Washington Ranks Second as Innovation-based Economy

Washington ranked second as an innovation-based economy in a report released today by ITIF and the Ewing Marion Kauffman Foundation. Surprisingly, the prestigious report placed Massachussetts in 1st place and California in 8th place.

Washington’s high ranking came in part from the diversity of its economy with strong performance in a range of areas from manufacturing and exports to online population, agriculture, research, patents and venture capital.

The report notes many jobs lost in the recession are never coming back. This has created an imperative to develop new jobs, business models and industries. Between 2000 and 2007, companies on average increased the amount they pay workers by 22 cents an hour. But the amount workers actually received was more like 11 cents an hour. The report says the difference comes from the fact that a larger share of the nation’s workers are employed in lower paying occupations, the result of globalization, particularly in the once-high paying area of manufacturing.

The report uses 26 indicators to assess the states’ efforts to succeed in the innovation economy. The report notes that after running trade surpluses in high tech products for decades, the U.S. began running a deficit in the 2000s reducing Silicon Valley’s strength. California fell from 2nd in 2002 and 5th in 2007 to 7th this year. Washington did a better job than California in terms of the immigration of knowledge workers, the export focus of its manufacturing sector, the number of patents issued, the share of IT professionals as a proportion of the workfroce and the percentge of managerial, professional, technical jobs. We did worse than California in the number of IPOs and the amount of foreign direct investments. Massachussetts scored at the top in terms of the education levels of its workforce, the proportion of managerial, profiession and technical jobs, mirgration of U.S. knowledge workers and the proportion of its companies that are fastest-growing.

Does this sound right? Most people today would say that with Facebook, Google, Twitter, Apple and other high growth companies, California wins hands down. Massachussetts has felt like a depressed economy for many years. What do you think?

Overall Ranks

1. Massachusetts

2. WASHINGTON

3. Maryland

4. New Jersey

5. Connecticut

6. Virginia

7. Delaware

8. California

9. Colorado

10. New York