Wednesday, October 26, 2011

Where are the jobs going?

Everywhere else but to the United States, just so that the top 1% could increase their wealth by 275%.

U.S. multinational corporations, the big brand-name companies that employ one fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization's effect on the U.S. economy. They cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million. In all, U.S. multinationals employed over 10.3 million abroad as of 2009.

China had 9.94 million new jobs in the first nine months of 2011, and 9.31 million this time last year, They have a 4.1 percent unemployment rate.

The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas just last year alone. American jobs have been moving overseas for more than two decades.

Demand has grown dramatically this year in emerging markets like India, China and Brazil. Meanwhile, consumer demand in the U.S. has been subdued. "Companies will go where there are fast-growing markets and big profits," says Jeffrey Sachs, globalization expert and economist at Columbia University.

Caterpillar has invested in three new plants in China to design and manufacture equipment. Between 2005 and 2010, its work force grew by 15,900, or nearly 39% overseas.

DuPont said its number of employees in the U.S. shrank by 9 percent between January 2005 and October 2009. In the same period, its work force grew 54% in the Asia-Pacific countries.

Coca-Cola CEO Muhtar Kent often points out that a billion consumers will enter the middle class during the coming decade, mostly in Africa, China and India. He is aggressively targeting those markets. Of Coke's 93,000 global employees, less than 13 percent were in the U.S. in 2009, down from 19 percent five years ago. Its latest new investments are overseas, including $240 million for three bottling plants in Inner Mongolia as part of a three-year, $2 billion investment in China. The three plants will create 2,000 new jobs in the area. In September, Coca-Cola pledged $1 billion to the Philippines over five years.

Oracle, which makes business hardware and software, has 63% of its employees overseas, and over the past five years Cisco Systems Inc. has added 21,350 jobs overseas - 46% of its work force is now abroad.

Between 2005 and 2010, General Electric cut 28,000 workers in the U.S., but Jeffrey Immelt, GE's chief executive (and ironically, Obama's job Czar), claims these cuts don't necessarily reflect a relentless search for the lowest wages, or at least they don't any longer. "We've globalized around markets, not cheap labor. The era of globalization around cheap labor is over. Today we go to Brazil, we go to China, we go to India, because that's where the customers are." 54% of GE's employees are overseas, where the majority of it's profits were also earned and left untaxed by the U.S. in foreign off-shore accounts.

Big multinationals account for about 1/5 of the nation's private-sector jobs. Economists from the McKinsey Global Institute wrote a report dubbed Multinationals "Canaries in the coal mine." They warn that a combination of the declining state of U.S. infrastructure, the quality of the country's education system and barriers to the immigration of skilled workers may be making the U.S. less attractive to multinationals.

Lou Dobbs from CNN compiled a HUGE list of American corporations that are either sending American jobs overseas, or choosing to employ cheap overseas labor, instead of American workers.

"Any job you can think of now can be done by someone on the other side of the world for less cost,” said Matt Barrie, chief executive at . By 2015, U.S, companies will move 3.3 million service jobs to offshore locations, accounting for some $136 billion in wages. Many of those jobs will be in the information and communication technology sectors, according to Forrester Research.

The main reason for outsourcing is the cost saving to the company that is giving out the job. The key driver in this cost-cutting is the "low cost human capital available in other countries". This directly translates into savings in overhead costs.

National and international labor unions have expressed concern that multinational corporations in economically developed countries can avoid labor negotiations by simply moving their jobs to developing countries where labor costs are markedly less. Labor organizations in developing countries face the converse of the same problem, as they are usually obliged to negotiate with the national subsidiary of the multinational corporation in their country, which is usually willing to negotiate contract terms only on the basis of domestic wage standards, which may be well below those in the parent company's country.

As you can see from the chart, the economic recession has had little impact on Corporate America’s patriotism. In fact, in 2009, representatives of many of the nation’s most powerful corporations attended the 2009 Strategic Outsourcing Conference to talk about how to send American jobs overseas. Conference organizers polled the more than 70 senior executives who attended the conference about the behavior of their companies in response to the recession. The majority said their companies increased outsourcing in response to the downturn, with only 9 percent saying they terminated some outsourcing agreements:

Current trends in the international marketplace favor the continued development of multinational corporations. Countries worldwide are privatizing government-run industries, and the development of regional trading partnerships such as the North American Free Trade Agreement (a 1993 agreement between Canada, Mexico, and United States) and the European Union have the overall effect of removing barriers to international trade. Privatization efforts result in the availability of existing infrastructure for use by multinationals seeking to enter a new market, while removal of international trade barriers is obviously a boon to multinational operations.

Obama just recently signed another trade agree with Korea, Panama, and Columbia.

Apple Inc. has received criticism for the use of sweatshop labor, environmental destruction, and unethical business practices. It's workers toil as slave labor at Foxconn in China and get paid $172 a month, but is also considering moving to Vietnam in order to lower labor costs even more by replacing employees with robots at an automated facility in Taiwan.

But what's just as criminal and morally reprehensible for all these American corporations, even though directly or through their suppliers, they knowingly conduct their businesses like this; but not so much as to remain "globally competitive in the marketplace" (as they claim for a defense), but so that their salaries will match theirs of their competitors.

The Congressional Budget Office has officially confirmed what we already knew: The income distribution has been getting more unequal in recent decades. A new report (PDF) on changes in the distribution of income from 1979 to 2007 shows that average income for the top 1 percent grew by 275 percent between 1979 and 2007. Those in the middle—60 percent of Americans—had average income growth of just under 40 percent. And, of course, the 20 percent with the lowest income saw the smallest income growth at just 18 percent.

But the Republicans say that if we give the top1% more tax breaks, they'll create jobs. But if we tax millionaires just a little bit more, Armageddon will wipe us all out.

Harvard Business School Dean Nitin Nohria once worried that the trend could be dangerous. In an article in the November issue of the Harvard Business Review last year, he said that "if U.S. businesses keep prospering while Americans are struggling, business leaders will lose legitimacy in society."

That was an understatement. Now we have Occupy Wall Street. And if corporations were really people, then why don't they die?

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