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"insourcing:" jobs coming to america, not away from

Old 08-07-2005, 12:16 AM
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"insourcing:" jobs coming to america, not away from

from John Maulden's weekly newsletter, August 5, 2005:

Globalization refers to the increasing economic integration and interdependence of countries. Economic globalization in this century has proceeded along two main lines: trade liberalization (the increased circulation of goods) and financial liberalization (the expanded circulation of capital). Friedman starts with insights on the ten forces that flattened the world. Things like: the fall of the Iron Curtain, search engines, out-sourcing and in-sourcing, the development of software which controls supply chains, a wired and wireless world and more.

We are familiar with the problem of manufacturing jobs in the US going to China, as well as service jobs being outsourced to India. Each factory which closes down has the local news team at its door when the announcement is made.

But what we do not focus on is the fact that more jobs get outsourced to the United States from foreign countries than the other way around. Globalization has many aspects, but it means that everything is going to change even faster.

Thomas Friedman, author of "The World is Flat," notes that new technologies have enabled new processes which make it easier to do business anywhere in the world. The playing field for business has become horizontal. And (quoting):

"Just as we finished creating this new, more horizontal playing field, and companies and individuals primarily in the West started quickly adapting to it, 3 billion people who had been frozen out of the field suddenly found themselves liberated to plug-and-play with everybody else.

"Save for a tiny minority, these 3 billion people had never been allowed to compete and collaborate before, because they lived in largely closed economies with very vertical, hierarchical political and economic structures. I'm talking about the people of China, India, Russia, Eastern Europe, Latin America and Central Asia. Their economies and political systems all opened up during the course of the 1990s, so that their people were increasingly free to join the free market game. And when did these 3 billion people converge with the new playing field in the new processes? Right when the field was being flattened, right when millions of them could compete and collaborate more equally, more horizontally, and with cheaper and more readily available tools than ever before. Indeed, thanks to the flattening of the world, many of these new entrants didn't even have to leave home to participate.... the playing field came to them!

"It is this triple convergence - of new players, on a new playing field, developing new processes and habits for horizontal collaboration - that I believe is the most important force shaping global economies and politics in the early 21st century. Giving so many people access to all these tools of collaboration, along with the ability through search engines and the Web to access billions of pages of raw information, ensures that the next generation of innovations will come from all over Planet Flat. The scale of the global community that is soon going to be able to participate in all sorts of discovery and innovation is something the world is simply never seen before."
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Old 08-07-2005, 12:20 AM
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insourcing and Nissan

"What is "insourcing''? . . . . Well, it has been a company such as Nissan opens a plant in the United States and thereby creates high-paying jobs for American workers to the benefit of those American workers. In fact, that is the very thing that happened in Tennessee when, in 1980, Nissan opened its first plant in Smyrna . . . . Nissan today employs roughly 7,400 workers and in the year 2000 paid out $27.7 million a month in payroll . . . . Because of increased demand for Nissan cars, the company has spent $1 billion to expand its Smyrna and Decherd plants . . . . There are now more than 900 suppliers providing 140,000 jobs in the State. Nissan is just one success of how insourcing has led to job growth. Over 400 overseas companies have U.S. subsidiaries that are employing and creating jobs just in . . .Tennessee . . . . Over 157,000 jobs in Tennessee are the result of insourcing. . . .U.S. subsidiaries support nearly 7 percent of Tennessee's private sector workforce. . . ."

~Majority Leader Sen. Bill Frist (R-TN) in April 8 comments on the Senate Floor
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Old 08-07-2005, 12:32 AM
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points about the extent of insourcing

not all jobs in the United States are going to India and China. many are coming here, have been here, and are on the rise here:

U.S. subsidiaries employ 5.4 million Americans.

U.S. subsidiaries (a domestic arm of a foreign company) support an annual payroll of $307 billion and pay, on average, 31% more than all U.S. companies.

U.S. subsidiaries heavily invest in the American manufacturing sector. 34% of the jobs at U.S. subsidiaries are in manufacturing -- more than double the proportion of manufacturing at all U.S. companies.

U.S. subsidiaries manufacture in America to export goods around the world -- accounting for over 20% of all U.S. exports.

New foreign direct investment (FDI) in the U.S. totaled $39.9 billion in 2003.

In 2003, U.S. subsidiaries reinvested $38.6 billion in their U.S. operations.

U.S. Subsidiaries have spent $27.5 billion on U.S. research and development activities.

source: http://www.ofii.org/insourcing/
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Old 08-07-2005, 12:35 AM
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insourcing seldom ever mentioned

The Times Union
By Elizabeth Benjamin
March 6, 2005


INSOURCING AN OVERLOOKED ECONOMIC BENEFIT

ALBANY - With all the dark talk lately about the outsourcing of American jobs to countries like India, China and Mexico, globalization tends to get a bad rap.

But there is a positive, often-overlooked side to the growing global economy, according to a 2004 study released by the Organization for International Investment, a trade association representing U.S. subsidiaries of foreign companies.

It's called "insourcing" - the investment in America by foreign companies that brings with it a whole host of benefits like jobs, revenue, infrastructure, products and intellectual capital.

"There's a lot of evidence that globalization benefits the U.S. economy ... that doesn't get into the political discussion as much as it should," said Matthew Slaughter, an associate professor at Dartmouth College's Tuck School of Business, who authored the study entitled "Insourcing Jobs: Making the Global Economy Work for America."

According to the study, multinational companies with a majority of foreign investment employ more than 5.4 million workers through their operations in the United States. That's about 5 percent of the country's private-sector employment, up from 3 percent in 1987. All told, those workers were paid more than $307 billion, more than 6 percent of all U.S. private-sector labor compensation.

This isn't to say that insourcing is making up for the rapid outsourcing taking place in many industries. Indeed, a 2003 study by the University of California at Berkeley contends that 14 million white-collar jobs could be lost to low-wage countries such as India, China and Mexico by 2015.

But insourcing is occurring, Slaughter said. Using data from the U.S. Commerce Department's Bureau of Economic Analysis, the study ranks New York second in the nation for the number of workers employed by foreign subsidiaries: 394,700. And 72,700 of those jobs, or 18.4 percent, are in manufacturing, a sector in which the state lost more than 220,000 jobs between 1993 and 2003, according to the state Department of Labor.

The Empire State lags far behind No. 1 on the list - California - with 616,400 foreign-funded jobs. But it's ahead of No. 3, Texas, which has 351,400.

Among the prominent foreign-based companies with roots in America is Tokyo Electron Ltd., the world's No. 2 manufacturer of semiconductor production equipment.

TEL has embarked on a $300 million research and development center at the University at Albany's Albany NanoTech complex. The center is TEL's first dedicated R&D facility outside Japan.

New York state officials have been aggressively courting technology companies, particularly - when it comes to the Capital Region - those associated with the nanotechnology industry. The state pledged $100 million over seven years to TEL.

That cash undoubtedly helped New York beat out two other communities to land TEL's R&D center and the estimated 300 well-paying jobs it will have when fully staffed.

But there is no silver bullet when it comes to attracting foreign business, said the Tuck School's Slaughter. State incentives alone - in the form of tax breaks or cold, hard cash - won't do the trick. It's actually a mix of things that lures a company, from a well-educated work force to an area's quality of life.

Some factors - like the weather - state officials can't do anything about. But weather isn't necessarily a make-or-break factor for high-tech companies.

Chris Kramer, vice president of strategic accounts for Austin, Texas-based TEL America, said company officials decided Albany was a good fit for them because of its proximity "to the best minds - both academic and in the industry." He also credited Gov. George Pataki's "vision" of a high-tech corridor in New York for giving the state an edge over other states.

TEL isn't having any trouble attracting employees to Albany, Kramer said, because people want to do the kind of work going on here.

"I joined TEL seven years ago, and there were 13 people in New York state, mostly serving and supporting IBM," he said. "I probably never would have thought we'd have more than 50, but now we have more than 100."

Even though that's only a third of TEL's eventual payroll, Albany Mayor Jerry Jennings said the city is already experiencing a boon from the company's presence and from those of other companies at the NanoTech complex, like Sematech.

"It's not just about new workers, it's about an attitude about the region," Jennings said. "There's more interest now than there ever was from new companies that want to come in here. ... We're in the global market now."

Jennings declined to name the companies that have called him. But Pataki announced during his 2005 State of the State address that IBM Corp., ASML Holding N.V. of the Netherlands and several other companies are planning projects that could create 600 jobs at the NanoTech complex.

According to Empire State Development Corp., the state's economic development arm, New York's share of gross property, plant and equipment from foreign affiliates reached $63 billion in 2002, the most recent data available.

The top investing country was the United Kingdom at $13 billion; Canada ranked No. 5 at $7.3 billion.

To help attract business to New York from overseas, Empire State Development has nine foreign offices, including two in Canada and one each in Tokyo, Mexico City, London, Israel, South Africa and Chile. These offices are largely staffed by contractors who both bring in new business and also serve as a point-of-contact for companies seeking information about New York.

The combined budget for these offices is $1 million a year.

Why has insourcing been largely ignored in the debate over globalization?

Said Slaughter: "The incidence of globalization hurting the economy is often quite concentrated, while the benefits are often quite diffuse."

In other words, a community feels the pain when a company closes up shop and relocates its jobs overseas. But when the entire computer industry benefits from research and development done by employees working for a foreign company's U.S. subsidiary, it's not quite so obvious.

On the other hand, Slaughter said, no one should gloss over the fact that not everyone can benefit from insourcing.

"Those who get hurt when jobs leave the country tend to be most visible at the local level," he said. "I'm the first to acknowledge there are real distributional impacts."
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