The Apple Effect: You Can't Count the Company's True Value in Workers

This is the paradox of most Apple punditry: What we can measure (Apple's employees) doesn't really matter. And what does matter (Apple's impact on the economy) we can't really measure.


Let's do a quick thought experiment. Pretend for a second that Apple was almost exactly the same company we all know today -- the same tech leader beloved by millions of religiously devoted fans the world over, with a stock price well above $500 -- but instead of employing 47,000 Americans, its entire U.S. payroll consisted of just 40 nerds in a small Silicon Valley office. Heck, let's say that was Apple's entire worldwide workforce, and that its manufacturing was still handled by contractors in China.

Would Apple still be important to the U.S. job market?

Absolutely. You can't measure the jobs impact of a major tech firm's by its headcount alone. That would ignore the value of its products, and the new business markets they create.

But is there a better way to measure it? Try as we might to find one, no, not really.

That's what makes Apple's recent PR push to cast itself as a major U.S. job creator so quixotic. The company has been under fire for its labor record, including its strategy of outsourcing manufacturing to China. So on Friday, it published an analysis attempting to conjure up the precise total of jobs it generates in the U.S. The magic number? 514,000. The figure includes jobs either "created or supported" by Apple, meaning everyone from engineers and marketing executives at its Cupertino, California headquarters, to UPS delivery men who carry boxes of iPhones and iPads to your front door.

All of this should be taken with a massive giant grain of salt. Apple's calculations are based on speculation and convenient assumptions. Who's to say, for instance, that if the iPad didn't exist, your local UPS man wouldn't be schlepping around some other gadget that was on everybody's holiday wish list?  As David Autor, an economics professor at the Massachusetts Institute of Technology, told the NYT yesterday:

The "entire business of claiming 'direct and indirect' job creation is disreputable" because most of the workers Apple is taking credit for would have been employed elsewhere in the company's absence.

When you strip away the fanciful math, though, Apple's analysis does illustrate one important point. Its value is innovation. And you can't capture that just by counting its employees.

The company attributes much of its job impact to the growing industry dedicated to creating smartphone and tablet apps. Indeed, one could fairly call Apple the father of the entire app economy. As the Progressive Policy Institute Chief Economist, and frequent Atlantic contributor, Michael Mandel has written, "nobody conceived of the idea of 'apps' before the iPhone was introduced...." By pumping life into the smartphone market, and really the entire mobile web, it's created an entirely new playing field for businesses to compete and make money on. Of course, that creates jobs. Mandel estimates the app industry employs 466,000 workers. But in the bigger picture, it helps keep America's economy vibrant as older industries migrate overseas or die off.

Apple's location also has an economic impact that can't be measured in a specific number of jobs. By headquartering on the West Coast along with the other titans of the web -- Google, Facebook, Microsoft, and Amazon -- it fosters a community of engineering and design expertise that makes the U.S. a destination for high tech talent and entrepreneurs from around the world. No single company necessarily employs that many workers, especially when you compare them to the industrial giants that anchored America's economy in the 20th century. But in aggregate, they make an invaluable contribution.

Apple would be an important part of that mosaic, even if were just 40 nerds in an office.

Would it be nice if Apple employed thousands of Americans manufacture its products at home? Yes. But there would also be tradeoffs. Most obviously, its products might be too expensive for the millions of middle-class Apple owners. Second, the company has generated its high margins in part by mastering the global supply chain, squeezing efficiencies wherever possible from its contractors. Those enormous profits give it a free hand to research and develop new products at its own pace, unburdened by the demands of impatient shareholders. If Apple were a little less profitable -- and make no mistake, producing electronics in the U.S. would not be as profitable -- it might not be quite as good at dreaming up new product ideas.

In the end, we shouldn't expect Apple, or any single contemporary tech company, to be a major source of employment in the U.S. But as long as Apple and its ilk continue creating new products that make us happy, create new industries, and open up new opportunities for entrepreneurs, they're helping America press the refresh button.

Image: Reuters