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Austin Draws Tech Companies—Growth Highlights Workforce Challenges

This blog is the fourth in a series that examines the technology talent gap by major metro area serviced by Genesis10. The series has covered Milwaukee, Charlotte, and Cleveland thus far. We will also be examining the following markets in the weeks to come: Dallas, Kansas City, and Orlando.

In late March, Amazon announced that it is expanding its Austin Tech Hub and plans to create 800 new tech jobs in such fields as software engineering and cloud computing, among others. 

Blog-Austin-Draws-Tech-CompaniesIt’s building on momentum—in the past four years, Amazon has created more than 1,000 jobs in Austin. “With a strong pool of technical talent and dynamic quality of life, we are excited to continue to expand and create more opportunity in this vibrant city,” said Terry Leeper, General Manager of Amazon’s Austin Tech Hub.

The local chamber couldn’t agree more. “This expanding presence is indicative of our region’s ability to provide creative and innovative talent. We’re proud to call Amazon a partner in our efforts to achieve regional prosperity,” said Gary Farmer, Opportunity Austin Chair, Austin Chamber of Commerce.

Amazon’s announcement is one of many recently. According to a Bloomberg article, “Austin Is Building a Mini Silicon Valley,” Apple, Facebook and Google all have established large Austin outposts and each recently has signaled plans to expand there.

  • Apple’s presence in Austin is the biggest after its headquarters in Cupertino, California. The company is investing $1 billion in Austin to build an office park capable of holding 15,000 additional employees, roughly double the current workforce there.
  • Juul Labs Inc., the San Francisco-based maker of a popular e-cigarette, is opening an office in Austin for about 50 employees to start. The plans designate Austin as the head of Americas for Juul.
  • U.S. News & World Report named Austin as the “Best Place To Live” three years in a row.

In 2018, the Austin metropolitan area added 36,800 net new jobs, or 3.5%, according to the Texas Workforce Commission and the Bureau of Labor Statistics. Austin’s 3.5% growth makes it the fourth best-performing among the 50 largest metro areas in the U.S.  Austin is also attracting talent because of its affordability, employment opportunities and eclectic city vibe.

Still the Austin Statesman reported that companies “are having trouble finding employees locally amid an extremely tight Austin labor market that is straining businesses from retail stores and restaurants to software developers and construction firms. Widespread hiring difficulty, it said, “is starting to slow the growth of Austin’s long-booming economy, according to recent data from the Federal Reserve Bank of Dallas.

Christopher Slijk, an assistant economist at the Dallas Fed said that the tight labor market is a reason for the slowdown. “The region “is almost a victim of its own success (because) the area has grown so quickly that it can’t bring in enough workers for businesses to fill the positions that need to be filled.”  The Dallas Fed revised its measure of the region’s annual growth rate from 6% to 4.7%.

An article in the Austin Business Journal, Tight Labor Market Starts to Drag on Austin Economy, echoes these sentiments reporting that employers are having difficulty filling such tech roles as software developers, Linux engineers and business operations analysts.  The Austin market may be cooling down a bit due to the tight tech labor market.  William Mellor, Vice President at Angelou Economics feels that immigration reform could ease the situation by enabling foreign workers to fill open positions.  He went on to say that the labor market has been a problem in Austin for some time.

Academic leaders recognize and emphasize the need for strong collaboration between the education system, from community colleges to four-year universities like Texas State, and Corporate America on workforce needs.  Richard Rhodes, President and CEO of the Austin Community College District, said his institution draws on the advice of roughly 700 business leaders per year to learn how ACC's academic programs can prepare students for specific careers.  Another suggestion from the Chief People Officer, Laura Sue D’Annunzio at Rackspace is to require tech classes in K-12 education.  “Tech classes shouldn’t be electives”, she said – “they should be required.” 

The technology talent market remains tight nationwide. While Austin has many amenities that make the city a desirable place to live, and tech companies like Amazon, Google and Apple are expanding here--both of which attract young tech workers to the area—we are seeing companies get creative with signing bonuses, retention bonuses and other perks in an effort to retain their FTEs, according to Colleen McIntyre, Central Texas Region Managing Director at Genesis10.

In addition to the retention tactics Colleen shared, creative approaches and investment will be required to increase workforce capacity and capabilities in the short-term. Staffing companies and consulting firms alike are looking at talent pools through a different lens — by bringing back retirees, training to upskill or reskill, tapping returning military veterans or developing junior talent are all tactics being used to increase workforce capacity whether it is in Austin or across the United States.