|
|
 |
|
| Politics & Policy |
Inside Outsourcing
Nancy McLernon
07/01/2004
|
Thanks in large part to election year rhetoric, most Americans are familiar
with the term “outsourcing.” By this, I am referring to U.S.-based companies
investing in other countries and employing people there rather than here.
But
have you heard much about “insourcing?” This is the forgotten side of the
current debate. Insourcing is the term describing foreign companies investing in
the United States and employing people here rather than there. Because
insourcing has a significant impact on the U.S. economy, it bears serious
discussion. U.S. subsidiaries of foreign companies currently employ 6.4 million
people nationwide. Insourcers are companies such as Sodexho, employing 110,000
Americans; Nestlé, employing 43,000; and Siemens, employing 65,000.
Foreign
companies would not have American operations if not for an open international
investment system. These policies are the same ones that allow U.S.-based
companies to start operations overseas. The debate about outsourcing is
essentially one about globalization.
Discussions about global trade commonly
focus on displaced workers. We sympathize with the person who loses his job
because his employer has found a better and more cost-effective way to produce
elsewhere. But what about those who benefit from globalization? I am not only
referring to consumers who get a higher quality product at a lower price, but
also to those people who benefit more directly—the 6.4 million Americans whose
jobs depend on globalization. In determining the overall economic impact of an
open international investment system, the benefits, as well as the costs, must
be taken into account.
Terms of Trade
According to the most recent U.S. government statistics,
over a 15-year period, the number of insourced jobs grew by 117 percent (an
annual rate of 7.8 percent), while total outsourced jobs grew by 56 percent (an
annual rate of 3.8 percent). The U.S. subsidiaries of foreign companies support
an annual payroll of $350 billion and provide compensation, on average, 19
percent higher than U.S. companies. For example, the typical American worker at
a U.S. subsidiary earns $55,019, while one at a U.S.-based company earns
$46,201. The higher compensation signifies the level of skill required for the
job. In general, U.S. subsidiaries support good, high-wage, high-skill
jobs.
|
|
|
|
|
|
|
