http://www.epi.org/content.cfm/webfeatures_snapshots_20060405
> Insourcing" is not creating jobs in the U.S. economy
>
> Dubai Ports World's failed attempt to take control of a company that
> manages terminals at major U.S. ports has renewed debate about the
> benefits of "insourcing," the shorthand for the notion that foreign
> companies that increase their investment in the United States are
> creating employment here. President Bush sounded this theme on a
> recent trip to a John Deere-Hitachi joint venture plant in North
> Carolina, and officials responded warmly to the announcement that a
> new Korean auto assembly plant—Kia Motors—will be built in Georgia.
> Treasury Secretary John Snow, visiting a plant purchased by Volvo in
> 1999, recently said, "We know that investment in America lies at the
> heart of creating good jobs...Indeed, 5.3 million U.S. workers alone
> are directly employed by U.S. affiliates of international
> companies."1
>
> But do we really know this? An examination of annual data collected
> by the Commerce Department on employment related to new foreign
> investment in the United States casts a different light on the
> employment benefits conferred by these deals. The acquisitions of
> ongoing U.S firms—not new startups—account for the vast majority of
> employment associated with new investments by foreign companies. And
> these investments, as a whole, have not been adding jobs over the
> past 12 years.
>
> Some investments, such as the Honda auto plants built in Ohio over
> the past decade, have led to increased employment as they grew, but
> this is the exception rather than the rule. Some jobs were eliminated
> as imports were substituted for domestic production while others were
> lost through corporate reorganizations.
>
> Acquisitions such as Daimler's purchase of Chrysler in 1998 and
> Chinese computer maker Lenovo's purchase of IBM's PC business in 2004
> were simple changes in ownership between domestic and foreign
> investors, and were not done to create new production facilities in
> the United States.
>
> In the Commerce Department's data, which distinguishes between
> acquisitions and start-ups, the true picture emerges. In 1990, U.S.
> affiliates of foreign multinational corporations (MNCs) employed 3.84
> million workers. Between 1991 and 2003, foreign MNCs acquired firms
> employing 4.51 million workers (Figure A). Over that same 12 years,
> only 290,000 workers were employed in foreign-owned startups in the
> United States, or 24,000 jobs per year. Thus, foreign MNCs added or
> acquired firms employing 4.80 million workers over this period. If
> not for layoffs and the sale of some parts of these firms back to
> U.S. owners, total employment in these firms would have been 8.64
> million jobs (including the 3.84 million workers they employed in
> 1990 plus the 4.80 million hired or acquired), as shown in Figure B.
> However, in 2003, these firms actually employed just 5.25 million
> workers. Thus, although total employment in foreign-owned firms
> increased in this period from 3.84 to 5.25 million jobs, 3.39 million
> jobs in these firms were either eliminated or divested to domestic
> owners in this period relative to potential employment of 8.64
> million jobs shown in Figure B. Just because foreign companies are
> employing millions of Americans does not mean that those companies
> have created more jobs in the United States.
--ravi
--
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