December 13, 2016

IBM’s Chief Executive Officer Ginni Rometty stated today that the technology giant plans to invest $1 billion in America over the next 4 years, and will create 25,000 jobs in the process.

This comes on the heels of other big announcements by US Steel and Masa.

This announcement has been seen by some as a PR stunt—an attempt to ingratiate IBM with President Elect Donald Trump, who is meeting with Rometty this Wednesday.

Facebook’s Sheryl Sandberg and Amazon’s Jeff Bezos will also attend the meeting.

For her part, Rometty has said that IBM’s hiring because American workers have the skills to do the jobs:

What matters most is that these employees – with jobs such as cloud computing technicians and services delivery specialists – have relevant skills, often obtained through vocational training.

Either way, this comes as good news for a country gripped by high unemployment and stagnating economy.

IMB Has A History Of Offshoring

IBM has has long been lambasted in the public eye for moving American jobs abroad.

They were one of the first major technology firms to experiment with offshoring.

In 2004, they planned to move 3,000 America jobs to China—but under public pressure this number was reduced to 2,000 later that year. At the time, the average IBM programmer made $56 per hour in America—their Chinese replacements cost $12.50.

In 2009 IBM was at the center of another media firestorm, when they offered their terminated American employees the “opportunity” to reclaim their jobs by moving to India, Nigeria, or Russia—in exchange for a hefty pay-cut.

Despite the flak, the company continued to offshore American jobs.

By 2013, IBM employed more workers in India than America. This made economic sense from the company’s perspective—their average Indian employee made $17,000 USD per year, compared to over $100,000 for an American doing identical work.

The Ugly Side Of Free Trade

IBM’s not alone. America’s advanced industries (things like information technology firms, pharmaceuticals, aerospace) have been hollowing out for decades.

For example, in 1980, 59 of America’s 100 largest cities were “innovation capitals” (ie. over 10% of their workforce was employed in advanced industries): by 2013, only 23 were.

Additionally, when looking at the number of global patent cooperation treaty applications per capita, only 2 American cities (San Diego and San Jose) broke the top 20—more and more research and development is being done abroad.

In fact, 38% of America’s research has been offshored.

All this in spite of America’s advanced industries being amongst the world’s most productive. Our advanced industries are 50-70% more efficient than their Western European competitors in Sweden, Italy, or Germany.

And yet, it’s America’s industries which are being offshored. Not Sweden’s. Not Italy’s. Not Germany’.

This is because America lacks a nationalistic economic policy that puts American interests first.

Instead, our workers directly compete with those in India or China, who earn pennies on the dollar—not to mention the fact that their companies have state support.

Trade may be free, but it isn’t fair.

Select Sources:

Muro, Mark, et al. “America’s Advanced Industries: what are they, where are they, and why they matter.” Brooking’s Institute, 2015.

Selvaggio, Lisa. “Outsourcing Statistics: the pros and cons.” Accessed June 20, 2016. https://blog.udemy.com/outsourcing-statistics/

Scott, Robert E. “Manufacturing Job Loss: trade, not productivity, is the culprit.” Economic Policy Institute Report, 2015.