Where Are The Jobs? For Many Companies, Overseas
Corporate profits are up. Stock prices are up. So why isn't anyone hiring?
many American companies are — just maybe not in your town. They're
hiring overseas, where sales are surging and the pipeline of orders is
More than half of the 15,000 people that
Caterpillar Inc. has hired this year were outside the U.S. UPS is also
hiring at a faster clip overseas. For both companies, sales in
international markets are growing at least twice as fast as
The trend helps explain why
unemployment remains high in the United States, edging up to 9.8 percent
last month, even though companies are performing well: All but 4
percent of the top 500 U.S. corporations reported profits this year, and
the stock market is close to its highest point since the 2008 financial
But the jobs are going elsewhere.
The Economic Policy Institute, a Washington think tank, says American
companies have created 1.4 million jobs overseas this year, compared
with less than 1 million in the U.S. The additional 1.4 million jobs
would have lowered the U.S. unemployment rate to 8.9 percent, says
Robert Scott, the institute's senior international economist.
a huge difference between what is good for American companies versus
what is good for the American economy," says Scott.
jobs have been moving overseas for more than two decades. In recent
years, though, those jobs have become more sophisticated — think
semiconductors and software, not toys and clothes.
now many of the products being made overseas aren't coming back to the
United States. Demand has grown dramatically this year in emerging
markets like India, China and Brazil.
consumer demand in the U.S. has been subdued. Despite a strong holiday
shopping season, Americans are still spending 3 percent less than before
the recession on essential items like clothing and more than 10 percent
less on jewelry, furniture, electronics, and big appliances, according
to MasterCard's SpendingPulse.
will go where there are fast-growing markets and big profits," says
Jeffrey Sachs, globalization expert and economist at Columbia
University. "What's changed is that companies today are getting top
talent in emerging economies, and the U.S. has to really watch out."
the future looking brighter overseas, companies are building there,
too. Caterpillar, maker of the signature yellow bulldozers and tractors,
has invested in three new plants in China in just the last two months
to design and manufacture equipment. The decision is based on demand:
Asia-Pacific sales soared 38 percent in the first nine months of the
year, compared with 16 percent in the U.S. Caterpillar stock is up 65
percent this year.
"There is a shift in
economic power that's going on and will continue. China just became the
world's second-largest economy," says David Wyss, chief economist at
Standard & Poor's, who notes that half of the revenue for companies
in the S&P 500 in the last couple of years has come from outside the
Take the example of DuPont, which wowed
the world in 1938 with nylon stockings. Known as one of the most
innovative American companies of the 20th century, DuPont now sells less
than a third of its products in the U.S. In the first nine months of
this year, sales to the Asia-Pacific region grew 50 percent, triple the
U.S. rate. Its stock is up 47 percent this year.
work force reflects the shift in its growth: In a presentation on
emerging markets, the company 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 percent in the Asia-Pacific countries.
are a global player out to succeed in any geography where we
participate in," says Thomas M. Connelly, chief innovation officer at
DuPont. "We want our resources close to where our customers are, to
tailor products to their needs."
of DuPont's research labs are still stateside, Connelly says he's
impressed with the company's overseas talent. The company opened a large
research facility in Hyderabad, India, in 2008.
key factor behind this runaway international growth is the rise of the
middle class in these emerging countries. By 2015, for the first time,
the number of consumers in Asia's middle class will equal those in
Europe and North America combined.
the growth over the next 10 years is happening in Asia," says Homi
Kharas, a senior fellow at the Brookings Institute and formerly the
World Bank's chief economist for East Asia and the Pacific.
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.
would not say how many new U.S. hires it has made in 2010. But 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.
The strategy isn't
restricted to just the largest American companies. Entrepreneurs,
whether in technology, retail or in manufacturing, today hire globally
from the start.
Consider Vast.com, which
powers the search engines of sites like Yahoo Travel and Aol Autos. The
company was founded in 2005 with employees based in San Francisco and
Harvard Business School Dean Nitin
Nohria worries that the trend could be dangerous. In an article in the
November issue of the Harvard Business Review, he says that if U.S.
businesses keep prospering while Americans are struggling, business
leaders will lose legitimacy in society. He exhorted business leaders to
find a way to link growth with job creation at home.
economists, like Columbia University's Sachs, say multinational
corporations have no choice, especially now that the quality of the
global work force has improved. Sachs points out that the U.S. is
falling in most global rankings for higher education while others are
"We are not fulfilling the
educational needs of our young people," says Sachs. "In a globalized
world, there are serious consequences to that."