Economy / Fiscal policy / Foreign Policy / Gov. Officials / Politics / Presidency / U.S. Domestic Policy

Overseas Employment: Increasing Jobs at Home by Investing Abroad

Obama’s fundamentally flawed attacks on Bain Capital’s outsourcing history seem both hypocritical and highly ignorant of the global economy considering that major companies present in his own jobs council have been “pioneering” outsourcing themselves. GE, American Express, Intel, and UBS are all present on the President’s Council of Jobs and Competitiveness and all have increased overseas employment relative to domestic employment during the past ten years. While this fact underlines the hypocritical nature of Obama’s attacks on Romney (even while questions remain about Romney’s presence at Bain during its bigger outsourcing years), it also shows his inability to understand the economic importance of multinational corporations competing outside the United States.

In the past 10 years, relative to domestic employment, GE increased its overseas workforce by 35 percent, American Express by 56 percent, Intel by 52 percent, and UBS by 28 percent. All these companies except Intel have had greater average proportion of workers overseas under Obama than under Bush.

Obama’s clear hypocrisy likely stems from simple ignorance of the benefits from engaging in foreign markets. 95 percent of the world’s consumers and 75 percent of its purchasing power resides outside the United States. For US multinational corporations to maximize profit, they must truly be global and compete in producer and consumer markets abroad. So, they must hire foreign workers. These companies are not simply “shipping” jobs overseas. Instead, they are tapping into new markets that allow them to increase profit, which in turn lets them reinvest both abroad and at home. Research now establishes that allowing multinationals to build factories and hire workers overseas does not cut domestic jobs or investment. Instead, it increases both.

A 2008 study by Harvard Business School’s Desai and Foley and University of Michigan’s Hines analyzes foreign and domestic operations of major US multinationals between 1982 and 2004. Their data proves that a 10 percent increase in foreign investment is accompanied with 2.6 percent greater domestic investment. Likewise, with a 10 percent increase in foreign employee compensation, they find there is a 3.7 percent increase in domestic employee compensation. So as foreign employment increases, domestic jobs and wages increase as well.

GE’s hiring over the past decade illustrates this. During the Bush years, GE on average increased overseas employment by 2714 people per year and decreased domestic employment by 857 people per year. During Obama’s years, GE decreased overseas employment by 333 workers per year on average. Along with that, the company annually cut its domestic workforce by an average of 7000 jobs. Obama’s protectionist mindset is already hurting one of America’s greatest companies, which on average now cuts more jobs per year at home than it cut during Bush’s entire 8 years in office. Clearly, protectionism is not the way to reinvest at home.

Whether or not Romney was involved with Bain Capital’s outsourcing, accusing him of doing so implies that hiring employees overseas is bad. By bashing Romney for “shipping” jobs overseas, the Obama administration is sidestepping the real issue at hand: an ideological disagreement about the relationship between international competition and domestic employment. Clearly, Obama is only avoiding this discussion because research is starting to prove him wrong. Instead of Obama’s protectionism, research seems to suggest that a good way to increase domestic jobs is to embrace global competition, which requires investing and operating abroad. This is a fact that Obama is clearly unwilling to face despite it being present on his very own jobs council.