Tuesday, October 12, 2010

Outsourcing and Insourcing Both Create U.S. Jobs

From today's WSJ editorial "Obama and the Politics of Outsourcing" by William S. Cohen:

 "Most people treat outsourcing as a zero-sum game—one foreign worker replaces one American worker. But this is not how the dynamic global economy works. In 2007, Matthew Slaughter, an economist at Dartmouth's Tuck School of Business, published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.

He found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs. For every job "outsourced" to India and other foreign countries, nearly two new jobs were generated here in the U.S. Those new U.S. jobs were higher-skilled and better-paying—filled by scientists, engineers, marketing professionals and others hired to meet the new demand created by their foreign subsidiaries.

A 2004 study by Prof. Slaughter titled "Insourcing: The Often Overlooked Aspect of Globalization" found that the number of American jobs created by the subsidiaries of foreign-based multinationals has more than doubled over the past generation. In 2002 those subsidiaries employed over 5.4 million American workers, nearly 5% of total private-sector employment. They also paid American workers 31% more than their American nonsubsidiary competitors—an average of $56,667 per year. If Congress enacts legislation to stop American companies from outsourcing, foreign governments could do the same—and that could put at risk millions of high-paying jobs in the U.S."


At 10/12/2010 4:46 PM, Blogger juandos said...

Happening not far from my hometown of Laredo...

China stakes claim to S. Texas oil, gas

“This is a pretty simple business transaction,” McClendon said. “The initial feedback we’re getting is that this is something the government should be very happy to see, which is the return of American capital into our country so that we can use it to create high-paying American jobs and also reduce oil imports a few years down the road.”

He projected that the sale would create as many as 20,000 jobs, directly and indirectly, and, on CNOOC’s dime, allow the company to increase its rig count in South Texas from 10 rigs to about 40 by the end of 2012...

More real jobs than the Obama administration has actually generated...

From Bloomberg: Cnooc to Pay $1.08 Billion for Stake in Texas Shale Gas Project

Cnooc Ltd. will pay $1.08 billion for a one-third stake in Chesapeake Energy Corp.’s Eagle Ford shale project in Texas, in the biggest acquisition of a U.S. oil and gas asset by a Chinese company...

At 10/12/2010 7:16 PM, Blogger David Foster said...

Certainly true that the *positive* aspects of trade are often lost sight of in the discussions. But the analysis seems lacking. For one thing, "offshoring" doesn't always mean "foreign subsidiary." If I take a part that I have previously manufactured and decide to have it made by a contract manufacturer in China or wherever, I don't need a foreign subsidiary to do that.

At 10/12/2010 10:04 PM, Blogger Hydra said...

Fascinating. Those who believe otherwise will have a hard time accepting the evidence.

At 10/13/2010 9:54 AM, Blogger sethstorm said...

From Bloomberg: Cnooc to Pay $1.08 Billion for Stake in Texas Shale Gas Project

Now where's the national security threat objection? CNOOC is no less a threat now than they were before. If anything, it means that Chesapeake needs to re-evaluate whether it really can afford being beholden to a hostile foreign government.

Unfortunately offshore outsourcing is never honest in its approach or use, unless there is no way to object.

It's not really the evidence that you think it is. If it really was something that had irrefutable positives, the businesses would not hide it from view; no company reveals it until nobody can object to it.

At 10/13/2010 1:04 PM, Blogger Sean said...

Thanks for some current evidence for positive effects of globalization that are not limited to platitudes.

At 10/14/2010 5:45 AM, Blogger James said...

When Galileo pointed his telescope on the havens he reported seeing what he was not supposed to see. Those with a firm commitment to geocentric view that the earth was at the center of the universe refused to believe him. He invited them to look for themselves. They looked and denied seeing what was there.

When the 1964 report on smoking and health was issues by the Surgeon General the tobacco industry claimed it was wrong. More recently tobacco chief executives denied to Congress under oath that smoking was addictive.

Now 2500 US based multi-national companies report that For every job "outsourced" to India and other foreign countries, nearly two new jobs were generated here in the U.S. In other words given an opportunity to confess that they were harming their fellowman they claimed they were not.

Sorry but neither the conclusion nor the methodology pass the smell test.


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