Apple's real worth: How many U.S. jobs it creates

Apple, Silicon Valley leaders are displacing traditional corporations in net worth, helping to keep good jobs in America

How many ways does your kid use his or her iPod? Let's see: It's an MP3 player, a photo album, a mini game machine, a digital recorder or laser pointer (with added apps), a calendar, and so on and so on. But you already know that. Here's a use that I bet you didn't know: It's a job-creating engine.

A study by researchers at UC Irvine (PDF) found that the iPod was responsible for creating nearly 14,000 jobs in the United States and another 27,000 abroad. And those numbers are a few years old. Given the age of the product today, the iPod may not be generating many new jobs, but think of the positions that have been created subsequently by the far more complex iPhone and iPad.

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What brings that to mind is Apple's claim to the title of the world's richest public company. At market close yesterday, the company's market cap -- the number of outstanding shares multiplied by their price -- hit $337 billion, surpassing that of ExxonMobil by about $6 billion. Think of it: A company that lives in the digital world, a world that only existed as a thought experiment a few generations ago, is more valuable as one of the world's largest oil companies.

But this is not just a case of Apple exceptionalism. It turns out that Apple is hardly the only IT company sitting atop that mountain of riches. Four of the six richest companies (also by market cap) on the planet are Silicon Valley giants. They are, in order, Apple, Microsoft, IBM, and Google. Chevron, that other oil giant, is No. 5, sitting between IBM and Google. Look a little further and you'll notice that Cisco Systems, Intel, and Oracle are among the 20 richest companies.

The number of people those companies employ worldwide is staggering: more than 500,000. Large as it is, that number understates the impact those companies have on the worldwide economy. Although just 18,000 people work directly for Apple, there are hundreds of thousands more working at companies up and down the supply, support, and distribution chains.

Despite all this, there's a tendency to dismiss the importance of products like the iPod and iPad as toys for yuppies. There's also a tendency to bemoan the fate of the American economy, saying we don't make anything anymore.

Well, we do. Sure, the iPod, iPad, and iPhone are assembled in Asia. But the real value in those products was added in Cupertino, Calif. -- part of Silicon Valley -- where they were invented, and in the offices and cubicles of developers around the country who crank out the apps that make the iPad and the iPhone so useful.

U.S. workers win
Maybe you don't think that U.S. workers are getting a good deal when so much of the work connected with IT-related products occurs offshore. Fortunately, that's not the case. Here's why: As I mentioned, the UC Irvine researchers estimate that the iPod and its components accounted for about 41,000 jobs worldwide in 2006, of which about 27,000 were outside the United States and about 14,000 were Stateside, a 2:1 ratio.

But the offshore jobs are mostly in low-wage manufacturing, while the jobs in the states are more evenly divided between high-wage engineers and managers and lower-wage retail and nonprofessional workers. As a result of this and of cross-country wage differences, U.S. workers earned a total of $753 million, while workers outside the country earned $318 million, the researchers found.

The conclusion of that report argues directly against one of the most pervasive myths of today's economy: U.S. workers and the middle class are not reaping the gains of the high-tech economy. "So it appears that innovation by a U.S. company can benefit both the company and U.S. workers, even if production is offshore and foreign suppliers provide most of the inputs," the report concludes. The relationship between innovation by U.S. companies and employment in the United States is more complex than phrases such as the "vanishing middle class" suggest. 

Finally, remember the market cap numbers. Because they are based on the share price at any one time, they reflect what the market thinks of that company, and by extension the money that can be returned to shareholders.

Five years ago, shares of Apple were trading at $64; when the market closed yesterday, they were priced at $363.69, an increase of nearly 500 percent. Lots of that money went into the coffers of hedge funds and billionaires, but much of it is in the 401(k)s of ordinary middle-class folks whose retirements will be that much more secure and whose kids will have a chance to go to college.

Keep that in mind when someone tells you that our middle class is being left out in the cold by the digital revolution.

I welcome your comments, tips, and suggestions. Post them here (Add a comment) so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net. Follow me on Twitter at BSnyderSF.

This article, "Apple's real worth: How many U.S. jobs it creates," was originally published by InfoWorld.com. Read more of Bill Snyder's Tech's Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

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