Tech industry a growing force in US economy for jobs, innovation and exports, study finds

Editor’s note: This report was written by Robert D. Atkinson, founder and president of the Information Technology & Innovation Foundation, a non-partisan think tank in Washington, D.C. Atkinson Atkinson holds a Ph.D. in city and regional planning from the University of North Carolina, Chapel Hill. This story is the latest in a series of “Deep Dives” from WRAL TechWire that take in-depth views and analysis into R&D, economic development, jobs and more.


WASHINGTON, D.C. – The information technology (IT) sector makes an outsized contribution to the U.S. economy as a leading exporter that creates high-paying jobs, including for non-college-educated workers, while producing highly innovative products and services that drive broad-based growth, counteract inflation, and improve people’s quality of life.

Industries vary in the relative contributions they make to national economies: Some pay their workers more than others do. Some raise their prices more slowly than others do—or even reduce their prices over time. Some export, which expands their production and shifts the overall economy toward greater competitiveness and productivity, enabling average workers to better afford imports. And some innovate more than others, thereby driving economic growth and improving people’s quality of life.1 America’s IT industry has all these qualities: high pay, low price inflation for consumers, strong exports, and superior innovation. This report relies on the latest data available from the federal government to examine the key role and contributions of the IT industry in the U.S. economy. (Appendix 1 describes the methodology.)

The U.S. IT sector (which many refer to as the “tech sector”) includes industries such as computing, data storage and processing, IT components, information services, semiconductors, and software. The sector employed 5.9 million workers in 2020, accounting for 4.4 percent of U.S. private sector jobs.2 These workers earned more than double the average U.S. wage.3 Taking into account the multiplier effect, the industry supports 19 percent of all U.S. jobs.4

The IT sector also is an important source of well-paying jobs for non-college-educated Americans. The sector pays such workers approximately 50 percent more than do non-IT industries.5

Importantly, the lion’s share of the sector is globally traded, meaning it exports products and services and competes with production from other countries. As a share of U.S. industries that compete in the global economy, the IT sector accounts for 28 percent of establishments, 22.4 percent of jobs, and 30.7 percent of payroll expenditures.6 But given the ferocity of the global competition for leadership in the IT sector, the United States should take none of this for granted.

Finally, the IT sector is important not just because of its direct impact on the economy in terms of jobs and income, but also because of its indirect effect on organizations using IT to improve quality and productivity, whether they are for-profit companies, nonprofits, or governments. This is why there is a modest negative correlation between an industry’s use of IT and inflation over the last decade. In other words, industries that use more IT raise prices at half the rate than does the overall economy—and those savings are then passed onto American consumers.

More broadly, the nation’s most strategically important industries have three main characteristics—they are driven by advanced technologies, they are globally traded sectors, and they serve the dual purpose of contributing to both economic and national security—and even among the select group that meet those criteria, the IT sector is a standout for the United States, punching 35 percent above its weight in the global marketplace. That is, the U.S. IT sector represented nearly one-third of the global IT market in the most recent comparative data available from the OECD (32.1 percent), which was 35 percent higher than the U.S. share of the overall global economy.7

This is a telling measure of industry concentration known as location quotient (LQ), and as shown in figure 1, the trend line for the U.S. IT sector has been distinctly positive in recent decades: Its relative global market share went from 1.08x in 1995 (i.e., 8 percent higher than the size-adjusted average among 66 countries in the OECD’s dataset) to 1.35x in 2018 (or 35 percent above the relative average). In fact, if not for the IT sector’s contribution, America’s most strategically important advanced industries as a group would have receded precipitously in that period in the face of surging competition, particularly from China. The IT sector thus represents a core strength that U.S. policymakers should not take lightly.

Figure 1: U.S. performance in advanced industry sectors8image

Figure 2 further underscores the IT sector’s growing importance in the U.S. economy. Among strategically important advanced industries, it has stood out in recent decades as a particularly high performer—important not just for its size, but also for its growth relative to the rest of the economy. In other words, the United States—still the world’s largest economy, and among the most diversified—is becoming increasingly specialized in IT.

Figure 2: Change in relative concentration of advanced industries in the U.S. economy, 1995–2018 (scaled to production output in 2018)9image


In 2020, there were 275,859 IT industry establishments in the United States with a total annual payroll of $722 billion.10

Moreover, the sector is a source of well-paying jobs for Americans. In 2020, the average annual compensation per worker in the IT industry was $122,270, 117 percent more than the average U.S. private sector wage.11 The Department of Commerce’s new report on the digital economy finds that from 2012 to 2020, the nominal compensation for digital economy workers grew at an average annual rate of 6.0 percent.12 From 2019 to 2020, the average nominal compensation saw an even larger growth of 7.3 percent.13 This report includes fewer industries than does the Commerce report. See appendix 2 for an explanation of the differences in methodology between the Department of Commerce and ITIF.

In 2020, the industry employed 5.9 million workers.14 From 2017 to 2020, IT jobs grew more than twice as fast as total U.S. private sector jobs did (10.7 percent vs. 4.3 percent).15 Jobs in IT hardware grew by 1.5 percent, in part because of faster productivity growth, while jobs in IT services and software grew by 12.4 percent.16 Using a more expansive measure of the digital economy—which includes much of retail that uses e-commerce, telecommunication services, and some entertainment services—the Department of Commerce report shows the industry employed 7.8 million workers in 2020.17

Figure 3: IT industry’s share of the total U.S. economy18image

Using the ITIF industry definition, in 2020, the IT sector accounted for 3.5 percent of all business establishments and 4.4 percent of private sector employees, meaning the average IT firm was about 27 percent larger than the average private sector firm.19 However, because the IT industry pays so well, it accounted for 9.5 percent of all private sector wages.20 (See figure 3).

As a measure of industry contribution to the economy, the most accurate measure is value added, the result of subtracting the cost of purchased inputs (e.g., raw materials, energy, etc.) from final sales. In 2020, the IT industry generated $1.2 trillion in domestic value added, approximately 5.5 percent of the U.S. economy.21 Value added in the IT sector grew by $600 billion (109 percent) from 2010 to 2020, with data processing, Internet publishing, and other information services growing the fastest at 215.1 percent.22 Overall, U.S. gross domestic product (GDP) grew 39 percent over the same period.23

The Department of Commerce found that the digital economy accounted for 10.2 percent ($2.14 trillion of value added) of U.S. GDP in 2020.24 According to the Department, from 2012 to 2020, the digital economy’s average real (inflation-adjusted) annual growth in value added was 6.3 percent.25 The Department’s data also highlights that the digital economy’s real value added grew 151.4 percent from 2005 to 2020.26 (See figure 4.)

Figure 4: Commerce Department estimates of growth in real value added in the digital economy, 2005–202027image

Finally, while U.S. government data on exports is limited, export data was available for 11 of 22 IT industries.28 These industries collectively exported $301 billion worth of IT goods in 2020.29 Despite only making up 11 of the 112 total categories in exports, the IT industry contributed 21.2 percent to the economy’s goods exports in 2020.30 Furthermore, the Bureau of Economic Analysis has estimated that the IT industry exported $83.9 billion worth of information and communications technology services in 2020.31


The impact of the IT sector on U.S. jobs and output goes far beyond just the sector. The IT sector purchases goods and services supplied by other industries to support its core activities, which in turn creates output and jobs. In addition, IT workers spend their earnings, which creates what are called “induced jobs.”

The sector employed 5.9 million workers in 2020.32 When the multiplier effect—which accounts for the estimated number of supplier and induced jobs an industry contributes—is taken into consideration, the IT sector also supported an estimated 10.7 million domestic supplier jobs and 8.7 million induced jobs that year.33 (See figure 5.) Overall, in 2020, the IT sector supported a total of 25.3 million jobs, or 19 percent of private sector employment.34

Figure 5: IT-supported jobs as a share of U.S. private sector employment, 202035



While comparisons with the overall economy are useful, it is important to compare the IT sector with other industries that are also globally traded. The reason is simple: The United States does not have to worry about losing its barbershop or dry-cleaning industries to foreign competition, as Americans can only patronize barbers or dry cleaners in the United States. But globally traded sectors, such as computer production, software publishing, and automobile production, can be lost to foreign competitors, in which case the number of good jobs is reduced, the trade deficit worsens, and the value of the dollar goes down.

Moreover, changes in traded sector output and jobs have multiplier effects on overall domestic output while changes in nontraded sectors do not. At the regional level, this is why mayors and governors welcome job creation from traded sectors such as IT hardware and software. These industries bring money to the local or state economy, and the companies and their workers spend that money locally, creating even more jobs. As…

Read More: Tech industry a growing force in US economy for jobs, innovation and exports, study finds

Notify of
Inline Feedbacks
View all comments