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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 19, 2011 at 9:40 AM

The giant sucking sound from corporate America

Talk about a lost decade. According to the Commerce Department, U.S. multinationals added 2.4 million jobs overseas during the 2000s while reducing domestic employment by 2.9 million souls.

This is a stark turnaround from the 1990s, when 2.7 million jobs were created in multinational units abroad while 4.4 million were added at home. All told, these major companies employ one-fifth of all working Americans, 21.1 million in 2009. The story was first reported by the Wall Street Journal.

The data provide fresh context to the tepid job growth experienced during the past decade even at the height of the boom. And while small businesses create most jobs, the larger corporations tend to provide higher salaries and better benefits for American workers. The strength of their domestic operations is also critical to small-business vendors.

No easy fix for this trend is to be found. The world is awash in cheap, high-skilled labor. The fastest-growing markets are in Asia. In China, especially, American corporations are pressured to set up factories and even research facilities there — not that they probably need much nudging. According to the Journal, 30 percent of GE’s business was overseas in 2000, while today 60 percent is. As a result, 54 percent of GE employees are located abroad vs. 46 percent in 2000.

While U.S. corporate tax rates appear high on paper, in reality these large multinationals pay relatively low taxes. They have entire departments whose task is to milk every loophole, and with powerful lobbyists they also benefit from large sums of corporate welfare. General Electric, led by Obama economic adviser Jeff Immelt, notoriously paid no federal taxes in 2010. Trade agreements no doubt contribute to the situation, but millions of American workers, and Washington state especially, depend on exports.

But make no mistake: Fixing the federal deficit and debt will be dependent on growing the American economy, including creating many more jobs, and good ones at that.

UPDATE: The Journal dug deeper in the Commerce report and found another troubling trend: Foreign companies operating in the U.S. aren’t hiring here either.

Speaking of jobs, the feds released their latest report on state and regional unemployment. The West, weighed down by Nevada and other Sun Belt disaster zones, has the highest unemployment. Some green shoots can be found in the fact that Washington state added 33,800 jobs from March 2010 to last month. It’s not enough, but still relatively strong performance in this weak jobs recovery.

Today’s Econ Haiku:

Paul Ryan’s health care

Is guaranteed by the feds

Let’s cut your health care

Comments | More in Global economy, Jobs/Unemployment


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