Boeing-funded study of tanker jobs doesn't add up
A Boeing-backed study says the Air Force tanker contract could create 71,000 jobs — and politicians seized on the number despite its implausibility.
Local politicians were quick to embrace a Boeing-commissioned report this past week declaring that 10 times as many U.S. jobs will be created if the Air Force buys Boeing 767 refueling tankers rather than Airbus A330s.
U.S. Sen. Maria Cantwell lauded the "new independent consultant's report" for demonstrating that a Boeing tanker "will translate into some 71,000 jobs across the United States." Gov. Chris Gregoire likewise touted the study's tally of "new U.S. jobs" in her own news release. The study also got good play in some media reports.
Just a couple of problems with the excitement:
First, the politicians didn't read the fine print. While the report claims a Boeing tanker would create as many as 71,000 "new U.S. jobs," a footnote makes clear that this number is arrived at by adding up the number of one-year, full-time jobs over the contract's 18 years.
Boeing could do that by hiring just 3,900 people on the tanker program and keeping them employed for 18 years.
Second, the abstract method the consultant used in his calculations ignores the specifics of the contending tanker proposals and produces an Airbus jobs projection that makes no sense.
(Third, we could add, the study came out two days after Northrop Grumman and Airbus parent company EADS pulled the Airbus plane out of competition for the contract. But Boeing, eager to justify its status as sole remaining contender, nevertheless trumpeted the result.)
The lead author of the jobs-impact report is economist Rob Shapiro, a former U.S. undersecretary of commerce during the Clinton administration and now chairman of Sonecon, a consulting firm.
In an interview, Shapiro declined to say how much Boeing paid for the report, but insisted it was "intellectually independent."
Boeing has previously claimed its tanker program would support 44,000 U.S. jobs nationwide, while Northrop has claimed 48,000 — both including suppliers, which Shapiro's study ignores.
To cut through the competing claims, which Shapiro dubbed a "war of PR firms," he said he deliberately avoided using any private data from Boeing and instead used only publicly available data.
Shapiro conceded that the 71,000 jobs figure represents his estimate of the number of "full time equivalent" jobs (FTEs), or one-year jobs, totaled over 18 years.
His comparable figure for an Airbus/Northrop win is a paltry 7,000 FTEs in the U.S over 18 years. That amounts to 388 jobs, on average, in any given year.
Yet Airbus promised 1,300 new jobs in a facility in Mobile, Ala., that would build both the military tankers and commercial freighter aircraft. Northrop promised 500 more jobs in an adjoining new facility.
So how could the jobs discrepancy possibly come out 10-to-1 in Boeing's favor?
That's because Shapiro's method ignores the actual plans for building both the A330 and 767 tankers — those don't even enter his calculation.
Instead, he takes historical data from the Internal Revenue Service. That data, he says, shows that U.S.-based aircraft manufacturers have generated a 0.79 percent increase in employment for every 1 percent increase in investment in plant, property and equipment; subsidiaries of foreign planemakers based here, by contrast, produced slightly more than half that employment increase, or 0.42 percent.
He adds the assumption that 96 percent of Boeing's operational assets are located in the U.S., versus just 4 percent of Airbus'.
Those two numbers, combined with an assumption that either contractor would spend 15 percent of its $35 billion contract on new investment, lead to Shapiro's conclusions about how much each company would increase its current employment.
Here's how it goes for Boeing (bear with us on the math here): a $35 billion contract x 0.96 available to U.S. operations x 15 percent of that projected to be spent on investment = $5 billion, which is 58 percent of Boeing's 2008 total annual investment in plant, property and equipment. So multiplying 58 x .79 produces a 45 percent employment boost to the current Boeing U.S. work force of 156,000, or 71,000 FTE jobs over 18 years.
For the rival team, assuming Airbus gets three-quarters of the contract and Northrop the remaining quarter, Shapiro winds up with a 12 percent U.S. boost in Airbus' low current U.S. employment base of 2,200, or just 256 jobs.
At Northrop, applying his ratios to its U.S. work force of 42,500, Shapiro adds 6,800 more jobs, all going on the Airbus side of the ledger.
Clearly the paltry Airbus outcome defies common sense. To generate 256 FTEs, Airbus could hire just 14 people to run its proposed Mobile facility for 18 years.
But Shapiro's abstract method is divorced from any specifics of the two contending tanker plans. The only criterion factored into the calculation is historical investment patterns — although historical data, from the IRS or elsewhere, can't accurately project the impact of Airbus's unprecedented plan to invest in a major U.S. manufacturing plant.
And even the Boeing side of Shapiro's analysis is suspect. There's no assessment of the 767 supplier sourcing, for example. Shapiro said no definitive independent data is available on A330 and 767 suppliers, so he omitted that. (Most of the 767 fuselage panels are made in Japan, the vertical tail in Italy.)
If only it were true that a Boeing tanker win would increase the size of the company's work force by 45 percent.
Alas, it won't.
— Dominic Gates
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