Blog Post

AEIdeas

We’ve heard a lot of criticism over the last several years, especially from President Trump and many of 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 20,000 Google search results for “Trump” + “stealing jobs”). Further, Trump warned after he was elected that his administration would punish US companies seeking to move operations and jobs overseas with “consequences.”

What we don’t hear very much about from Team Trump are the jobs that are “insourced” into every US state by foreign companies, even though those insourced jobs totaled more than 7.1 million Americans and represented 5.6% of all private sector US jobs in 2016 based on new preliminary data released this week by the Bureau of Economic Analysis on “Activities of U.S. Affiliates of Foreign Multinational Enterprises in 2016.” The map above (thanks to AEI’s Allison Torban for assistance) shows the thousands (and in half of the US states the hundreds of thousands) of insourced jobs in each US state in 2016.

Here are some key statistics on jobs insourced to the U.S. that highlight some of the significant economic benefits to the U.S. economy from the thousands of foreign-based firms that outsource jobs and production to the U.S.:

More than 6,000 US affiliates of foreign multinational enterprises (MNEs) employed 7.1 million American workers in 2016, an increase of 3.9% from 2015, adding roughly 300,000 to the US economy

Employment by US affiliates represented 5.6% of the total U.S. private industry employment in 2016 (126.8 million workers)

The current-dollar value added of majority-owned US affiliates, a measure of their direct contribution to US GDP, totaled $910 billion in 2016 and accounted for 6.4% of total US business-sector value added in 2016

US affiliates supported nearly 2.6 million factory jobs in 2016 , accounting for 21% of total American manufacturing employment (12.35 million factory workers)

, accounting for 21% of total American manufacturing employment (12.35 million factory workers) US affiliates of foreign MNEs supported an annual payroll of $625 billion in 2016 —with an average compensation per worker of $80,028

—with an average compensation per worker of US affiliates of foreign companies paid an average annual compensation of more than $92,000 in the manufacturing sector

in the manufacturing sector US affiliates employed more than 410,000 US autoworkers in 2016, with average compensation per worker exceeding $76,000

US affiliates exported $379 billion in goods (26% of all US exports)

US affiliates imported $661 billion in goods (24% of all US imports)

US affiliates spent more than $65 billion on R&D in 2016 (12% of all US R&D)

in 2016 (12% of all US R&D) US affiliates paid more than $48 billion in US income taxes

US affiliates spent $278 billion on new property, plant, and equipment in 2016

in 2016 As a separate state, the $625 billion annual payroll of Americans working for foreign insourcing companies in the US would have ranked that group of American employees in 2016 as the seventh largest US “state” for Personal Income, just behind No. 6 Pennsylvania at $657 billion and ahead of No. 8 New Jersey at $555 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 ever hear about from Team Trump 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 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 6,100 US-based affiliates of foreign multinational companies that operate here and employ millions of our workers.

Q: How could it possibly make sense for Trump to accuse Mexico, China and Japan of “stealing” our jobs, unless he also admits that the US is apparently then also “stealing” jobs from other countries, more than seven million in 2016? 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 2016 sales were in foreign markets), Procter and Gamble (58% sales were overseas), GE (62% foreign sales) and Pfizer (56% overseas sales). Hopefully, Team Trump will eventually 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 inter-connected, cross-border transactions where production and employment decisions are grounded in the reality of economics, and not politics.

Bonus: Venn diagram version below.