The iPod's effect on the global economy

Chrystia Freeland, editor of Thomson Reuters Digital, wrote a piece last week in which she cited a paper -- Innovation and Job Creation in a Global Economy: The Case of Apple's iPod -- by three scholars who studied how the iPod has impacted the world economy. Freeland's assertion in "Winners and Losers in the Apple Economy" is that "the key to understanding the U.S. economy" is any device created by Steven P. Jobs.

The paper by scholars Gren Linden, Jason Decrick, and Kenneth L. Kraemer that Freeland takes her talking points from was published last month, but uses somewhat stale data. The study results are based on data from five years ago, which is like trying to describe the current U.S. military with a discussion of equipment and tactics from the Civil War. In 2006, iPod design and manufacturing employed 27,250 people overseas, and about 13,920 in the U.S. That's a year before the iPhone hit the market, and four years prior to the introduction of the iPad, so the numbers are miniscule compared to the employment in the Apple economy in 2011.

Freeland's conclusion is that American innovation creates a lot more jobs outside of the country than it does inside. That's not surprising in the least. The interesting part of the post is that the predominant beneficiary of Apple's innovation were the American engineers and professional workers who created the iPod. They made up only 6,101 of the almost 14,000 U.S. Apple employees associated with iPod design and production, but made about US$525 million -- more than twice what all of the foreign non-skilled employees took home.

Freeland notes that although globalization does create more jobs overseas, the professional employees and shareholders of Apple clearly keep much of the financial value inside the United States. The non-skilled American Apple employees who participated in iPod production and development -- such as office support and retail staff, or freight and distribution workers -- accounted for 7,789 jobs, but brought in only $220 million.

I'm not sure exactly what Freeland is trying to do with her article other than throw fuel on the tired "haves, have-nots" fire. Sure, non-skilled workers both here and abroad are making less money than their professionally trained counterparts. However, the engineers and developers who are pulling in the big bucks spend years of their lives not only getting advanced degrees, but also continuing their education to stay current with the latest technological leaps.

It would be eye-opening to see the results of a similar study of the Apple economy that takes advantage of more recent data, particularly now that Apple's success has been skyrocketing thanks to the iPhone, iPod touch, and iPad.