Adding Foreign Jobs; But What About US?

Rapid growth concentrated in emerging foreign markets has posted millions of workers to the payrolls of U.S.-based multinational corporations--1.5 million workers in Asia/Pacific region and 477,500 in Latin America--yet payrolls at home have been cut by 864,000, the Commerce Department reported recently.

Why have multinationals been sourcing labor abroad? Not for reasons one may think. In a recent survey, economists of the U.S. Commerce Department wrote that the corporations' goals was "primarily to sell to local customers rather than reduce their labor costs for goods and services destined for sale in the U.S, Western Europe, and other hight-income countries." Unlike the manufacturing-job shift to immigrants in the migration boom in the 1800s and turn of the 20th century, in which employers sought to cut labor costs by employing non-natives at home, today's corporations are looking abroad for labor to bolster company presence, and thus, sales, rather than outsourcing to cheap unskilled laborers.

The bulk of multinationals' capital investment and research-and-development is still done within the U.S., yet an increasing share is being done abroad, increasing annual capital spending by 0.2% at home and 4% abroad in the 2000s.

Some may interpret these foreign-directed moves as bad for the U.S. economy. But as President Obama recently spent 9 days in talks with Asia-Pacific leaders, the imminent opportunity to hitch the faltering U.S. economy to the booming world economy could be a welcome strategic move in foreign policy, a "win-win" situation for both regions. This likely move signals a shift in the world order, a "reversal of fortune" in the labor market relative to the past 2 centuries, if you will. In the past, immigrants have been eager to enter the U.S. and corporations were eager to hire cheap labor. Yet those days are long behind the now lackluster U.S, and firms are now eager to add foreign jobs and join forces with foreign economics rather than outsource and overtake them. The latest data (2000-2009) show that firms cut 864,600 workers at home and added 2.9 million workers abroad--a reversal, indeed.

Sources: Wall Street Journal & Reuters