This is Part Two of a two-part series highlighting insourcing, whereby foreign companies invest in American workers and create jobs here. Part One was published last Friday.
We can all agree America needs to get back to work. From President Obama on down to your next door neighbor, job creation is a frequent conversation topic. And job creation is at a 29-year low, according to a recent report released by the Kauffman Foundation.
All jobs are not created equal though, we also all know that. And we wanted to take a more critical look at insourcing, an area where seemingly good paying jobs are still being created, albeit by foreign-owned companies.
“First, I think the most important issue is the quality of the jobs that are being created, not the ultimate ownership of the organization,” says Professor John Budd, Director, Center for Human Resources and Labor Studies, Chair, Department of Human Resources and Industrial Relations, Carlson School of Management at the University of Minnesota.
“U.S. companies can create lousy jobs, and good jobs. Foreign companies can create lousy jobs, and good jobs. We should be applauding and prodding the creation of good jobs irrespective of ownership, and we should be concerned with the creation of lousy jobs irrespective of ownership.”
According to OFII’s statistics, U.S. subsidiaries of global companies employ 5.6 million Americans, support an annual payroll of $408.5 billion, invest heavily in the American manufacturing sector and account for more than 18% of all U.S. exports, or $232.4 billion.
“At a time when America is still trying to dig out of recession, creating jobs has never been more important,” said Nancy McLernon, President & CEO of the Organization for International Investment. “Global companies insource millions of good paying jobs each year—and pay workers 33 percent higher than all U.S. companies.”
As we reported in Part One, despite sluggish economic growth here, the U.S. remains the world’s largest consumer market. It’s also the world’s top destination for foreign direct investment. Is there a dark side to that?
“If we really wanted to try to identify a dark side of insourcing, we could imagine some concerns stemming from economic nationalism,” Professor Budd tells Staffing Talk.
“If a U.S. company is more likely to reinvest profits in the United States, then insourcing is not as good as job creation by U.S. companies (but this doesn’t make insourcing bad per se).
If insourcing allows foreign companies to export sensitive technology, then this can also be a cause for concern. But the current reality is that U.S. companies are not necessarily better U.S. citizens than foreign companies.”
Professor Budd goes on to point out that U.S. corporations will invest their profits wherever it is most profitable to do so. They have also been accused of exporting sensitive technology to make a sale or inroads into a new market such as China.
“So while we should be concerned with where profits are reinvested, and with the exporting of sensitive technology, it’s not clear that such concerns are sharper in the context of insourcing,” Professor Budd says.
When I was reading various articles on the subject of insourcing in preparation for writing this, I found several taking the view that foreign companies insource to the United States merely to avoid more onerous government regulations and stronger labor unions in their home countries.
For example, the foreign-owned auto plants in the United States, including a billion dollar BMW expansion in South Carolina and new Toyota plants in Mississippi and San Antonio, Texas, are almost entirely nonunion.
“But again, it’s not clear that this is significantly different from the behavior of U.S. companies. So this brings me back to my first point–the real issue is the quality of the jobs being created, not who is creating them.”
Here is a brief overview of some of the larger insourcing firms:
EADS North America: The U.S. operations of Netherlands-based global aerospace and defense giant EADS supports more than 200,000 American jobs coast to coast.
Sodexo, Inc.: French-based food workers and facilities management company employs 110,000 American workers.
BAE Systems: British defense and aerospace company employs over 45,000 workers across the country.
Nestle USA: Switzerland-based Nestlé operates 82 U.S. factories and employs over 42,000 American workers.
T-Mobile USA: German wireless services provider, owned by Deutsche Telekom, employs 41,000 Americans.
Thomson Reuters: Information company, 53% Canadian-owned, employs 26,000 Americans.
Sony Corporation of America: Japanese electronics firm has 15,000 American employees.
BASF Corporation: The largest chemical company in the world is headquartered in Germany and has 15,000 American workers.
Volvo Group North America: Swedish car company has over 10,000 American workers.
Alstom: France-based global transportation infrastructure and energy company employs about 6,000 American workers. .
Source: The Organization for International Investment
For a complete list of the Top 20 insourcing states click here.
To view state by state job insourcing information for all 50 states visit OFII’s Jobs By State page.