communication firms, which conduct large amounts
of their own computer servicing, have also under-
gone significant expansion in the district. Sprint,
which has grown from a smaller long distance car-
rier into one of the biggest employers in the Kansas
City area, is now building a central campus to
house over 14,500 employers in a centralized loca-
tion. Jobs such as these are classified in other sec-
tors, but their basic function is often computer or
data processing, which if contracted to outside
firms, would be classified as computer services.
Conclusions
The computer sector has grown faster in the
district than the nation as a whole due to solid
manufacturing growth and a boom in computer
services. Computer industries have created numer-
ous high-paying jobs for district workers. Computer
sector growth has been widely shared across the
district and has revitalized many district cities by
providing a solid foundation for expansions in other
industries.
While computer sector expansions have driven
job growth dramatically, growth in the future may
not be as rapid. Currently, the Tenth District and
the nation are enjoying one of the lowest unem-
ployment rates in history, creating a general tight-
ness in the labor market—including a shortage of
computer specialists. This shortage is inhibiting the
ability of some firms to expand and grow. If the
computer sector should continue to expand, how-
ever, the Tenth District is poised to become a major
computing center.
REFERENCES
Holstein, William. 1997.  “They’d Rather Be in Omaha:
As the Heartland Goes High Tech, the Cornfields are
Rocking,” U.S. News and World Report, Sept., pp.
53-56.
16
Jason Henderson is a research associate at the Federal Reserve Bank of
Kansas City.

They’d Rather Be in Omaha: As the Heartland Goes High Tech, the Cornfields are Rocking,” U.S. News and World Report,

An emerging computer sector in the Tenth District

http://www.kansascityfed.org/publicat/red/pdf/3q98bank.pdf

An emerging computer sector in the Tenth District

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