NYT Article on App Economy Understates Jobs Impact

As most of you know, I spent years as chief economist and lead economics writer for BusinessWeek. And I have utmost respect for the difficult task that journalists face under deadline pressure.

Having said that, I feel that the NYT article As Boom Lures App Creators, Tough Part Is Making a Living understates the jobs impact of the App Economy in three ways.

First, the article notes that the App Economy “was responsible, directly and indirectly, for 466,000 jobs,” as of the end of 2011, based on a February 2012 study that I did for Technet. However, an October 2012 report entitled The Geography of the App Economy, done by myself and Judith Scherer, showed 519,000 jobs in the App Economy as of April 2012. It would have been much more accurate for the reporter to have cited the more recent–and larger–estimate of App Economy jobs.

Second, it’s certainly true that App Economy entrepreneurs are not all successful, just like entrepreneurs in other fields. However, “The Geography of the App Economy” paper makes it clear that large companies are hiring droves of app developers in-house to create and maintain apps, listing quite a few by name. That paper identified 10 different categories of App Economy jobs, only one of which consisted of the stand-alone app developers that the NYT article focuses on.

Entrepreneurs know that startup businesses typically take at least 3-5 years to make a profit. How long were the entrepreneurs they interviewed in business? And the skills and experience these people develop in their own ventures make them more appealing to be hired at large salaries by more established companies. Indeed, the article notes in passing that one of the entrepreneurs was then able to get a job as a app developer working for a larger company.

In our research, we have found that one of the biggest problems facing App Economy entrepreneurs is that they are competing with large companies for the same talent pool of skilled computer software engineers, user interface designers, and others with app economy skills. In this industry, talent is the most important input, wages are high and rising, and there’s more demand for these skilled individuals than there is supply.

Finally, the NYT article ignores the positive impact of the App Economy on state and local economic development. In an upcoming paper, South Mountain Economics will look at the ways that some leading states and cities are trying to attract app developers and other innovative companies as the foundation for growing their economies. These innovation-minded economic development efforts will turn out to be crucial for economic success going forward.

Comments

  1. I find M. Mandel’s arguments not entirely convincing. Reasons, in order made: (1) 466/519 = 90%. So the NY Times article was accurate. And if you look at the NYT graphic, it shows 1M developers if you count all the categories (there may be double counting however). (2) “That paper identified 10 different categories of App Economy jobs, only one of which consisted of the stand-alone app developers that the NYT article focuses on” – so? Maybe all ten categories are hurting? The implication is they are not–but it’s just an implication. I briefly read the CTIA report “The Geography of the App Economy” and it reads more like an infomercial. “Case studies” highlight the successful programmers–just like the NYTimes article mentioned, the 5% or so that “strike it rich”. Hardly scientific. The NYTimes article is focusing on the 95% that don’t, and they reference sources too (see the article). I myself find most programmers make relatively little money. Above the mean perhaps, but not serious six figure (USD 100k+) incomes unless they work for large, ad-driven companies (see Google) or companies that make money ‘elsewhere’ and need programmers (for example, big banks). (3) the fact that states try and develop ‘technology clusters’ is simply perhaps ‘groupthink’. Does it also make economic sense to finance sports stadiums using public money? If you were around in the 1990s, you would think so. All in all, Mandel’s paper fails to convince me. See the comments in the NY Times article for more diverse opinions. Will this comment stick or will the author bury it, since he’s a consultant? I’ll check tomorrow.

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