Thursday, September 1, 2011

New ITC Report: Investment Abroad by US Services Firms Supports 700k US Jobs (UPDATED)

From the non-partisan US International Trade Commission comes further proof that political promises to "end tax breaks for companies that ship jobs overseas" are utterly nonsensical and potentially destructive:
This working paper examines the effect that U.S. services firms’ establishment abroad has on domestic employment. Whereas many papers have explored the employment effects of foreign direct investment in manufacturing, few have explored the effects of services investment.  We find that services multinationals’ activities abroad increase U.S. employment by promoting intrafirm exports from parent firms to their foreign affiliates.  These exports support jobs at the parents’ headquarters and throughout their U.S. supply chains. Our findings are principally based on economic research and econometric analysis performed by Commission staff, services trade and investment data published by the Bureau of Economic Analysis, and employment data collected by the Bureau of Labor Statistics. In the aggregate, we find that services activities abroad support nearly 700,000 U.S. jobs. Case studies of U.S. multinationals in the banking, computer, logistics, and retail industries provide the global dimensions of U.S. MNC operations and identify domestic employment effects associated with foreign affiliate activity in each industry.
Those gosh-darn outsourcers and their totally-helpful economic activity!

UPDATE:  A friend emails with the following anecdote:
Couldn't agree more. Before returning to the States as an adult, I helped an Indian BPO offshore [a Fortune 500 Retailer's] English- and Spanish-language customer contact solutions from Texas to Guatemala. Not only did the customer service quality improve (for USD 12/hour in San Antonio, TX, [the Company] could only higher monoligual ex-drug addicts and parollees to answer the phones but, for USD 5/hour in Guatemala City, we could hire bilingual college grads, many of them with enginerring degrees) but Sears also expressed to us that, had it not been for the cost savings of moving to Central America, it would have likely sold off its home repair service line of business (thus leading to a massive lay off of thousands of repair technicians). While it is unclear whether those technicians would have found work with third-party service providers or not, the offshoring we did helped save that industry from an even more precipitous decline and/or painful structural changes.

The math was as such:

A few call center operators lost their job in TX = thousands of repair technicians held onto their jobs (and [Retailer] conserved one of its oldest and most trusted lines of business which is home repair service).

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