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Hundreds Of Foreign Companies Are Insourcing American Workers

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Hundreds Of Foreign Companies Are Insourcing American WorkersThis is Part One of a two-part series highlighting insourcing.  Part Two, which will list the top countries that create jobs in America, will be published on Monday.

There is an in as well as an out. No, we’re not talking bellybuttons, but jobs. As in insourcing versus outsourcing.

We all read stories and complain about our jobs being shipped overseas. And of course, America has lost lots of jobs to lower paid workers around the globe.

However, what is considerably less well known, is that hundreds of foreign companies are investing in American workers and creating jobs right here, something that is called “insourcing.”

“Insourcing companies account for 18% of all U.S. exports, and they pay an average compensation of $73,000 per worker, more than a third higher than the national average,” says Matthew J. Slaughter,  Associate Dean of the MBA Program and the Signal Companies’ Professor of Management at the Tuck School of Business at Dartmouth. “They are knowledge intensive, investment intensive, export intensive and pay really high wages. They are precisely the kinds of companies we need growing in the United States.”

So what are the barriers to their growth? Slaughter says the foreign CEOs he talks to cite our high business taxes.

“In particular, the statutory corporate tax rate, which at 35% is one of the highest rates in the world,” Slaughter said, (although as General Electric recently demonstrated, with enough good tax lawyers and lobbyists, sometimes you can pay no federal taxes, even on $14 billion in profits, but that’s another story).

More trade liberalization says Slaughter is another great way to grow  exports going out of the United States and the jobs linked to that.

And despite what we all still see as sluggish economic growth, the U.S. does remain the world’s largest consumer market. As a result, it is the world’s top destination for foreign direct investment (FDI).

During the last decade, FDI in the United States jumped by 82% from $179 billion to over $325 billion, resulting in the insourcing of 5.3 million American jobs, or 4.6% of the U.S. workforce.

While our offshore work typically involves procuring the cheapest labor on the planet, these foreign firms show that they actually value a higher quality U.S. workforce.

“The silver lining of globalization is that the shift toward expansion will require companies to redirect their workforce to locations that provide the greatest opportunities, not just the lowest costs, and at the same time, re-imagine their management strategies to reflect an increasingly dynamic workforce,” Denis Brousseau, vice president of organization and people for IBM Global Business Services, said in a statement.

Tomorrow, read some interesting facts about how much insourcing companies contribute to the U.S. economy (hint, they write over $350 billion in paychecks annually), who the biggest insourcers are, and how many American jobs they provide.

{ 8 comments… read them below or add one }
  1. Tom

    Good jobs are good jobs, and you can cash a paycheck from a French company the same as one based in Fresno. I guess I do agree that there are things we can do to pave the way for even more growth from these foreign companies. But I sure would hate for that to be at the expense of anything we do to get growth from our own homegrown companies.

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  2. Nancy

    I agree with Tom’s consideration. We do need to look at stimulating growth in the United States and for the United States internationally. As U.S. citizens, we are all stakeholders in American business. It is important for all of us that a mutually beneficial balance is the focal point with such things though there’s no denying great opportunities and an eagerness to get some money flowing.

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  3. David Gee

    A week ago, a GE spokeswoman told a reporter that “GE did not pay U.S. federal income taxes last year because we don’t owe any.” GE took full advantage of the various tax loopholes in the U.S. tax code that are available to it. However, as Joe Nocera, a columnist for the New York Times writes, “The real villain here isn’t GE for gaming the corporate tax system. The villain is a political system that makes the corporate tax system so easy to game.” By the way, his piece is quite balanced and thorough, and explains the reasons behind a low – or no – tax bill (losses at GE Capital and something called the “active financing exception”).
    Read more: http://www.charlotteobserver.com/2011/04/08/2206639/ges-not-the-tax-villain-its-congress.html

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  4. KB

    Thanks! that was a good piece on the GE situation. I’ll come back to check out the next part in this series. Bookmarked Staffing Talk!

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  5. David Gee

    Thank you KB for engaging in the discussion, and of course for bookmarking Staffing Talk! We are engaged in an ongoing effort to figure out what resonates with our audience, and creating conversations is part of that. Corporate taxation is a bit off topic for a blog about the staffing industry admittedly, but it does all kind of lead back around to jobs and resources and the role of the federal government in all of that. We’ll be back Monday with some more factoids and commentary and context.

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