This 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.
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.