U.S. Jobs Continue to Flow Overseas

One in a series of occasional reports about the U.S. unemployment crisis.

Though
some American firms are bringing overseas work back home, evidence is
growing that companies are moving more jobs than ever to China and other
countries — a trend that could exacerbate efforts to bring down the
nation's stubbornly high unemployment rate.

One sign of increased offshoring is the rising number of applications
for federal Trade Adjustment Assistance, which usually goes to factory
workers who lost their jobs because their work was sent overseas or was
undercut by cheaper imports.

For the six months that ended Sept.
30, workers at about 1,200 offices and plants nationwide were approved
for federal Trade Adjustment Assistance. That's about 20% more approvals
than in the same six-month period last year, according to the U.S.
Labor Department.

In addition, the most recent Commerce Department
data show that employment at the foreign subsidiaries and affiliates of
U.S. multinational firms grew by 729,000 in two years, to 11.9 million
in 2008 from 2006. Over that same period, domestic employment by such
firms slipped by 500,000 jobs, to 21.1 million.

"The paradigm has
shifted," said John Challenger, chief executive of outplacement and
consulting firm Challenger, Gray & Christmas. "Most companies see
the next phase or era of growth as global.… That'll still create jobs
here, just not on the scale when they were focusing on growth in the
U.S."

That trend could further stall the recovery, which many
economists believe will continue to lack vigor while unemployment
remains at current levels — 9.6% nationally and 12.4% in California. The
government is expected to report Friday that the economy added few if
any jobs in September.

Among the companies that have recently sent
jobs overseas are Hewlett-Packard Co. in Palo Alto, CKE Restaurants
Inc. in Irvine and Hilton Worldwide, the McLean, Va., hotelier that
maintained a reservations center in Hemet employing 295 people.

Hilton's
filing and comments indicated it was moving the center to the
Philippines to save money. "Across all aspects of its business, Hilton
Worldwide is committed to maximizing operating efficiencies while
maintaining service levels," Hilton said in a brief statement.

Also
moving to the increasingly popular Philippines this year were JPMorgan
Chase's telephone banking operations, from Troy, Mich., and CKE is
moving its technology assistance desk there.

HP is laying off an
undisclosed number of human resources employees in California and nine
other states, transferring their functions to Panama.

HP, CKE and Hilton would not provide details of the job moves, which were disclosed in recent government filings.

The
offshoring of American production and jobs has been going on for more
than two decades, with service firms more recently pushing the trend.
Experts say more offshoring could help U.S. firms better compete in the
global economy, thus boosting sales and profits that will sustain them
and generate new business.

Eventually, stronger, expanding firms could create more opportunities
for American workers, though that's not a sure thing. More and more,
for example, upscale engineering and development for products
manufactured in China are being done in China — not the U.S. — near the
centers of production.

"When companies succeed abroad, people at home succeed," said Mihir Desai, a finance professor at Harvard Business School.

Challenger
agrees with that logic, but he also said that some companies continue
to engage in "pure labor arbitrage," moving overseas simply for cost
savings. That kind of rationale may do little for building long-term
value in the company or its products and services.

Many others, he said, don't see much choice but to do more overseas given the prospects of a hobbled American economy.

But
whatever happens long term, current high levels of offshoring will add
to the nation's employment hardships for workers with college training
as well as for lower-skilled workers.

PwC, the big accounting firm
formerly known as PricewaterhouseCoopers, last spring and summer laid
off about 125 support staff members in client services, transferring the
work to Uruguay. Those positions were considered mid-level.

Dennis
Donovan, a veteran corporate-relocation consultant, said many legal and
engineering firms already have outsourced routine work overseas, and he
sees a bigger wave of offshoring by the burgeoning healthcare industry.
At the same time, he sees fewer companies moving overseas strictly on
the basis of cost.

"Now it's R&D; centers and also for market
penetration," said Donovan, a principal at Wadley-Donovan-Gutshaw
Consulting in New Jersey.

He said some American firms were
beginning to move call centers and other back-office operations — or
"in-sourcing" — back to the U.S. because costs in China, India and other
top outsourcing countries had risen sharply and quality hasn't been
consistent.

U.S. Outsourcing and Multinational Corporations

March 18, 2008

Many millions of jobs that have been harbored safely within the borders
of the U.S. as an active part of the U.S. economy have been moved to
distant locations outside the U.S. where labor costs are significantly
reduced. The outsourcing of U.S. jobs, often referred to as
“offshoring”, while not new, has become quite prolific since the advent
of NAFTA by the Clinton Admini- stration. The immediate reaction was
that hundreds of manufacturing plants were closed and relocated outside
the States. Champions of NAFTA and the World Trade Organization
rationalized that low-skilled and low-paying manufacturing jobs would be
replaced with higher paying jobs in high-tech and service sectors.
Corporate momentum is such that outsourcing has gained wholesale
acceptance by companies across-the-board seeking lower costs and higher
profits. Job outsourcing has moved up the corporate ladder of hierarchy
from telemarketing jobs to highly-skilled and managerial positions.
Multinational Corporate America has been relocating the very jobs that
NAFTA and the WTO announced would replace low-paying manufacturing jobs.
The newest wave of job outsourcing is being exercised in accounting and financial services, computer and IT services along with telecommunications.

Multiple times, Congressional measures have been considered to restrain
the federal government from granting contracts to companies to send work
overseas. The Bush Administration has consistently opposed the
legislation. The administration has continually supported tax incentives
to outsource jobs overseas. Unprecedented levels of sensitive personal
information are being shipped overseas where privacy protections are not
in place. The federal government has made efforts to undermine state
laws by convincing state governors to accept new rules for trade
agreements, working to promote the use of funding that employs
outsourced workers overseas.

While it is safe to say that these multinationals have heavily funded
the Bush campaigns, the same support was obviously in place when the
trade agreements were pressed into service by the Clinton
Administration. The role of money in politics often appears to be very
subtle. General Electric, Deloitte Touche, IBM, Morgan Stanley, Goldman
Sachs, Microsoft, Texas Instruments, SBC and Verizon are among the top
exporters of U.S. jobs since 2000. There is speculation and analysis,
but almost no solid information of the number of U.S. jobs that have
been outsourced. Ernst & Young sends tax preparation work to India.
Aetna has medical records reviewed in India. Deloitte sends government
work to India and commonly brings Indian workers from overseas to
perform government work. The large organizations that support a
multinational workforce have resisted disclosure of any information that
might work against their corporate benefit. The government has worked
as a partner to stem public scrutiny of job outsourcing with no federal
reporting requirements for outsourced jobs. Multinational corporate
America is fearful over a public backlash of opinion that would prevent
them from exercising complete autonomy over their corporate workforces.

Increasing numbers in the United States
labor force compete with developing third-world countries. The U.S.
government continues to subcontract work to private contractors that
often outsource with an overseas affiliate or subcontractor.
Corporations like Deloitte Touche, have increasingly been sending IT and
managerial jobs overseas. It is not uncommon for Deloitte, a major
governmental finance and accounting firm, to bring foreign workers into
the country to educate them while maintaining control of all aspects of
worker’s lives, a form of indentured servitude. Work visas are commonly
employed to bring foreign workers to work in the States for reduced
wages. The action is considered as harmless and justifiable because of
the number of multinational offices held by many players of Corporate
America.

The effect of job globalization is the
suppression of wages in the United States. 57% of reemployed displaced
workers earned less in new jobs than in the jobs that were lost from
outsourcing. 34% of those displaced workers saw earnings reductions of
more than 20%. Brookings Institute recommends that outsourced reemployed
workers recover 47 cents of every dollar that they used to earn.

Perhaps the ultimate expression of capitalism results in the export of
jobs to lowest-cost countries to enable what used to be “American
companies”, now multinational corporations that have the sole goal of
maximizing their corporate profits. The ultimate political expression
has evolved to a sector of the world that is, in effect, ruled by
multinational corporations.

Mexico was a huge testing field for NAFTA
and corporate internal structuring. For a time, Multinational Corporate
America sustained many manufacturing plants in Mexico within reach of
the U.S. border. When the labor costs and the professional level of the
Mexican worker began to increase, most of the plants were quickly
abandoned for other less expensive provisions overseas. The corporate
taste for labor manipulation was fully birthed.