American Companies Are Hiring (Overseas)

Why they're doing it, and what it means for the U.S. economy

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Earlier in December, President Obama met with some of the country's most high-powered CEOs, with the goal of convincing corporate America to use some of its $2 trillion in cash reserves to hire more workers. But it turns out many U.S. companies are hiring. Overseas, that is.

The AP reports that corporations, buoyed by rising profits and stock prices, are hiring a substantial portion of new employees overseas--sometimes for sophisticated, high-tech jobs--as sales in international markets outpace sales in a U.S. market still reeling from the recession. The report cites an Economic Policy Institute finding that American companies have created 1.4 million jobs abroad this year, compared with less than 1 million at home. An economist at the institute estimates that the additional 1.4 million jobs would have reduced the U.S. unemployment rate from its present level at 9.8 percent to 8.9 percent.

What's behind the trend, and how should government react?

  • This Isn't How It Used To Be, observes Jon Talton at the Seattle Times. Before the 1980s, he explains, greater demand overseas translated into more jobs in American factories, which "helped sustain a consensus that trade was a good thing for America." Since then, however, American corporations have increasingly moved operations offshore to better access emerging markets and take advantage of cheaper labor, sometimes setting up shop in foreign countries as "the price of admission to the market." Profits, Talton concludes, "still flow back home, but not as many jobs."
  • Multinationals Are Following the Money, notes David Dayen at Firedoglake: "They don’t see the same demand in America that they do in these other markets, and the worker talent level there is also high."
  • And Emerging Markets Offer Better Growth Prospects, argues Newsweek: "Countries like Brazil, India, and China came out of the recession largely unscathed. They all have GDP growth rates well above that of the United States and Europe. They have younger demographics, an emerging middle class and consumers who are not saddled with debt." This is not all bad news for the U.S., Newsweek continues:

Growth from emerging markets--while far from a massive, job-creating catalyst--is still likely to benefit developed countries and a subset of domestic workers; the latest technological gadgets may be assembled in China, but they are still designed in Silicon Valley, their marketing plans are still drawn up in New York or London, and that’s not likely to change.

  • Government Must Put A Stop to This Trend, demands an editorial in the Idaho Mountain Express: "Tax and investment laws, export-import regulations, public education standards, labor contracts--every conceivable incentive for shifting jobs overseas--must be ended. U.S. corporations must be given reason to revive global industrial preeminence at home. Remedies must be found lest newly poor Americans only find work producing cheap products for a newly rich middle class overseas."
  • No, It Should Embrace It, counters Mihir Desai, a Harvard Business School professor, at The Wall Street Journal. Desai says research he conducted demonstrates that "when American firms grow abroad, they also grow domestically." He elaborates:

The data do not support the crude, fixed-pie intuition that firms either invest abroad or at home. Ten percent growth in American firms' foreign investment is associated with 3% growth in their domestic investment. And when firms grow abroad, their domestic exports and R&D activities grow especially ...

Vilifying or penalizing American businesses for their global operations will only lead them to consider leaving the U.S.--or consider being bought by foreign companies. Such moves would hurt America by removing valuable headquarter jobs.

This article is from the archive of our partner The Wire.