Silicon Valley is shrinking

Government study shows the number of hi-tech jobs in the valley declined by 16.5 percent between 2001 and 2008

The number of high-tech jobs in all industries Silicon Valley declined by 86,000, or 16.5 percent, between 2001 and 2008, according a federal study of employment trends in the valley.

In the study released last month, the U.S. Bureau of Labor Statistics (BLS) identified 11 industries as high-tech employers in Silicon Valley and then assessed what happened to them after the 2001 dot com bust. The study found that while paychecks in those industries increased by nearly 36 percent from 2001 to 2008 to an overall annual payroll of some $58 billion, only three of the 11 industries -- aerospace, pharmaceuticals and scientific research -- boosted their Silicon Valley workforce numbers.

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Increasing salaries among the Valley's declining high technology workforce may suggest "that the types of people that continue to be employed in Silicon Valley are a higher skill set people," said Mark Roberts, executive director of the TechServe Alliance (formerly the National Association of Computer Consultants). Among other hings, the alliance analyzes federal labor data compiled about IT-related occupations.

"Silicon Valley may well be shedding individuals that possess lower skills, work that can be performed in other areas of the country," said Roberts. The BLS study found that some of the disappearing jobs in Silicon Valley may be due to the high cost of working and living in Silicon Valley. Following the dot com bust, decisions were made by some tech companies to move some aspects of production to areas with lower commercial rents and housing costs.

Of the industries studied, manufacturing had the largest number job losses. For instance, semiconductor manufacturing companies cut some 30,000 positions between 2001 and 2008. The industry ended the year with about 58,000 workers, 34 percent less than in 2001.

About one-in-five tech workers in Silicon Valley is employed in what the BLS called the "computer systems design" industry -- a catch-all labor category that includes IT managers, programmers, software engineers, systems analysts, database administrators, electrical and electronics engineers.

Out of the total "computer systems design" industry employment of 521,963 in Silicon Valley's high-tech industries in 2001, 107,000 were listed in the as IT workers. By 2008, the number of IT workers in that industry declined by 7.4 percent, or 7,900, according to the study.

The average wage for IT workers increased about 21 percent from $105,500 to $127,300 between 2001 and 2008, according to the study.

Nationally, high-tech jobs grew by about 4 percent from 2001 through 2008, according to the government, but this figure doesn't include the decline in tech jobs through the first six months of this year. IT employment peaked at just over 4 million last November, but had declined to 3.82 million by June of this year.

Another indicator of flagging job growth is the flatlining demand for H-1B visas . In May, the U.S. Citizenship and Immigration Service received approximately 44,900 visa petitions toward its 65,000 H-1B visa cap. Demand has slowed since then, and by last month only 45,000 of those visas had been claimed.

Despite the employment trend, the federal study did point out that Silicon Valley remains "at the cutting edge of innovation." According to the U.S. Patent Office, in 2008, 11 of the top 20 U.S. cities with the most registered patents were in Silicon Valley.

This story, "Silicon Valley is shrinking" was originally published by Computerworld.

Copyright © 2009 IDG Communications, Inc.