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New report: Utah high-tech is a high-performance juggernaut

SALT LAKE CITY — Utah tech is killing it and showing no signs of slowing down anytime soon.

That's the nutshell takeaway from a just-released report from the University of Utah's Kem C. Gardner Policy Institute.

The expansive study is the result of a two-year effort that dug into the depth and breadth of the state's tech sector, parsing its micro- and macro-economic impacts, historical trends and how Utah compares to the rest of the country when viewed through the filter of high-tech industry performance and growth.

The report also highlights issues that have accompanied tech's stellar growth arc in the state, including data showing workforce diversity is lagging well behind national averages.

And, some industry watchers are wary of the growing wage gap between tech and nontech professions and how that disparity could exacerbate affordable housing challenges in the state.

Heather Tuttle

Utah's tech sector has built an enormous and still-growing footprint when it comes to what's driving the state's economy. As of the close of 2018, the sector is responsible in direct and indirect fashion for over 210,000 jobs in the state, contributing nearly $30 billion to the state's GDP (about 18% of total) and is compensating employees at the rate, on average, of $106,100 annually versus the $58,500 average yearly compensation in nontech industries.

Val Hale, executive director of the Governor's Office of Economic Development, said the Gardner findings will not be a surprise to anyone who's been watching the rise of Utah tech.

"It’s no secret and the study confirms what we already know," Hale said. "The tech sector has really been driving Utah’s economic prosperity over the last decade and longer. The tech industry just continues to expand, and it's pretty remarkable performance.

"We really see no sign of things slowing down."

Levi Pace, senior research economist for Gardner and the lead researcher on the Utah's Tech Economy report, echoed Hale's sentiment on the likelihood of continued expansion of the state's tech economy, a growth cycle he noted began in the aftermath of the housing bubble collapse.

"Coming out of the Great Recession is when we started to really pull away from the rest of the U.S. in terms of growth," Pace said. "Now, Utah is getting a much larger share of out-of-state investment dollars and, even with wage increases, the state is very attractive as a location to expand or relocate.

Construction continues on Pluralsight's new headquarters in Draper on Monday, July 29, 2019.
Construction continues on Pluralsight's new headquarters in Draper on Monday, July 29, 2019.
Kristin Murphy, Deseret News

"Utah has shown it is very competitive and that will keep rolling," Pace said.

Pace's report shows ample evidence of that, and Utah — even when compared to other state economies that are orders of scale larger — is a very high performer when it comes to tech economy metrics.

According to the report, in terms of total employment and wages in the private sector, no state with an economy of Utah’s size had a larger tech industry as of 2018. And Utah had the second-highest 10-year tech industry job growth rate among all states and the third-fastest total wage growth. When it comes to tech jobs as a proportion of of all industries, Utah is holding down the fifth spot nationally with a 6.4% rate. And those jobs provided 11.6% of the state's total private sector wages.

Wage rates for tech workers in Utah have been among the fastest rising in the country, averaging 6.9% annual growth from 2008-18, an increase from $3.6 billion to $7 billion in inflation-adjusted dollars. That stellar growth arc was capped by a nation-leading 16.6% jump from 2017 to 2018, against a national average that year of 5.4% for tech workers.

Utah's 6,700-plus tech companies can be found all over the state, but are largely concentrated along the Wasatch Front, with Salt Lake and Utah counties hosting the preponderance of those entities. While Utah County's Point of the Mountain area is widely referenced as the heart of the state's so-called Silicon Slopes, Gardner's data reflects many more companies are located in Salt Lake County. And Salt Lake City hosts more tech firms than any other Utah municipality with 916 companies.

Heather Tuttle

The report also notes that while the state's tech sector is an economic powerhouse, it reflects the same diversity challenges as the overall U.S. tech realm, with the typical Utah tech worker likely to be male, white or Asian and midcareer. Viewed against countrywide performance data, diversity in the Utah tech sector is lagging behind national averages. According to the report, in 2017 83.2% of Utahns in tech occupations were white while 16.8% were racial or ethnic minorities. Nationally, about 36% of tech workers in 2017 were racial or ethnic minorities.

Utah is trailing the national average for the number of women employed in tech, as well. While 2017 data reflects 22.5% of U.S. tech workers were female, in Utah in the same year, women made up only 15.2% of the state's tech workforce.

At a Tuesday panel discussion of the Gardner report findings, several questions were raised about the state's booming tech economy's relationship to affordable housing issues.

Gardner researchers James Wood and Dejan Eskic published a research brief last year that took a hard look at what's behind rising housing costs in Utah and found two factors: First, increased costs of things like permits, construction and land costs, and the second category, the state's booming economy, of which tech has grown into a primary driver.

Hale said the downside of growth includes the challenges it precipitates such as a dearth of qualified workers and rising costs. He noted while state leaders are already working on multiple fronts to build the tech talent pipeline, housing can be a trickier dilemma.

"We are experiencing growing pains, and they include workforce shortages … and the cost of housing and cost of living along the Wasatch Front, which has gone up considerably," Hale said. "Affordable housing is one of our most difficult challenges … housing cost is driven by demand and I'm not sure there’s a silver bullet for government to address that."

Hale said as tech continues to power Utah's economy, a fundamental rethinking of housing inventory will be required, including a much bigger committment to multi-family and high-density housing, particularly as developable land tracts along the Wasatch Front continue to disappear.