Thursday, June 5, 2008

EPI Releases Tanker Jobs Study

A just released Economic Policy Institute (EPI) analysis of the Air Force tanker contract finds a significant difference in U.S. job creation between proposals by Boeing and the KC-30 team.

We at Tanker War Blog have only been able to glance over the report as of yet, but in a press release the Institute states:

Boeing would likely create at least twice as many US jobs as NG/Airbus under the 35 billion contract, according to EPI economist Robert Scott.

Also, at the end of the press release the Institute mentions EADS's prior inflated job statistics in regards to the Army light duty helo contract; an issue we had specifically questioned in the past:

Total employment impact estimates put forward by both bidders were higher than the figures arrived at by EPI, although the difference was far greater in the case of NG/Airbus. Scott said the claims by NG/Airbus were at least 45% higher, and as much as 179% higher, than what could be realistically expected. A previous contract for light duty helicopters awarded to Airbus parent company EADS failed to create even half of the U.S. jobs claimed.
It should be noted that EPI's methodology for categorizing and determining of what they call re-spending jobs is very different than the Commerce Department. In the report EPI determines the following:
Direct jobs:Boeing 6,838KC-30 Team 3,419
Indirect jobs:Boeing 7,098 KC-30 Team 3,549
Re-spending jobs:Boeing 14,770 KC-30 Team 7,385
Total Employment:Boeing 28,707 KC-30 Team 14,353

In order to determine the truthfulness of the competitors previously claimed statistics, and compare the job numbers of Boeing and the KC-30 team, you need to understand that both their claims use Commerce Department nomenclature and methodology.

As we mentioned, EPI seems to use its own jobs model. What EPI labels separately as direct jobs and indirect jobs, the Commerce Department labels both as direct jobs. Second, what EPI calls re-spending jobs the Commerce Department calls indirect jobs. Lastly, while the EPI jobs model uses an implied average "re-spending" multiplier of 1.06, the Department of Commerce uses a multiplier of 2.3 for its indirect jobs calculations.

In other words EPI multiplies the sum of its direct and indirect job estimates by 1.06 to calculate the number of re-spending job that are created; while the Commerce Department model simply multiplies the number of direct jobs by 2.3 to calculate the number of indirect jobs created.

It is sort of confusing, but in the end if you use EPIs job creation analysis but the Commerce Department nomenclature and 2.3 multiplier you can adequately compare the past job claims:
Direct jobs:
Boeing claim: 13,497 Boeing EPI/Commerce hybrid estimate: 13,936
KC-30 claim: 14,147 KC-30 EPI/Commerce hybrid estimate: 6,968
Indirect jobs:
Boeing claim: 30,600 Boeing EPI/Commerce hybrid estimate: 32,053
KC-30 claim: 34,190 KC-30 EPI/Commerce hybrid estimate: 16,026

Total jobs:
Boeing claim: 44,097 Boeing EPI/Commerce hybrid estimate: 45,989
KC-30 claim: 48,000 KC-30 EPI/Commerce hybrid estimate: 22,994

So the bottom line is that Boeing seems to have fairly estimated is jobs numbers. But, the KC-30 team has grossly exaggerated its contribution to the economy and will produce not only half the jobs as Boeing but less than half of the jobs they claim.

It is also very interesting that the EPI/Commerce Department hybrid estimate we came up with is about the same number of jobs the KC-30 team originally stated prior to the KC-X contract selection. Or as a Seattle Post-Intelligencer article stated:
The Northrop team originally projected that the new tanker contract would create about 25,000 U.S. jobs. Amid the uproar following the Air Force announcement, the team increased its jobs creation claim to 48,000 jobs.

Remember, Senators Maria Cantwell (WA), Debbie Stabenow (MI), Patty Murray (WA), and Ron Wyden (OR) last month sent a letter to Secretary of Commerce Carlos Gutierrez and Secretary of Labor Elaine Chao asking them to verify the claims made by KC-30 team concerning the creation of U.S. jobs.

Given the fact that the KC-30 team claims more US jobs than Boeing while also admitting the KC-30 has less US content, we can't imagine why it is taking Mr. Gutierrez or Ms. Chao so long to determine what EPI has already figured out.

Note: Jobs claims for Boeing were taken from the EPI report. And, jobs claims for the KC-30 Team are were taken from Leeham Companies, LLC's state by state listing, which is identical to the job claim numbers the KC-30 team has distributed to offices on the Hill.


Anonymous said...

This is no surprise Look at who we are dealing with and there past Performance with Employment # and all the spin they put to all this, Do they really expect even the average Joe that has no ties to aerospace to believe this. They are the biggest Suckers for Believing this

Anonymous said...

The Webs we Weave ....