Engineering, Accounting, Research, Management & Related Services
Overview
Like its manufacturing counterpart, the extensive services sector is very heterogeneous. However, a closer examination of service industries suggests that they can fit into two groups: producer services and consumer services. Producer services typically include business services; finance, insurance, and real estate; legal services; membership organizations; accounting, architectural, engineering, management services; and public relations. These producer services are generally provided to other service and manufacturing firms, as opposed to consumer services (e.g., personal services, auto repair), which typically serve consumers directly. Additionally, these producer services are generally driven by external demand—that is, so-called "export sales." These two groupings of services—producer and consumer—are also distinguished by the significant differences in their labor requirements. Because producer services, like engineering and architecture, offer specialized services, they require highly skilled or educated labor. Such skill requirements bring higher wages. Finally, the producer services sector represents one of the most rapidly growing sectors as measured by the rate of job growth.
Engineering, accounting, research, and management has been one of the stellar sectors within producer services, both nationally and in Washington. For Washington, engineering and management was the second fastest growing sector as measured by the rate of job growth.
Table 1
Employment Growth in U.S. Producer Services and Other Sectors,
1969-1997
Source: U.S. Bureau of Economic Analysis
| United States | Employment 1997 (thousands) |
Annual percent growth |
||
| Producer services | 30,984.1 |
4.8% |
5.1% |
3.1% |
| Business services | 10,585.6 |
9.7% |
8.1% |
6.4% |
| Engineering, accounting, research & management | 4,832.8 |
7.2% |
14.1% |
2.9% |
| Finance, insurance & real estate | 11,777.3 |
4.4% |
2.5% |
1.3% |
| Legal services | 1,485.4 |
7.5% |
7.7% |
1.3% |
| Membership organizations | 2,303.0 |
-1.1% |
1.8% |
3.0% |
| Communications | 1,582.4 |
2.5% |
-0.1% |
2.7% |
| Construction | 8,363.7 |
3.2% |
2.3% |
1.8% |
| Electric, gas & sanitary services | 911.4 |
2.0% |
1.9% |
-1.1% |
| Manufacturing | 19,413.8 |
0.5% |
-0.7% |
-0.4% |
| Retail trade | 26,352.9 |
3.2% |
2.8% |
2.0% |
| Wholesale trade | 7,176.8 |
3.8% |
1.8% |
0.9% |
| Transportation | 5,059.4 |
1.4% |
1.7% |
3.0% |
| Health | 10,981.1 |
7.8% |
5.3% |
3.6% |
| Government | 21,781.0 |
1.6% |
1.3% |
0.6% |
| All services (nongoods) | 124,671.7 |
3.2% |
3.0% |
2.3% |
| Total, all sectors | 156,400.4 |
2.4% |
2.1% |
1.7% |
Table 2
Employment Growth in Washington Producer Services and Other
Sectors, 1969-1997
Source: U.S. Bureau of Economic Analysis
| Washington | Employment 1997 (thousands) |
Annual percent growth |
||
| Producer services | 635.2 |
5.5% |
5.7% |
4.1% |
| Business services | 205.5 |
13.9% |
8.2% |
8.3% |
| Engineering, accounting, research & management | 103.7 |
9.5% |
14.5% |
3.9% |
| Finance, insurance & real estate | 246.4 |
3.9% |
3.5% |
2.0% |
| Legal services | 28.8 |
12.1% |
10.1% |
2.0% |
| Membership organizations | 50.8 |
0.9% |
0.8% |
4.2% |
| Communications | 32.6 |
4.2% |
0.1% |
3.3% |
| Construction | 188.7 |
8.0% |
1.1% |
3.0% |
| Electric, gas & sanitary services | 16.4 |
2.4% |
3.5% |
8.4% |
| Manufacturing | 395.9 |
1.2% |
1.9% |
0.5% |
| Retail trade | 572.1 |
5.0% |
3.7% |
3.4% |
| Wholesale trade | 163.2 |
5.3% |
2.4% |
2.7% |
| Transportation | 106.0 |
1.9% |
3.5% |
2.7% |
| Health | 208.0 |
8.4% |
6.2% |
3.2% |
| Government | 528.7 |
0.8% |
2.1% |
1.9% |
| All services (nongoods) | 2,679.8 |
3.7% |
3.9% |
3.4% |
| Total, all sectors | 3,364.8 |
3.4% |
3.3% |
2.8% |
Although data on output are limited for Washington, total receipts for the national industry were over $387 billion in 1998. Total receipts, in real terms, increased by nearly 12 percent from 1997. Growth in sales has averaged 7.5 percent in real terms over the last ten years ending in 1998. Professional services, particularly engineering services, were subject to the cyclical forces of the recession during the early 1990s. Besides the recession and the secular forces of downsizing and foreign competition, the engineering profession also suffered from severe cutbacks from one of its most important clients--the defense industry. Architectural services also fared poorly during and immediately following the recession of 1990-91, due to overbuilding in commercial construction during the 1980s. In contrast, management services grew rapidly during the first half of the 1990s, seemingly oblivious to the national recession. Management consultants provide counsel and assistance to private, non-profit, and public organizations for such services as strategic planning, financial planning and budgeting, information systems, human resources, marketing counsel, and production planning.
Total Receipts in U.S. Engineering, Accounting, Research &
Management, 1986-1998 (millions 98$)
Source: U.S. Census Bureau
For more detail of above graphic
Definition of Engineering and Management
This industry report uses industry definitions and concepts that underlie the U.S. government's Standard Industrial Classification (SIC) system. In the SIC system, engineering and management services is a major industry, one of sixteen such industries that form the services sector. This industry includes a broad array of professional services; according to the Standard Industrial Classification, there are thirteen separate engineering and management services industries. Each of the roughly 250,000 engineering and management services establishments (both for-profit and not-for-profit) operating in the United States in 1997 was placed in one of these thirteen industry subsectors.
Engineering, accounting, research, management, and related services (SIC 87) is organized into the following four major groups:
engineering, architectural, and surveying services (SIC 871)—including engineering services, architectural services (with the exception of landscape architectural services), and surveying services;
accounting, auditing, and bookkeeping services (SIC 872)—including accounting and auditing services, bookkeeping and billing services, and certified public accountants;
research, development, and testing services (SIC 873)—including commercial physical and biological research, commercial economic, sociological, and educational research, noncommercial research organizations, and testing laboratories; and
management and public relations services (SIC 874)—including management services, management consulting services, public relations services, facilities support management services, and other business consulting services.
The two largest components are management services and engineering services. Management services comprises 34 percent of total sector revenues; while engineering services' share of total sector revenues is 33 percent. The remaining 33 percent is divided between accounting services and research and development and testing services.
Current Status
In Washington, engineering services and research and development and testing services are the largest components of the industry combined for nearly two-thirds of the 1998 total of 60,600 employees. Both of these sectors have enjoyed significant growth since 1988. While employment growth languished throughout the state during the early 1990s, employment jumped by over 23 percent between 1990 and 1991. Much of the growth was due to a reclassification of employment activity at the Department of Energy Hanford complex from chemical and allied products to engineering and management services. Since 1994, however, this sector has languished, due largely to the substantial employment drop in research, development, and testing. While other segments of the industry steadily grew, research, development, and testing decreased its employment; in 1997, research, development, and testing is two-thirds of its 1994 size.
Number of Establishments in Washington Engineering, Accounting,
Research & Management, 1988-1998
Source: Washington Employment Security Department
For more detail of above graphic
Employment in Washington Engineering, Accounting, Research &
Management, 1988-1998
Source: Washington Employment Security Department
For more detail of above graphic
In general, engineering and management services is a high-wage industry. Average covered wages for engineering and management services workers was $44,707 in 1998, among the highest in the state. Workers in engineering, architectural, and surveying enjoyed the highest covered wages, earning on average in excess of $48,318 in 1998. Forty-six percent of all engineering and management services workers earn over $20 per hour, compared with the rest of the state where slightly more than a quarter earn $20 or more per hour.
Table 3
Real Average Wages for Washington Engineering, Accounting,
Research & Management Workers, 1988-1998
(1998 dollars)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis
| Sector | 1988 |
1990 |
1992 |
1994 |
1995 |
1996 |
1997 |
1998 |
| Engineering, architechtural & surveying | ||||||||
$42,339 |
$40,868 |
$43,735 |
$44,006 |
$44,586 |
$45,244 |
$45,509 |
$48,318 |
|
| Accounting, auditing & bookeeping | ||||||||
$28,828 |
$29,443 |
$30,621 |
$30,326 |
$30,912 |
$32,140 |
$35,096 |
$37,162 |
|
| Research, development & testing | ||||||||
$35,378 |
$36,292 |
$42,000 |
$42,926 |
$44,596 |
$45,315 |
$44,698 |
$46,563 |
|
| Management & public relations | ||||||||
$31,649 |
$32,806 |
$37,124 |
$34,272 |
$36,523 |
$37,663 |
$39,991 |
$42,494 |
|
| Total Engineering & management services | ||||||||
$36,039 |
$36,299 |
$40,126 |
$40,323 |
$41,355 |
$41,949 |
$42,523 |
$44,707 |
|
| Total services | ||||||||
$21,420 |
$22,383 |
$25,617 |
$25,357 |
$26,490 |
$28,302 |
$30,653 |
$35,996 |
|
| Total nonfarm | ||||||||
$27,244 |
$27,399 |
$29,012 |
$28,579 |
$29,046 |
$30,068 |
$31,504 |
$33,922 |
|
Average Hourly Wages of Washington Engineering, Accounting,
Research & Management Workers, 1997
Source: Employment Security Department
For more detail of above graphic
The labor force in the engineering and management services sector is dominated by professional, technical, and clerical occupations. Managerial and administrative occupations are also important in engineering and management services. Common communication occupations within the professional and technical group are engineers, accountants, tax specialists, drafters, architects, geologists, chemists, and biologists.
Table 4
Occupational Profile of Engineering, Accounting, Research &
Management Workers in Washington, 1998 and 2008
Source: Washington Employment Security Department
Estimated 1998 |
Projected 2008 |
|||
| Engineering, Accounting & Research Mg SIC 87 | Estimated Employment |
Percent of Total Employment |
Projected Employment |
Percent of Total Employment |
| Managerial & Administrative | 7,532 |
11.3% |
11,268 |
13.1% |
| Professional, Paraprofessional & Technical | 32,072 |
48.2% |
40,958 |
47.7% |
| Sales & Related Occupations | 1,150 |
1.7% |
1,691 |
2.0% |
| Clerical & Administrative Support | 12,461 |
18.7% |
13,945 |
16.3% |
| Service Occupations | 726 |
1.1% |
1,119 |
1.3% |
| Agriculture, Forestry & Fishing | 3 |
0.0% |
4 |
0.0% |
| Production, Operating & Maintenance | 1,414 |
2.1% |
1,782 |
2.1% |
| Operators, Helpers & Laborers | 625 |
0.9% |
803 |
0.9% |
| Undefined Occupations | 10,544 |
15.9% |
14,229 |
16.6% |
| TOTAL | 66,527 |
100.0% |
85,799 |
100.0% |
Engineering and management services are unevenly distributed within the state. Prior research indicates that most engineering and management services firms are located near clients, suppliers, and competitors. This locational preference has created dense concentrations of these businesses in specific locations within Puget Sound, Spokane, Vancouver, and the Tri-Cities. Most engineering and management services firms are small with an average size of about 11 employees. Nearly half of this sector's work force are employed in firms with less than 100 employees.
Size of Establishments of Washington Engineering, Accounting,
Research & Management Industry, 1998
Source: Washington Employment Security Department
For more detail of above graphic
Contribution of Engineering, Accounting, Research and Management Services to the Washington Economy
Prior studies have found that a significant proportion of the state's professional services are sold afar rather than locally, implying that growth in engineering and management services need not be derived from growth in local goods production. One set of studies looks at the proportion of a state's engineering and management services employment. The observation that a state's employment concentrates in a particular engineering and management services industry (that is, that there is surplus labor employed in producing a service), suggests that the state produces more than it needs and therefore exports the surplus. The most commonly used measure for engineering and management services export has been a simple index of employment concentration which looks at an industry's share of total employment in a state. This share is put into index form by dividing by the industry's share of total employment in the nation. An index number greater than 1.0 suggests that the state produces a surplus in the business service which is exported elsewhere. Accordingly, an index number of 1.0 would indicate little or no trade while an index number less than 1.0 would suggest that the state imports the service. As Figure 6 indicates, engineering and management services in Washington has had a significant export component up until 1997.
Index of Specialization for Washington Engineering, Accounting,
Research & Management, 1988-1997
Source: U.S. Bureau of Analysis
For more detail of above graphic
Additional analytical studies confirm these impressions that engineering and management services is an increasingly important export sector in Washington. The most recent Washington State input-output study found that nearly one-fifth of business services' (including engineering and management services) total 1987 revenues of $4.09 billion was exported out-of-state to customers in other states or foreign countries. Another report, Foreign Exports and the Washington State Economy, found that business and professional services was among the state's leading service sectors in foreign exports with 1995 sales valued at $244 million.
According to a recent study, An Economic Analysis of the Puget Sound-Alaska Partnership, the Puget Sound area also serves as a regional center for Alaska, with a number of firms providing significant accounting, engineering, and managerial services.
Outlook
The growth in engineering and management services will likely be above average over the next ten years, as it was over the previous ten years. Sales growth is expected to moderate from the 7.5 percent per year averaged over the last ten years ending in 1998, to 6.9 percent over the next decade (in real terms, controlling for inflation). This forecasted growth is healthy given U.S. gross domestic product projected growth of about 3.2 percent over the same time period.
In Washington, engineering and management services is forecasted to be one of the fastest growing sectors in terms of employment. Forecasts to 2010 indicate annual growth rates of between 1.0 percent for accounting, auditing, and bookkeeping to 4.3 percent for management and public relations. The overall growth rate for engineering and management services is 1.8 percent for the 2000-2010 projection period, followed by a period of sluggish annual growth of 0.3 percent.
Washington Engineering, Accounting, Research & Management
Wage & Salary Employment Forecast, 2000-2020
Sources: Washington Office of Financial Management,
Washington Employment Security
Department
