The tech industry is now more than 23% of the overall workforce in southwestern Pennsylvania

If you think of the tech industry in 2022 as the industry that was trying to figure out what artificial intelligence, and in particular, generativeAI, is and would do, then 2023 was the year where the GenAI race started and Pittsburgh became part of it.

Against that backdrop, the Pittsburgh Technology Council last week released this year's TEQ State of the Industry report. As in previous years , the council teamed up with accounting firm PwC and the Center for Workforce Information & Analysis at the Pennsylvania Department of Labor and Industry to create the comprehensive report showing how each of the region's six tech sectors are doing.

The report included data from 10,367 technology establishments in 2023, representing 13.7% of all companies in the 13-county southwestern Pennsylvania region. These firms employ 283,779 people — 23.2% of the overall workforce in these counties.

That is good news, according to Jonathan Kersting, vice president at Pittsburgh Technology Council , because it means that the tech sector in southwestern Pennsylvania represents a significantly higher percentage of the workforce than you might expect from the number of companies, making it a higher contributor than the average of all other sectors – particularly important because annual payroll is among the most significant measures of wealth for any region.

Of the six sectors measured in this report, which covered 2021 through 2023, the aggregated information technology cluster had the highest average wage in 2023 at $119,844, followed closely by the aggregated life sciences cluster at $118,525.

But while the average wages in the life sciences companies has grown by 8.1% since 2021, the average wage in the IT companies sank by 6.6%.

Kersting speculates that the decrease among IT wages may have been caused by over-hiring during the pandemic to meet short-term needs that never materialized into long- term needs. It might also be the first sign of AI's impact on workforce growth. AI can potentially reduce the need to increase staff in departments such as marketing or customer service.

That's three times larger than the IT cluster, which included 63 hardware companies, 1,296 software companies and 592 telecommunications firms with a total annual payroll of $3.2 billion.

Like IT and life sciences, environmental technology and energy technology companies produced average annual wages with six figures, at $107,971 and $101,266.

But the other technology sectors covered by the study came in well below $100,000 in 2023. Advanced materials came in at $75,046 and health services at $86,440, despite wages rising 10.1% and 9.2% respectively over the period of the study.

This too might be due to averaging non-tech wages in the establishment covered in these areas.

University and government spending both impacted the employment and wages in the region. University spending increased 13% to $1.94 billion during the three-year period.

Penn State's Greater Allegheny campus, Penn State Beaver and Wheeling Jesuit College made the study this year for the first time, but University of Pittsburgh and Carnegie Mellon contributed the bulk of the impact in 2023, as in past years.

When considering life sciences alone, the University of Pittsburgh ranked seventh nationally in research and development spending, as 86% of its research and development expenditures were devoted to life sciences.

Carnegie Mellon ranked second in the nation in computer science R&D spending with $449 million in 2022. Software Engineering Institute (SEI), which is measured separately from CMU, reached $129.3 million.

The period covered in the report for universities is 2020-2022, lagging one year from the commercial segment numbers.

It's not all about spending, though. Results count, and for R&D, that means patents, start-up companies, license count and licensing revenue. Across the region, university research in 2023 resulted in 192 patents and 323 licenses executed for a total gross income of $57.9 million. Twenty-four startup companies were formed from university technology transfer — up from 23 and 21 respectively in 2021 and 2020.

Kersting, reflecting on the trajectory over the past decades, says, "We never can put headlines out saying something grew by like 30%, because we don't do that in Pittsburgh. But over the course of 25 years, growing at 1 and 2% here and there, 5% every once in a while, we've come a long way – now representing a third of the region's total wages."