We’ve heard a lot of criticism over the last four years from President Trump his economic advisers and supporters about US firms outsourcing factory jobs overseas, along with accusations that countries like Mexico, China, and Japan are “stealing US jobs” (see more than 25,000 Google search results for “Trump” + “stealing jobs”). Trump warned four years ago after he was elected that his administration would punish US companies seeking to move operations and jobs overseas with “consequences.”
What we haven’t heard from Team Trump are the jobs that are “insourced” into every US state by foreign companies, even though those insourced jobs totaled more than 7.8 million American workers and represented 6.2% of all private-sector US jobs in 2018 based on new data released this week by the Bureau of Economic Analysis on “Activities of U.S. Affiliates of Foreign Multinational Enterprises.” The map above shows the thousands (and in more than half of US states hundreds of thousands) of insourced jobs in each US state in 2018. You can move your mouse over individual states to see each state’s job figures, which range from 8,200 in Wyoming to 845,400 in California and average more than 152,000 insourced jobs per US state.
Here are some key statistics on business activities in the U.S. that highlight the significant economic benefits to the American economy from the more than 8,000 foreign-based firms that outsourced jobs and production into the US in 2018:
- The 8,005 US affiliates of foreign multinational enterprises (MNEs) employed 7.8 million American workers in 2018, a 5.4% increase from 7.4 million in 2017, adding roughly 400,000 insourced jobs to the US economy
- Employment by US affiliates of foreign companies represented 6.2% of the total U.S. private industry employment in 2018 (126.4 million workers)
- The current-dollar value added of majority-owned US affiliates, a measure of their direct contribution to US GDP, totaled $1.1 trillion in 2018 and accounted for 6.1% of total US private industry value added of about $18 trillion in 2018
- US affiliates of foreign companies supported nearly 3 million factory jobs in 2018, accounting for more than 23% of total American manufacturing employment (12.7 million US factory workers)
- US affiliates of foreign MNEs supported an annual payroll for US workers of $645 billion in 2018—with an average compensation per worker of more than $82,000
- US affiliates of foreign companies paid an average annual compensation of $92,500 to their US employees in our manufacturing sector
- US affiliates of foreign companies employed more than 500,000 US auto industry manufacturing workers in 2018, with average compensation per worker exceeding $77,000
- In addition to more than 500,000 US auto factory workers, foreign companies employed more than 100,000 Americans in the wholesale trade category “Motor vehicles and motor vehicle parts and supplies”
- US affiliates exported $409 billion in goods in 2018 (24.4% of all US exports)
- US affiliates imported $764 billion in goods in 2018 (nearly 30% of all US imports)
- US affiliates spent more than $73.8 billion on R&D in 2018 (18.3% of all US business-funded R&D of $404.2 billion)
- US affiliates spent $304 billion on new property, plant, and equipment in 2018
- US affiliates paid $43.2 billion in US income taxes in 2018
- As a separate state, the 7.8 million Americans employed by foreign-based companies would have been the fifth-largest US “state” ranked by the number of nonfarm payroll employees in 2018 behind only California, Texas, New York, and Florida
- As a separate state, the $645 billion annual payrolls of Americans working for foreign insourcing companies in the US would have ranked that group of American employees in 2018 as the seventh-largest US “state” for Personal Income, just behind No. 6 Pennsylvania at $682 billion but ahead of No. 8 New Jersey at $608 billion
In other words, the insourcing of production and jobs to the US has a significant and positive impact on our economy, and yet this huge economic stimulus gets almost no attention. All we’ve ever heard about from Team Trump, other politicians, and trade unions is the jobs that are allegedly being “stolen” from us by China, Japan, Europe, and Mexico.
Bottom Line: In today’s highly globalized economy, multinational firms (both US-based and foreign-based) operate in a world marketplace that increasingly makes national borders meaningless and irrelevant, as firms capitalize on hyper-efficient global supply chains that add enormous value, and ultimately result in lower costs and higher quality for the goods that consumers buy here and around the world. In the recent Trump-era discussions on US manufacturing, the outsourcing of production and jobs overseas, and the supposed “theft” of our jobs by Mexico, China, and Japan, we lose sight of another big part of the global economy: the insourcing of millions of jobs into America by the 8,000+ US-based affiliates of foreign multinational companies that operate here and employ millions of our workers.
Q: How could it possibly make sense for Team Trump and his supporters to accuse Mexico, China, and Japan of “stealing” our jobs unless they also admit that the US is apparently then also “stealing” jobs from other countries, more than seven million in 2018? A more enlightened and up-to-date view of international trade would recognize the economic reality that modern businesses today operate in an increasingly globalized marketplace for their inputs, parts, materials, supplies along complex, cross-border supply and value chains that include multiple dozens of countries. In addition, those global companies serve retail markets in hundreds of countries around the globe.
Just like it makes economic and business sense for thousands of foreign companies to outsource jobs and production from their countries to every US state (perhaps because the US is one of their major retail markets), it also makes economic and business sense for thousands of US companies to outsource jobs and production from the US to foreign countries, perhaps also because overseas markets now represent more than 50% of retail sales for many US-based companies like Apple (63% of 2018 sales were in foreign markets, see data here), Procter and Gamble (59% sales were overseas), GE (61.5% foreign sales), Pfizer (52.8% overseas sales), IBM (53.5%) and Johnson & Johnson (71.5%). Hopefully, Team Biden can move beyond a simplistic, nationalistic (“America First”), and outdated view of the global economy based on a fixed number of jobs where countries have to fight to “steal” jobs from each other in a zero-sum, win-lose world, to a more advanced and sensible view of a dynamic world of interconnected, cross-border transactions where production and employment decisions are grounded in the reality of economics, and not politics.
Bonus: Venn diagram version below.