How Many U.S. Jobs Does the Apple iPod Create?

Posted by: Michael Mandel on December 12

The answer: 13,920, including engineering and retail. But there are 27,250 iPod-related jobs created outside the U.S.

That’s according to a terrific new study called “Innovation and Job Creation in a Global Economy:The Case of Apple’s iPod”. The authors—Greg Linden, Jason Dedrick and Ken Kraemar, of the Personal Computing Industry Center at UC Irvine—want to address the question: Do U.S. innovations actually create jobs in this country? Alternatively, does globalization imply that most of the labor market benefits of innovation flow overseas?

They take a close look at the iPod and get a split answer—the jobs created by the iPod are mostly outside the U.S., but the wages are mainly in this country. The authors write:

Using the iPod as an example of a recent innovation in this industry, we estimated that the iPod and its components accounted for about 41,000 jobs worldwide, of which about 27,000 are outside the U.S. and 14,000 in the U.S. (Table ES1). The offshore jobs are mostly in low-wage manufacturing while the jobs in the U.S. are more evenly divided between high wage engineers and managers and lower wage retail and non-professional workers.

As a result of this, and of cross-country wage differences, U.S. workers earned $753 million, while workers outside the U.S. earned $318 million (Table ES2). While China accounts for the largest number of jobs outside the U.S., Japan earns by far the largest share of the non-U.S. wage bill ($102,380,000) because of its role in supplying key components like small hard-drives and displays.

To summarize these results, the iPod supports nearly twice as many jobs offshore as in the U.S., yet wages paid in the U.S. are over twice as much as those paid overseas. The most important factor is that Apple keeps most of its R&D, marketing, top management and corporate support functions in the U.S., creating over 5,800 professional and engineering jobs for U.S. workers that can be attributed to the success of the iPod.

I’d love to see a similar analysis of solar and wind power…how many jobs does investment in green technology produce in the U.S.? When I asked Kraemer in an email about the feasibility of such a study, he said that it could be done, but the length and cost would depend on having cooperation from a couple of companies (they did the iPod study without participation from Apple). Maybe that could be a prerequisite of getting government money.

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Reader Comments

Mike Reardon

December 12, 2008 10:04 PM

I've always held to the equation that 1 unit of labor generated at least 6 other job out into the immediate local community. That 6x employment generated is always subject to earning the unit of labor receives.

So the question is: is this 6 x $753,287,510 inside the US economy and 6 x $318,486,050 into those foreign locations. And also is there a factor that show the effects from profit going to investor that then generate both local employment also at 6 x and any future earning from reinvestment?

All employment generates these other jobs but a retail item sold can generate a utility use that is greater than its cost. The iPod generates a full ecosystem of related media and also life activities that generate employment. So is that in counted with the retail earnings? If you had the iPhone as and example the ecosystem of related media and also life activities that generate employment is clearly 10 x the iPod.

I’ve always supported the military budget it supports national defense and it also generates so many more jobs 6 x with both the manufacturing of its weapon systems and the sheer size its total personnel cost. That is why opposing universal national health care as another center of related local employment just seem dumb to me. Its also part of why the Auto bailout is needed.

Ajay

December 13, 2008 12:06 AM

I would add that the fact that the US keeps 70% of the revenue means that the job multiplier effect for those jobs is pretty good also, as those US engineers buy US-engineered broadband, hire local babysitters, and go out to eat in US restaurants. I think greentech is a boondoggle, as it's all still in early research stages and doesn't need that much money right now. The whole emphasis on jobs is mistaken and outdated anyway. What matter are the revenues and margins and those are clearly staying here. I wish it weren't so, as I'd like to see what great computers Lenovo's Chinese engineers could come up with and use the great software that India's engineers could build. Unfortunately, defunct and harmful ideologies still grip those countries and they will not catch up anytime soon, at least not China.

Keith

December 13, 2008 01:09 PM

What about the thousands of iPod accessories from the hundreds of accessories makers? If not for the iPod, those companies wouldn't have employees designing, manufacturing and marketing those accessories.

Kent

December 13, 2008 10:33 PM

You forgot the 10,000 applications and games written for the iPod Touch and iPhone in the past year. These iPod/iPhone apps are written by individuals as well as software game companies and even Disney.

Kent

December 14, 2008 03:11 PM

Here is a good example.
www.newsweek.com/id/174266

LAO

December 14, 2008 04:11 PM

I feel compelled to look at this in an unorthodox way, by presuming that the purpose of an economy is to provide a mechanism for its participants to survive and ideally to thrive, and that the efficiency of an economy ought to be measured by the cost of providing that mechanism -- jobs.

Without delving into the boring math, the article allows me to deduce that 13,920 American jobs, paying an average of $54,000 each, were provided by the Apple value chain, at a cost to the American consumer of $300,000 to $600,000 per job.

That is better than retail sales of mostly imported goods, which provide one $20,000 job plus fractional overhead at a cost of about $400,000. There are small components of retail that are simply necessities for living, and some that actually pay for themselves, such as insulation or repair parts, but not much.

The cell phone was surely a boon for the economy -- offices hit the road, coordination became easy, and employees and families became more productive. I maintain that iPod ownership delivers very little economic value over alternative ways to spend that money, such as a lower cost simple cell phone, paying a handyman for sealing heat leaks to gain an annual reduction in home heating bills, or a paying a well-trained mechanic for getting a car back on the road in a hurry. I discount the value of jobs provided to foreign nations, because the value to our economy when they fail to buy U.S. exported goods is not clear.

Like you, I am extremely interested in learning what alternative energy can really deliver in American jobs. We have already heard figures of 2.5 to 5 million jobs, but the importance to me is at what cost? Utility sized wind turbines are so massive that it is likely that the value chain will employ mostly Americans, although it is unfortunate that construction of their huge concrete bases represent equally huge contributions of CO2 to the environment with a corresponding difficult-to-measure cost. Small-scale wind turbines, solar photovoltaics, and solar thermal power generation may not do so well in providing American jobs. Relatively low tech solar thermal for air or water heating may do better.

Because the broader use of these technologies may tend to lower the price of displaced fossil fuel, cost justification without subsidy or carbon trading advantages may prove difficult, but they do deliver significant value to the economy beyond the jobs. Suppose the cost per job was equivalent to the Apple situation -- the value of the energy delivered for the life of the installations would still make the cost per American job much lower. Even if subsidies were required, there would be considerable latitude to keep the cost of generating each American job quite low in comparison to large segments of today's economy which seem designed to raid the economy rather than make it efficient.

Squeezebox

December 15, 2008 11:45 AM

Ajay is wrong that the jobs don't matter. People who work hard resent having to pay welfare or unemployment to people who aren't working. People can't spend money if they don't have it. Unless you're lucky enough to inherit a fortune or win the lottery, you have to work to get money.

I know the Asians are opening design schools and engineering schools at a breakneck pace. Don't look for the value-added work to stay in the U.S. much longer. Without protectionism we're all gonna be hosed by Merchantilist states such as China.

CompEng

December 15, 2008 04:50 PM

Ditto to Lao's point -- well said!

Ajay's point may be that any mechanism that brings in money will create jobs. However, many of those will be things like waiters, stylists, etc. I don't think those are the highest quality jobs, from a perspective of stability or pay. So, I think a focus on jobs (both numbers and quality) is still appropriate.

Kaleberg

December 15, 2008 11:09 PM

Actually it will be interesting to watch wind and solar power as the industries mature. Right now they are much more labor intensive than they would be with ten years of mass production behind them. Why not a one piece wind turbine installer, part crane, part drill? Our local PUD uses something like this for power poles. Why not snap together modular solar panels with plug and play? An awful lot of solar tuning is because of primitive control software.

Of course, growing an entire new industry will create a lot of jobs, as will creating the support industries it will require. How many people did the cellphone buildout employ? There were lawyers, spotters, engineers, construction crews, inventory managers, negotiators, real estate agents and so on.

Ajay

December 19, 2008 10:42 PM

Ultimately, the focus on jobs is from parasites who want the government to force people to pay more for the same goods that they can get much cheaper abroad. There is no doubt that there is a difficult period of adjustment for US workers when they have to retrain for the service sector when those jobs go abroad, but those who think they can simply avoid this adjustment by having the government force people to buy local are clearly deluded. Those of us who would rather buy cheap goods from abroad than support some local parasites will never go for it and we're clearly in the majority today.

Joseph T

December 24, 2008 07:00 PM

Opening the US commercial and labor markets to developing countries like China, India and Mexico means that the wages and standard of living of the average American must decline to be competitive.

There is no way around it, multinationals and the wealthy benefit, but for everyone else, it means unemployment, underemployment and falling wages.

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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