Thursday, July 08, 2004

Exporting jobs?

In a recent report the Federal Reserve Bank provides figures on overseas jobs in companies in which US corporations held majority ownership.

First of all, my experience with these reports is that they tend to be rather academic and not politically motivated. Secondly, it's important to notice that the report discusses jobs at companies in which American corporation held majority ownership. It does not talk about jobs that were outsourced entirely to independent contractors.

The primary finding is that the number of overseas jobs has increased by 77% during the past 15 years. However, balancing that growth has been the even greater growth (at least in percentage terms) of workers in the United States employed by foreign-owned corporations, which has more than doubled. A global labor market works in both directions.

Another interesting finding is that the 49 countries designated by the United Nations as the least developed (with an annual per capita GDP under $900) account for less than 1 percent of the foreign employment of U.S. foreign corporations. (The article doesn't say whether the 1% is a percentage of the number of jobs, which would be significant, or the amount of money spend on those jobs.) But the implication is that off-shore employment does not necessarily go predominately to low-wage countries.
"In 1987, 68.3 percent of workers employed by foreign affiliates of U.S. corporations were located in high-wage countries; in 2001, this share fell to 61.4 percent.(1)"
Finally, a third important consideration is the intended destination of the products produced overseas. Only 11%, on average, is shipped back to the United States. Although that number is higher in low-wage countries, the bulk of production is generally for local markets. Quoting from the report,
"For example, in 2001, 28 percent of the sales of U.S. affiliates in Mexico were exported to the United States, whereas 64 percent of the sales went to the local market.

In China, 71 percent of the production by U.S. affiliates was sold to the local market. This indicates that for some companies the attractiveness of investing in China is not the access to cheap labor but access to a billion consumers."
Exporting jobs may not be the scourge of our employment market that we fear it is.

(1) High-wage countries are the 15 countries of the European Union (as of 2001), Australia, Canada, Japan, New Zealand, Norway, and Switzerland.

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