Monday, June 19, 2017

The ‘Exporting Jobs’ Canard

Repeated research shows that multinational hiring abroad doesn’t come at the expense of U.S. workers.

By Matthew J. Slaughter, in the WSJ. He is dean at the Tuck School of Business at Dartmouth College. From 2005 to 2007 he served as a member of the Council of Economic Advisers. Excerpts:
"Mr. Trump assumes that when U.S. multinationals expand abroad, it necessarily reduces the number of people they employ in the U.S. But this assumption is wrong, and tariffs would hurt American workers, not help them.

Academic research has repeatedly found that when U.S. multinationals hire more people at their overseas affiliates, it does not come at the expense of American jobs. How can this be? Large firms need workers of many different skills and occupations, and the jobs done by employees abroad are often complements to, not substitutes for, those done by workers at home. Manufacturing abroad, for example, can allow workers in the U.S. to focus on higher value-added tasks such as research and development, marketing, and general management. Additionally, expanding overseas to serve foreign customers or save costs often helps the overall company grow, resulting in more U.S. hiring.

The ultimate proof is in the numbers. Between 2004 and 2014, the most recent year for which U.S. government data are available, total employment at foreign affiliates of U.S. multinationals rose from nine million to 13.8 million. Yet the number of jobs at U.S. parent companies rose nearly as much, from 22.4 million to 26.6 million.

Over the same period, the value-added and capital investment grew faster among U.S. parent companies than in their foreign affiliates. In fact, on these two measures the American parent companies outperformed the overall U.S. private sector. This suggests that having overseas affiliates gives companies a competitive advantage that allows them to invest more at home. More than ever, jobs in America are connected to the world."

"In 2014, U.S. multinationals undertook 45.4% of all private-sector capital investment, were responsible for 49.5% of all U.S. goods exports, and conducted a remarkable 78.9% of total U.S. private-sector research and development.

The 26.6 million domestic employees of U.S.-based multinational companies earned an average compensation that was 34.2% higher than the private-sector average."

"fully 89.2% of all inputs of goods and services purchased by U.S. parents—$8.8 trillion—were from other U.S. companies, not imports."

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