It may be hard to remember, but 30 years ago, America’s technology heartland wasn’t the San Francisco Bay area – it was around Boston Harbor. And decades after the nation’s tech consciousness shifted west, the technology sector still plays a vital role in Eastern Massachusetts.
It may be hard to remember, but 30 years ago, America’s technology heartland wasn’t the San Francisco Bay area – it was around Boston Harbor. And decades after the nation’s tech consciousness shifted west, the technology sector still plays a vital role in Eastern Massachusetts.
Attracted by abundant opportunity and a high quality of life, roughly one million new residents have moved to the Boston area in the past 25 years. Boston is New England’s economic and employment hub, and has become a national jobs magnet. The unemployment rate in the Boston area today is just 4 percent, down from 4.6 percent a year ago and well below the national rate of 5.1 percent.[1] And this growth in population and jobs has been met with healthy growth in wages, as well. Over the past 15 years, wages overall in the Boston area have risen slightly faster than the pace of inflation over the same time, with salaries in Boston’s dominant economic sectors growing much faster.
Boston was once a major hub for health care, manufacturing, retail and education jobs. And while those industries are still well represented in and around Boston, in recent years it has been the finance and tech industries that have led Boston’s growth.
Boston has long had a lucrative role helping manage the wealth of global elites and old-money Boston Brahmins alike – the nation’s first open-end mutual fund was established in Boston, and is still actively managed from the city today. The city is also home to a number of large, international finance and wealth management firms, including Fidelity Investments and State Street Corp.
And while most of the computer hardware companies that helped fuel the Massachusetts Miracle during the area’s 1980s tech heyday were long ago relegated to history’s dustbin (so long, Digital Equipment Corp. and Wang Laboratories), many major high tech employers still call the area home. Some of the bigger names include data storage firm EMC Corp., medical device manufacturer Boston Scientific and global defense contractor Raytheon, among others.
Finance work has remained much the same in the Boston area over the years (mutual fund investors are typically in it for the long term, after all). But the jobs done by Boston’s tech workers have shifted dramatically.
Since at least 1990, tech has been among the Boston area’s three largest employment sectors. But 25 years ago, 58 percent of local tech workers were employed in more blue-collar tech manufacturing work, producing semiconductors, computers and aerospace products, among others (figure 1). Today, roughly 75 percent of Boston’s tech jobs involve more white-collar work in fields including computer systems design, data processing and hosting, internet publishing, web search, scientific research and development, and software development.
The tech industry’s pervasive nature in the local job landscape is likely attributable at least in part to some of the area’s famous educational institutions, including MIT and Harvard, which produce lots of tech-focused graduates and research.
Today, the vast majority of Boston-area residents work in the tech, retail and food-service industries (figure 2, left panel). The concentration of retail and food-service employees in the Boston metro is about on par with the rest of the nation. But the local tech industry is pretty distinct, with 3.3 times as many tech employees clustered in the Boston metro as in the U.S. as a whole. And tech workers aren’t alone in being over-represented in Boston – the share of total employment in a few sectors is much larger in the Boston area relative to the U.S. share (figure 2, right panel).
In particular, information services jobs – including work at news syndicates, libraries and archives – are 5.2 times as prevalent in the Boston metro as in the U.S. as a whole. Publishing industries (4.5 times as prevalent), computer-related tech (3.5 times as prevalent), and finance (3.4 times as prevalent) jobs are also heavily over-indexed. Health care-related industries are a major source of growth for the area, as well, with a disproportionate number of Boston-area employees in this sector relative to the rest of the U.S. – perhaps unsurprising given Boston’s high concentration of world-class hospitals.
Over the past 15 years, Boston’s employment growth has been predominantly in the health care and social assistance sectors. Between 2000 and 2015, the number of people employed in the social assistance sector more than doubled, rising by 101.5 percent. Employment at doctor’s offices (ambulatory care services) and hospitals increased strongly as well, by 52.9 percent and 39.2 percent, respectively (figure 3, left).
More recently, however, even as growth in social assistance remains strong, other industries are gaining momentum (figure 3, right). Over the past half-decade (Q3 2010 to Q3 2015), some of the Boston area’s highest-growth industries have included computer-related tech jobs and construction (up 33.2 and 27.1 percent, respectively, since 2010).
Along with strong employment growth, many of these industries are also seeing significant increases in wages, contributing both to the local Boston-area economy and the broader New England economy as well. Not surprisingly, tech and finance boast some of the highest incomes and most significant wage growth. Tech workers currently earn $2,357 per week, on average, while those in the financial sector earn roughly $2,278 – up 43.7 and 63.8 percent, respectively, from 15 years ago. Other major sectors of employment have shown considerable income growth, too. Health care and social assistance workers, for example, earn $1,088 per week on average, up from $693 fifteen years ago.
But despite a history of strong growth in jobs and wages, Boston does suffer from a problem far too common in many of America’s largest metros: wages aren’t rising as quickly as the region’s housing costs. Boston-area renters should currently expect to spend 34.2 percent of their monthly income on rent, well above the 29.8 percent national average. Owning a home in the Boston area is also far less affordable than in the U.S. as a whole – currently, a Boston home buyer should expect to pay 22.2 percent of their income toward a mortgage, compared to 15.1 percent nationwide.
Drawn in part by the area’s strong labor market, people continue to flock to Boston – helping drive up not just population and employment, but also the area’s cost of living.
[1] Unemployment data is from the Local Area Unemployment Statistics, Bureau of Labor Statistics. March 2016 was the latest data available at the time of publication.
