The Promise of Innovation
Using Apple’s iPod as an example, new research released by a team from UC Irvine’s Merage School of Business sheds light on the debate about globalization and its impact on U.S. workers.
Results from the study, which was funded by the Sloan Foundation, indicate that innovation by U.S. companies can create high-wage jobs for U.S. professionals no matter where production facilities are located. The bottom line is U.S. innovation may create more jobs outside the U.S. but U.S. workers receive the lion’s share of the wages.
The study focused on the case of Apple’s iPod, mapping the financial value created by the iPod for Apple and its suppliers and distributors.
Singling out the iPod as an example of a recent innovation in this industry, the team estimated that design, production and distribution of the iPod and its components accounted for about 41,000 jobs worldwide in 2006.
About 14,000 of those jobs were inside the U.S. and were fairly evenly divided between high wage engineers and managers, and lower wage retail and non-professional workers. Another 27,000 jobs were created elsewhere in the world and consisted primarily of low-wage manufacturing positions.
One of the most important reasons for the presence of higher-paying jobs in the U.S. is that Apple keeps most of the R&D, marketing, top management and corporate support functions for the iPod in the U.S., creating over 5,000 professional and engineering jobs for U.S. workers.
Although some U.S. firms may employ more engineers overseas than Apple does, this relative concentration of high-paying jobs at headquarters is not unusual, according to the study’s authors.
The research paper is available here.
I have a couple of small reservations about studying outlier manufacturers as indicative of industry condition. The iPod is an exception in that Apple is market leader by brand, but not the volume leader in total sales volume compared to the mix of all products that come 100% from elsewhere in that segment. I suggest the conditions described are far worse than is represented.
I also take exception to the concept that we can simply educate our way out of needing production jobs in this country – a tired favorite of academics and politicians that ignores the reality that there will always be a need for a large middle ground between engineering/professionals and food service/retail clerks. We should stop treating people who work with their hands as disposable citizens who need to degree-up. This is unfair and unrealistic – and fails to recognize that professional jobs are now being exported right along with factory work – creating a shrinking of opportunities at both ends of the universe.
I am not a protectionist. I do not support putting up walls. Global competition is a good thing – when balanced with our need as a nation to avoid destroying the foundations on which it is built. This must come from a cultural awareness and a conscious desire to keep our country diverse and deeply textured, and supporting of hard work at all levels.
We should value the craftsman as much as we do the CEO’s who have been lining their pockets with cash while throwing hard workers to the curb. We need to leave space for our mechanical inventors, our fellows in leather gloves, our small business hard product people, and our factory machinists and assemblers – they are all as good for this country and its future as that grand heard of highly educated stock traders selling our 401k values into the toilet!
We need education all right. We need to educate everyone at all levels to the real costs and impact of shopping price over value, and the impact of buying into globalization at the cost of our own sovereignty. We need fewer academics dismissively stating that production work in the US is likely never to recover, and more working on ways to enable a its recovery. This will set the stage for a stronger free market.