You are here[HOT] EB-5 projects use the same type of job-calculation methodology as Apple did to calculate direct and indirect jobs creation

[HOT] EB-5 projects use the same type of job-calculation methodology as Apple did to calculate direct and indirect jobs creation

By eb5attorney - Posted on 07 March 2012

Read the below link on the recent calculation done by Apple to show the total job effects it had on the U.S. economy.

Relevant portion is copied below. One thing readers should know is that the same type of multipliers are used by EB-5 projects to "estimate" the direct and indirect jobs effect, and the same debate goes on. This is why we are very much against including the job creation as one of the requirements for EB-5 investors' getting permanent green cards. Our proposal is for EB-5 investors to loan $1 Million USD each to a federal fund called "USA Jobs Fund" and then put the burden on the federal agency to use and distribute the money to spur the job-creation across the United States. The fact that the job-creation number is so flexible and debatable is not the fault of EB-5 investors. The federal and state agencies use the same methodology to claim how many jobs their projects are going to create, and of course, there is a tendency to inflate the job numbers.

We fear that the current EB-5 Program is going to bog down to hard-to-prove jobs methodologies, and debatable studies by opposing economists are going to determine whether an EB-5 case is going to be approved or not. This is no way to run the EB-5 Program. One possible solution is if USCIS had a fast pre-approval process where its own economist will issue the job number USCIS will accept for each EB-5 project, so that the EB-5 projects can market corresponding number of EB-5 investors. Otherwise, the entire EB-5 Program is just a guessing game.

On Friday, the company published the results of a study it commissioned saying that it had “created or supported” 514,000 American jobs. The study is an effort to show that Apple’s benefit to the American job market goes far beyond the 47,000 people it directly employs here.

Apple, based in Cupertino, Calif., released the study on its Web site but declined to say why it published the results.

The company’s employment practices have come under closer examination. Apple and other high-tech companies, including Internet companies, employ relatively few people compared with other stalwarts of American business, like General Motors and General Electric in their heyday.

Apple, which is now the world’s most valuable company, has created more jobs overseas, approximately 700,000 through a network of suppliers that make iPhones, iPads and other products.

The accuracy of the Apple jobs calculation in the United States may well be debated among economists for years. “Apple has a big effect, and big is about as precise as I can make it,” said Gary P. Pisano, a professor of business administration at Harvard Business School. “It’s hard to say the exact size.”

David Autor, an economics professor at the Massachusetts Institute of Technology, said via e-mail that 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.

“But of course, they might not have been as well paid or gratified with their work,” Mr. Autor said. “We’ll never know.”

Mr. Autor also said that Apple should not be held accountable for employment problems in the United States. “Generating the conditions that give rise to high rates of employment and wage growth is the domain of policy makers, not individual companies,” he said.

A number of companies, including Microsoft, have commissioned similar research aiming to tally up such indirect employment, by suppliers and other partners. The use of “job multipliers” has become common practice, sometimes by businesses lobbying for tax breaks from local and state governments.

But the calculations of such multipliers are often fiercely debated both in economic and political terms. For instance, the Congressional Budget Office, which calculated the impact of the 2009 federal stimulus on jobs, has set estimates that vary between as few as 1.6 million jobs and as many as 8.4 million jobs.

Peter Cappelli, a professor of management at the Wharton School at the University of Pennsylvania, says companies often have a stronger case when quantifying their effects on a regional economy, rather than on the entire national economy. It does matter to a state, for example, whether a big business is there, though it might not matter nationally if the business moves to a different state, he said.

The Analysis Group, the consulting firm Apple hired, concluded that 257,000 jobs were in companies that work directly with Apple, including employees in Kentucky and New York at Corning, a company that creates glass for the iPhone, and people at a Samsung plant in Texas.

The Analysis Group arrived at that figure by analyzing how much Apple spent on goods and services in the United States in 2011 and applying that information to a formula developed by the federal government’s Bureau of Economic Analysis called an “employment multiplier.” The group used this multiplier to calculate direct and indirect employment figures from Apple’s spending, though it omitted any jobs created through spending by those people on, say, nannies, vacation homes or restaurants.

Among the outside jobs Apple said it helped support were the delivery services that bring packages of Apple devices to its retail stores and directly to customers’ homes. Norman Black, a spokesman for United Parcel Service, said the company estimated that for every 40 new packages a day transported through its system, the company hired one more person. He declined to say how many packages Apple shipped through U.P.S. and, therefore, how many jobs could be credited to the company.

“They rely on us for a lot of shipping,” Mr. Black said. “There’s no question that as they roll out and launch products, that’s creating new jobs in the U.S.”

Apple’s study said the company also supported an additional 210,000 jobs among companies creating apps for Apple devices like the iPhone and iPad. The study based that figure on the 466,000 app-related jobs that TechNet, a high-tech lobbying group, recently estimated existed in the United States. Apple’s study estimated that 45 percent of that figure could be credited to development of software for Apple devices, based on an analysis of online job listings.

While several economists and employment experts agree that Apple has an economic impact that goes beyond the people it directly employs, they said it was difficult to conclude from Apple’s study what the company’s benefit is to the overall jobs market. “They certainly have a big economic impact, as does every other firm,” Mr. Cappelli said. “If you say, ‘If there had been no Apple, those people would not have jobs,’ that’s not true.”

As an example, Mr. Cappelli said that if there were no iPad, the $500 an Apple customer would have spent on the device most likely would not have been put into savings, but rather spent on some other product or service. That impact could have been more or less than Apple’s. Apple is, however, an innovative company that created a market for tablets and radically increased demand for smartphones.