Tech is an absolutely huge part of our economy today. Think of how many high-tech gadgets you use on a daily basis, and you’ll start to get a strong idea of the size of the industry. It is massive.
This means that it also makes a big contribution to the economy. At the moment, there are some big challenges in the industry and huge expenses to deal with, but the contribution it makes in terms of jobs and taxes is not to be understated. In certain economies around the world, tech is heavily relied upon.
The current landscape of the tech industry
Understanding a few basics of economics helps you to understand the current state of the industry. If you know what causes inflation, you will understand that the current strain on raw materials and price increases for things such as fuels have led to large inflation and cost increases in a lot of tech goods. Some companies are even struggling. In spite of this, tech is still so heavily ingrained in what we are all used to and how we live our lives that many areas of tech are growing regardless of the challenges, which is contributing to the economy in the process.
Putting a dollar value on the tech contribution
It is almost impossible to put a specific value on the impact the tech industry has on the economy. Its contribution to the economy is made in different ways, including the export business, which has the US selling more than its fair share of tech products to companies based overseas.
According to a report by the Information Technology and Innovation Foundation, in 2020, there were 275,859 IT industry businesses and establishments operating in the United States. Their total annual payroll was $722bn, which means a lot of tax dollars are generated, and it provides a huge stimulation to the economy as the companies invest, employ and pay for other goods and services.
The tech companies operating in the US are varied in size. We all know companies like Microsoft, who are huge players in gaming, software and computing, and Apple, but there are many more tech companies with a B2B focus as well as those that aren’t quite as well known, all helping to drive the economy.
This also leads to certain geographical areas where the tech industry plays a huge role. For instance, if you spend any time near San Francisco or Silicon Valley, you will know just how many people are employed at the huge technology organizations in these areas.
One of the best ways to measure an impact on the economy is to consider the “value added”. This is a calculation that each business can do, and it involves working out the cost of final sales and taking away costs such as energy and the materials actually used to produce IT products and services.
Data from recent years shows the IT industry in the US adding over $1tn annually, with over five percent of the whole US economy accounted for by the value added in tech companies. The IT sector is only one part of the tech industry, of course. Between 2010 and 2020, the sector more than doubled in its size, with a 109 percent growth, which accounted for a significant amount of the US GDP growth during the decade.
At the time of writing, the tech and IT sectors account for around 20% of all private employment in the United States, providing jobs for people around the country.
The export industry is also hugely important, and it is clear that the IT and tech businesses make a huge impact on the American economy. For example, in spite of only making up 11 of over 100 categories of goods exported from the US, the industry contributes over 20 percent of the goods exported from the country, and this figure continues to increase. The Bureau of Economic Analysis estimates Information Technology exports over $80bn worth of products every single year.
Technology is part of virtually everything we do in the modern age, and there are many ways in which technology impacts the economy, both globally and in the US. Although there are many different ways to measure this impact, none are flawless. The bottom line is that the jobs and income that are provided by tech companies have become a huge part of the way the world works, and it is expected to continue to grow.
Photo credit: The feature image has been done by Kawing921.