Innovation Economy Strong, But State Lags in High Tech Job Creation, MTC Index Finds

Massachusetts' innovation indicators may be strong, but the conversion of innovation into new high tech jobs is lagging and the state’s median household income continues to dip, according to the latest Index of the Massachusetts Innovation Economy.

The 8th annual index, released last month by the Massachusetts Technology Collaborative (MTC), tracks nine industry clusters and 17 economic indicators that benchmark the state’s strengths and weaknesses against six other states: California, Colorado, Connecticut, Minnesota, New Jersey and New York. Positive signs for innovation in Massachusetts include:

• Through 2002, federally-supported research and development in Massachusetts totaled $4.6 billion -- up 10 percent from 1999 and second only to California.
• The number of patents awarded to Massachusetts inventors grew 8.3 percent in 2003, the highest among the benchmark states, and was higher than the 1.1 percent growth across the U.S., overall.
• Massachusetts' market share of venture capital invested in new U.S. firms has increased from approximately 11 percent to 14 percent during 2003 and first two quarters of 2004. Independent analysts suggest that non-venture capital private equity, or angel capital investments, invested in Massachusetts may equal or exceed venture capital investment.

Some of the less positive signs identified in the index include:

• Employment in the nine key industry clusters tracked by the index fell 3.2 percent in 2003 and 10 percent from 2001-2003. The state’s Software & Communications Services industries lost more than 9 percent of its jobs in 2003, total job losses in the Computer Software and Hardware clusters in the state total 28 percent since 2001, and year-to-date data from the state’s unemployment assistance agency suggest Information Technology-related jobs in all industries continue to drop.
• Less than one in four Massachusetts workers are now working in the Innovation Economy, as MTC has defined it. Historically, wages within the state’s Innovation Economy industry clusters have averaged about a third higher than average wages in the state economy as a whole.
• Lagging job growth in the Innovation Economy comes amidst continuing declines in real median income in the state. Median household income in Massachusetts fell 3.2 percent in 2003. Independent studies from Northeastern University point to a 15-year pattern of decline in real household income in the state.

"Less than 25 percent of the state’s workforce is currently working in the Innovation Economy – the lowest level since we started publishing the Index in 1997,” said Adams. “As the Innovation Economy has contracted, a long-term decline in the state’s household incomes has accelerated. That’s not a recipe for sustainable economic growth in the Commonwealth.”

The Index suggests Massachusetts has the infrastructure to create high tech jobs and improve the economy, but jobs related to the Innovation Economy are not being created as quickly as they are in other states. The Commonwealth needs to raise the level of educational attainment by expanding access to its investments in public higher education, the Index states.

Recent developments point toward the creation of highly innovative growth industries for the future. In early 2004, new economic development legislation approved by the governor and state legislature created a series of programs for science- and tech-based economic development.

In 2005, the state is expected to undertake a re-evaluation of the size and scope of the state’s public university and college system. Enrollments in the state’s public universities have remained flat over the last several years, while enrollment in degree-granting programs at the state’s community colleges have declined, the index points out.

Index of the Massachusetts Innovation Economy is available at: http://www.mtpc.org/institute/the_index/index_11_23_04final.pdf