Creating Jobs Overseas Creates Jobs and Wealth at Home
February 10th 2010 14:33
It does not take much effort to remember the last time you heard a politician decrying the practice of creating jobs overseas. In President Obama's State of the Union Address he said, "we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas." No mention of the exact tax breaks he was referring to, nor the magnitude of this problem of corporations shipping jobs overseas. I wonder what would happen if corporations were not allowed to "ship our jobs overseas."
1. U.S. consumers and producers would lose out. Consumers would be hurt by having to pay higher prices for their goods. Producers would be hurt by having to run their business less efficiently. This likely means lower income for employees. Like free trade, the money that the consumers would have spent elsewhere in the economy (creating jobs) will now be spent on paying the higher price of this good. The effect is fewer total jobs and/or a lower standard of living. (See here)
2. The foreign subsidiaries that U.S. companies start-up in other countries receive trillions of dollars in U.S. exports to sell into that market. It is not that U.S. companies are cutting down in the U.S. so that they can move to another country, but rather they need to expand physically to bring American goods to new markets. (See here)
3. When U.S. firms expand employment overseas, they match that with an expansion in employment at home. Foreign expansion creates a demand for (higher-paying) jobs back home to manage the foreign operations. From 1982 to 2006, parent companies added approximately 3,000 jobs and foreign affiliates added approximately 4,400 jobs. The average politician gives the impression that parent companies have been shedding jobs at a fast rate while affiliates have been popping them out at rapid speeds. This has not been the case. (See p. 27 [
LINK=http://www.bea.gov/scb/pdf/2008/11%20November/1108_mnc.pdf]here[/LINK])
Clearly, the choice politicians give the public between more jobs at home or more jobs overseas is false. The choice is between more jobs at home and more jobs overseas, or fewer jobs at home and fewer jobs overseas.
Follow me on Twitter: @AGoldenDoor
1. U.S. consumers and producers would lose out. Consumers would be hurt by having to pay higher prices for their goods. Producers would be hurt by having to run their business less efficiently. This likely means lower income for employees. Like free trade, the money that the consumers would have spent elsewhere in the economy (creating jobs) will now be spent on paying the higher price of this good. The effect is fewer total jobs and/or a lower standard of living. (See here)
2. The foreign subsidiaries that U.S. companies start-up in other countries receive trillions of dollars in U.S. exports to sell into that market. It is not that U.S. companies are cutting down in the U.S. so that they can move to another country, but rather they need to expand physically to bring American goods to new markets. (See here)
3. When U.S. firms expand employment overseas, they match that with an expansion in employment at home. Foreign expansion creates a demand for (higher-paying) jobs back home to manage the foreign operations. From 1982 to 2006, parent companies added approximately 3,000 jobs and foreign affiliates added approximately 4,400 jobs. The average politician gives the impression that parent companies have been shedding jobs at a fast rate while affiliates have been popping them out at rapid speeds. This has not been the case. (See p. 27 [
Can't we agree to have more jobs everywhere?!?
Clearly, the choice politicians give the public between more jobs at home or more jobs overseas is false. The choice is between more jobs at home and more jobs overseas, or fewer jobs at home and fewer jobs overseas.
Follow me on Twitter: @AGoldenDoor
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