At Tech Alliance annual luncheon, a stark economic analysis and a call to action

It’s a complicated moment in Washington, our home state, where the tech giants are strong, the satellites are abundant, and economic growth may no longer be above average.

That was the feeling walking out of the Technology Alliance’s annual State of Technology luncheon Tuesday, where a deep dive on Amazon’s Leo business and optimism about the future of the region’s satellite industry were preceded by a McKinsey analysis that gave a sobering picture of the state’s overall economic trajectory.

Washington’s economy grew 30% over the past decade, double the national average and the highest rate in the country, according to statistics presented by McKinsey partner Sarah Miller. 

But three headwinds threaten to cut that growth roughly in half, Miller cautioned in her remarks to the crowd: domestic migration has turned negative, the cost of living is outpacing incomes, and the state’s economy is unusually dependent on a handful of giant employers. 

The result: the Federal Reserve projects Washington’s growth will slow to roughly the national average. That means roughly 300,000 fewer jobs than the state would otherwise generate, based on the McKinsey analysis of 3.6 million people in nongovernmental jobs statewide.

“Growth built on a narrow foundation, concentrated in a handful of companies, one industry, one region, carries real risk and the conditions that sustain that growth are shifting,” said Technology Alliance CEO Laura Ruderman in her opening remarks before the presentation.

The Technology Alliance was founded nearly 30 years ago when a group of business and academic leaders recognized that Washington had the raw materials to be an innovation hub but needed to get organized or risk being left behind.

“That is still our mission,” Ruderman told the crowd, “and it matters now more than ever.”

Two clear messages emerged: the state needs a comprehensive economic development strategy, and it needs to invest far more aggressively in building a homegrown workforce, with stronger funding for education.

Larger backdrop: The report comes amid a wider debate over Washington’s economic direction. The legislature passed a 9.9% tax on income above $1 million in March, while some prominent founders and executives have been leaving for lower-tax states, raising questions about whether the region is squandering the advantages that made it an economic powerhouse.

Miller’s analysis noted that Texas has attracted more than 300 corporate headquarters in the past decade through low taxes, affordable housing, and a friendlier business environment.  

She also cited Minneapolis, which tripled its affordable housing supply to support population growth, and Illinois, which made a major public investment in a quantum and microelectronics park on Chicago’s south side.

While the state has “much to celebrate” about its economic position overall, Miller told the crowd that the firm hopes “these facts will create a burning platform for you all to work together to develop a sustainable economic development strategy for Washington.”

Key stats: The McKinsey analysis drilled into each headwind. In the five years before the pandemic, Washington added nearly 150,000 people through domestic migration. In the five years since the pandemic, that number flipped to negative 24,500 — meaning more people have been leaving for other parts of the U.S. than coming to Washington from other states.

People arriving in the state from outside the country are now responsible for the state’s net population growth, a vulnerability given current federal policies on immigration.

Housing costs have risen 59% and transportation 62%, both outpacing the 33% growth in incomes. Four companies — Boeing, Microsoft, Amazon, and Providence — account for nearly one in 10 nongovernmental jobs, a concentration two to three times higher than peer states. 

Roots in education: Ruderman connected the data to what she called a talent pipeline crisis. Fewer than half of Washington’s high school graduates earn a post-secondary credential within eight years, ranking the state in the bottom five nationally. The Washington Roundtable projects a shortfall of 120,000 to 135,000 skilled STEM workers over the next decade. 

“You can’t build a world-class innovation economy in a state that graduates half of its kids into nothing,” Ruderman said in her opening remarks. 

The Tech Alliance is piloting a program called STEM360 this fall in South Seattle that puts STEM professionals into high school classrooms for a full day of career immersion. Ruderman asked the room to help raise $100,000 to expand to all four high school grades at the school.

Space as a bright spot: The rest of the luncheon program offered some hope in the form of the space industry. More than 10,000 satellites have been built in Washington, two-thirds of all operational satellites worldwide were manufactured here, and private investment in the state’s space startups has topped $1.6 billion in the last 18 months, according to the presentation.

Amazon Leo VP Rajeev Badyal told the crowd the program started in 2018 with six engineers behind black curtains in a Bellevue office building. Today the company has launched more than 300 satellites from its Kirkland factory, can produce tens per week, and plans to begin commercial service later this year.

But even the space economy conversation circled back to the luncheon’s central theme. Badyal said the industry needs to do a better job reaching students early. 

“The kids actually don’t know much about our industry,” he said.

Kent Mayor Dana Ralph, who moderated the keynote panel with Badyal and Chris Weber, Amazon Leo’s vice president for business and product, noted that the Kent Valley alone has more aerospace manufacturing workers than the entire state of Colorado, yet Colorado is better known as a space state.

“We’re not telling the story,” Ralph said.

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