The “App Economy” Estimated to Contribute Nearly Half a Million Jobs to the U.S.

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Hard to believe, but it’s been less than five years since the launch of the iPhone. Prior to its explosion in popularity, an ‘application’ was a tool for finding a job, but ask anybody what an application is today, and the first things she thinks of are those helpful little programs we store on our phones and tablets. And according to a new study by Dr. Michael Mandel of South Mountain Economics, this new kind of application is creating a whole bunch jobs for Americans — 446,000 to be exact.

446,000 is a pretty healthy figure for an industry that hardly existed five years ago, and it outpaces the number of jobs the Bureau of Labor Statistics estimates software publishers, wireless telecom providers, or Internet publishing add to the economy, respectively.

So how did Mandel come to the 466,000 figure? Government statistics aren’t useful for infant industries like the app economy, so he had to take a different approach. Mandel instead studied The Conference Board’s comprehensive database of online help wanted ads. He searched the database for computer and mathematical occupations containing key words like “Facebook” or “iOS.” After finding the total number of want ads for app programing jobs, he studied the ratio of help wanted jobs to total employment in other industries that are accurately tracked by the Bureau of Labor Statistics. For instance, the want-ad to employment ratio for computer and mathematical occupations is 3.5.

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Multiplying the number of want ads for app programmers by 3.5 gave Mandel his estimate for total employment in the field. This figure, however, didn’t include the number non-programming jobs in the app economy, like sales or human resources.  Further study of want ads placed by mid-size app developers suggested that there was a one-to-one ratio of programming jobs to support positions.

In addition, Mandel multiplied this number by a “spillover multiplier” of 1.5. The idea behind this multiplier is that a job in one field will create job opportunities in other industries. 1.5  is a fairly conservative multiplier, as the U.S. Bureau of Economic Analysis estimates multipliers across industries ranging from 0.8 for retail trade to 6.9 for oil and gas extraction.

The report is bullish on the future of the sector as well. According to the study the average number of help wanted ads containing the word “app” has grown 250% since December of 2008, and shows few signs of slowing. “How big can the App Economy get?” Mandel asks in the report. “That depends in many ways on the future of wireless and social networks. If wireless and social network platforms continue to grow, then we can expect the App Economy to grow with them.”

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Of course, these estimates are based on several assumptions — the most tenuous of which is the ratio of job listings to total employment. At the same time, the rest of the “multipliers” are fairly conservative compared to other estimates of its kind. This study and simply taking a look at the technological landscape around us should prove that this sector of the economy is growing fast, and that many more of us will soon be earning our pay in the “App Economy.”