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The Economic Policy Institute debunks Henry Paulson. Rob Scott does good work. The summary of his recent report is below.
Foreign Companies in U.S. Reduce American Jobs
Stung by criticism over the loss of U.S. jobs abroad, some prominent
officials and economists have countered with claims that the United
States is gaining jobs as a result of direct investments made in the
United States by foreign companies, a process referred to as
“insourcing.” Treasury Secretary Henry Paulson recently declared that
U.S. affiliates of foreign companies “bring investments to our shores,
creating jobs and revitalizing communities.” But a new Economic Policy
Institute report shows that foreign companies operating in the United
States have actually reduced their payroll employment by 4 million jobs
since 1990, and that insourcing is not creating American jobs.
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EPI senior economist Robert Scott analyzes trends of total U.S. payroll
employment of foreign multinational corporations, and shows how
officials like Paulson, who are claiming these companies create jobs,
don’t present the full picture. Scott examined Commerce Department data
on employment related to new foreign investment in the United States
and finds foreign acquisitions of ongoing U.S firms—not new
startups—account for the vast majority of employment associated with
new foreign investments.
But many foreign investment proponents are often counting these
already-existing jobs as if they are new ones just because of a change
in ownership. What’s more, Scott contends, this insourcing trend has
seen many of these companies buy U.S, firms, layoff U.S. workers and
send jobs and production overseas. Chinese computer maker Lenovo, for
example, shut down IBM’s domestic laptop production and replaced it
with imports from China.
“It is disingenuous to look at what the data say and claim American
employment is being created from foreign investment,” Scott said. “It
all really points to job reduction.”
In 1990, U.S. affiliates of foreign multinational corporations employed
3.84 million workers. Between 1991 and 2005, the Commerce Department
shows foreign multinational corporations acquired U.S. firms employing
4.94 million workers, and began new startups employing only 303,000
workers. All told, this amounts to 9.09 million jobs. But due to
layoffs and sell-offs of U.S. companies during this time, these firms
actually employed just 5.09 million workers as of 2005, hence 4-million
jobs either lost or sold back to U.S. firms.
Scott’s report also shows the big economic and trade picture by
explaining how foreign multinationals taking over U.S. companies
contribute to the soaring U.S. trade deficit and the flood of imports
this country receives. The U.S. trade deficits of foreign-owned firms
more than tripled, from $79 billion to $283 billion, or 14.3% per year,
from 1990 to 2005. These firms were responsible for 36.1% of the
total U.S. trade deficit in 2005.
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