Watch out, Wall Street: report says tech is now NYC's second-largest sector
New York City’s economy has traditionally been dominated by finance, real estate, and media. But tech may be taking hold as a staple of the private sector, according to a new report, "Building a Digital City: the Growth and Impact of New York City’s Tech / Information Sector," commissioned by Mayor Michael Bloomberg’s private foundation. The study gives some clues as to how New York pulled off what many other cities are desperately attempting to do: invent a tech startup scene.
Rapid job growth has made the city’s tech and information industry the second-largest contributor to the private sector economy by wages, according to the study. The tech sector is also booming in the outer boroughs of Brooklyn and Queens, while the national tech industry is attracting Hispanic and black workers faster than white ones.
Tech is often billed as the solution to waning job growth in the US, and this study appears to confirm that. In 2009, New York City’s Independent Budget Office forecast that the city’s economic recovery from the Great Recession would lag behind the rest of the nation’s. Instead, New York pulled out of the recession faster than the rest of the country, in part due to the growth in the tech sector, says economist Michael Mandel, who conducted the study.
New York pulled out of the recession faster than the rest of the country, in part due to the tech scene
"New York City rapidly reinvented itself as a world-class, urban tech / information hub, uniting tech startups with world-class publishing, media, design, and entertainment companies," the study concludes. "Now, the New York tech / information sector is a critical engine to the city’s economy, creating thousands of jobs and supporting economic growth across the city."
Dr. Mandel counts 262,000 well-paying jobs in tech and information, an 11 percent jump since the economy crashed in 2007. The $30 billion in annual wages generated by the tech sector is small compared to the $90 billion in wages paid to the still-dominant financial sector, but tech wages have grown since 2007 while finance wages decreased.
New York City’s tech sector is consumer-facing and often converges with other industries. Jobs are growing at e-commerce, web, and media startups like Etsy, Tumblr, and BuzzFeed, as well as at large companies with New York operations such as Amazon, Google, and Facebook. App development shops like FiftyThree and Tendigi also accounted for a significant number of jobs, as did infrastructure companies like Verizon and advertising companies like AppNexus.
While most of these jobs are in Manhattan, Brooklyn’s tech sector grew faster from 2007 to 2012 than in any other urban center except for San Francisco. Tech employment in Brooklyn grew by 24 percent while wages grew by 54 percent. There was a noticeable impact from the $604 million acquisition of MakerBot, a 3D printing company based in downtown Brooklyn, Mandel says, but the job growth was evenly distributed and not dominated by single events or companies. In Queens, employment grew by 6 percent and wages grew by 20 percent.
Brooklyn’s tech sector grew faster than anywhere else but San Francisco
These new information and tech workers may also be more diverse than those the industry has traditionally attracted, according to the Bureau of Labor Statistics. The number of Hispanic and Latino workers nationally working at computer or math-related occupations has risen by 28 percent in the last two years, while the number of black workers rose 23 percent and the number of Asian workers rose 18 percent. The number of white workers rose by just 5.5 percent.
The study was commissioned for the second annual Bloomberg Tech Summit, a closed-door meeting in New York arranged by Mayor Bloomberg that brings together CEOs and industry leaders such as Twitter’s Dick Costolo and AOL’s Tim Armstrong. This year’s theme, "building digital cities," will address how growth in New York’s and San Francisco’s tech sectors can be replicated around the country.
The report concludes that tech-friendly policies such as funding tech incubators and marketing the startup sector were a "key catalyst" in the industry’s growth. The Bloomberg administration has made a significant effort to foster tech and information companies, and the mayor wants a robust tech sector to be part of his legacy. Considering Bloomberg’s philanthropic foundation paid for the study, its rosy conclusions should be taken with a degree of skepticism.
The rise of New York City’s tech sector has been a topic of conversation for a few years, prompting a barrage of headlines about New York’s booming startup scene and more than a little Silicon Alley cheerleading. However, Mandel’s conclusion that the tech scene was spurred by city policies is conjecture based on the fact that the city’s economy was on track for a longer rebound.
The mayor wants a robust tech sector to be part of his legacy
"No one would have guessed in the fall of 2008 that the New York City economy was going to outperform the national economy so conclusively," Mandel told The Verge. "That’s a testament on the one hand of the power of the tech / information boom to propel growth, and it also tells us that good policy actually makes a difference."
New York techies might disagree, however. Many cornerstones of the local tech scene, like the New York Tech Meetup (NYTM), which now has 33,000 members, or the coworking space General Assembly, started as grassroots initiatives longer before the Bloomberg administration got involved in the tech scene. "I'm sure there are legitimate criticisms as to how much impact policy had versus other factors," entrepreneur and local tech luminary Anil Dash said in an email. "But my bias there is to think the community (especially NYTM) was self-organizing and then the policy sort of followed."
Industry leaders are bullish on New York tech, however, and they’re optimistic that economically depressed cities like Detroit, Kansas City, and New Orleans can follow its lead. "Over the past five years, I have seen the phenomenal growth of the urban tech boom in both San Francisco and New York," Ron Conway, an influential investor in Silicon Valley, said in an email. "It’s important to uncover what worked in New York and San Francisco so we can bring these lessons to other cities, grow our economy, and create jobs across the country."