The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad.GE exemplifies this trend. Over the last decade, the company's overseas footprint has doubled, increasing from 30 percent of its business to 60 percent. GE's work force during that time has gone from mostly being based in the U.S. to mostly being abroad. Interestingly, it's not that the conglomerate is transferring lots of American jobs to Rio de Janeiro or Ulan Bator. Rather, GE is "streamlining" everywhere, only far more aggressively here at home. The WSJ's David Wessel notes that between 2005 and 2010 the company cut 1,000 workers overseas and 28,000 in the U.S.
Wessel cites GE chief Jeffrey Immelt, who moonlights as President Obama's jobs "czar," as saying that corporations no longer export work overseas in search of cheap labor. Rather, global companies add jobs wherever the sales are.
I believe him. For one thing, you don't have to hire cheap foreign workers when you can lower wages and benefits in the U.S., as GE is seeking to do today. For another, as the NYT recently highlighted, big American companies focus on overseas business at least as much to reduce their domestic tax bills as to cut their labor costs.
That's why GE a couple years ago helped kill the "Creating American Jobs and Ending Offshoring Act," which would've curbed tax deductions for companies who ship jobs overseas in exchange for a two-year break on payroll taxes for work created in the U.S.
The job destruction Act
It also explains why GE lobbied for the "American Jobs Creation Act of 2004," under which corporations got a huge tax cut on overseas profits. That was supposed to boost U.S. hiring. It didn't. Companies that got the biggest breaks eliminated U.S. jobs over the next couple years. The windfall was mostly used to repurchase stock, pay dividends and, as the Commerce data show, expand abroad. As think tank the Center on Budget and Policy Priorities found:
A comprehensive study published by the National Bureau of Economic Research found that the repatriation holiday "did not increase domestic investment, employment, or [research and development]." Multinationals that repatriated higher levels of earnings under the holiday did not increase their domestic investments (or any other approved uses of the funds) to a larger degree than multinationals that repatriated lower levels of earnings. Other studies yielded similar results. One found that "firms enjoying disproportionately larger gains under the act were no more likely to spend repatriated funds on growth-generating activities than other firms...."
After examining the various studies that have been conducted, the Congressional Research Service reported that the "studies generally conclude that the reduction in the tax rate on repatriated earnings--did not increase domestic investment or employment."Global U.S. corporations like GE increasingly want it both ways. They want the benefits of operating as American companies, just without the obligations.
Image from Wikimedia Commons, CC 2.0
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