Large Companies Creating More Jobs Overseas Than in US

Since 2000 US Companies Prefer Hiring Overseas

OLX Corporation

It is no secret that the US job market is sputtering. As of March 2012, there were 150,000 fewer Americans with jobs than at the beginning of 2009. In that same time period 7.9 million new workers joined the workforce.

No matter what positive spin the media puts on the employment situation, it is clear that this economy will struggle to produce enough jobs to keep pace with the growth of the civilian working age population. In March 2012 only 120,000 new jobs were created. This is not good news for anyone in the job hunt, including the soon-to-graduate Class of 2012

Large US companies, many flush with cash, have emerged from the recession leaner and stronger. They would seem to be in position to improve the labor picture by simply stepping up and hiring more American workers.

It is not that these companies are reluctant to hire. They have added as many as 1.1 million jobs since 2007, the WSJ recently reported..

But many of those jobs were outside of the US.

This represents an acceleration of an already established trend. According to the Commerce Department, during the 2000s U.S.-based multinational corporations added 1.5 million workers to their payrolls in Asia and the Pacific region and 477,500 workers in Latin America. Much of that hiring was concentrated in China, Brazil, India and Eastern European. General Electric Co., Caterpillar Inc., Microsoft Corp. and Wal-Mart Stores Inc. are expanding their reach into Asia particularly.

During that same decade US companies cut payrolls in the US by 864,000

While larger US companies' global reach enables them to generate profits (and cushion the impact of the recession), it also enables them to take a "global" perspective on hiring. In other words, such companies have the organizational wherewithal to hire outside the US.

For instance, Watson Pharmaceuticals Inc. had most of its manufacturing facilities in the US. Since the recession the company closed North American factories and moved them to India. Many of Watson's customers are in India, a well.

Companies are attracted by the strong growth overseas, particularly in emerging markets, and a regulatory environment that is sometimes more friendly in foreign countries.

According to Jim Dugan, a Caterpillar spokesman, "As a greater percentage of our sales have been outside the U.S., we have seen our work force outside the U.S. grow."

I recently had the opportunity to attend a seminar featuring the CEO of a large US data processing company. His presentation was impressive--the company is expanding globally, and

seems to be ahead of the curve technologically. Their marketing and market research efforts insure future company financial success.

The audience reacted positively to this dazzling presentation of a true American success story. Their enthusiasm was dampened, however, during the Q&A session, when a young attendee asked about employment possibilities in this prosperous US corporate dynamo.

The CEO explained that, like many US companies, most of its hiring would be done overseas. The reasons were couched in terms of "globalization" and "worldwide expansion."

One of the reasons for the company's decision to shift hiring overseas emerged from an interview I conducted recently with a laid-off employee of a 500-person division of that organization. Most of the employees, skilled IT professionals, felt that their jobs were secure. They were shocked when as a cost-cutting measure the company closed down the US division, and simultaneously opened up essentially the same division in India staffed with foreign professionals earning roughly one-quarter the salaries of their American counterparts.

This experience sent her scurrying back to school, determined to acquire a skill for a field not easily outsourced to an offshore location. That field, she told me, is cyber-security. She feels that companies would be reluctant to outsource the development and implementation of their secretive computer security systems. Only time will tell if she has made the proper career choice.

The reasons that US companies are hiring more foreign workers than homegrown talent vary. US companies can hire high-skilled workers at substantially lower wages than their American counterparts. A more critical reason might be the onerous US tax and regulatory environment many companies see threatening long term corporate growth.

According to the Gallup organization, close to one in five Americans is either unemployed or underemployed, that is, working part time while desiring full-time employment. If US policy makers are serious about improving the employment prospects for American workers, they must take whatever steps necessary to encourage US companies to hire here and not oversees. A starting point would be lowering the corporate tax rate and embarking on a steady course of deregulation.

Until that happens, corporate America will continue to shift overseas its business activities as well as the bulk of the new jobs its creating.