Scattered Clouds88° WeatherScattered Clouds88° Weather

Companies' jobs flow overseas

Corporate profits are up. Stock prices are up. So why isn't anyone hiring?

Actually, many American companies are — just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.

More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the United States. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.

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 meltdown.

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 fewer than 1 million in the United States. 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.

"There's a huge difference between what is good for American companies vs. what is good for the American economy," Scott says.

American 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.

And 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.

Meanwhile, U.S. consumer demand 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.

"Companies 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."

Tampa Bay area companies have embraced the offshoring trend for a long time, led by some of the area's biggest public companies like Jabil Circuit. The St. Petersburg-based electronics manufacturer has facilities in nearly two dozen countries, including China and Malaysia.

In its last fiscal year, Jabil derived 85 percent of its revenue from international operations. Jabil's head count rose from 61,000 to 69,000 over the past year, with the vast majority of workers located outside the United States.

In its 2010 report, the company highlighted "Shanghai's rapid hiring" and innovations of its human resources team there to bring on new workers. Among the initiatives: an "engineers in training" program, university tuition sponsorship and the Jabil Shanghai College.

More recently, both PricewaterhouseCoopers and Nielsen Media have snatched headlines through outsourcing Tampa Bay area jobs to India-based companies.

Last summer, Pricewaterhouse confirmed it was cutting 500 information technology positions, nearly all in Tampa, and sending the work to India-based Tata Consulting Services. Nielsen also turned to Tata for cheaper labor in laying off more than 200 workers at its Oldsmar complex since 2008.

With 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 United States. 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 United States.

Take 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 United States. In the first nine months of this year, sales to the Asia-Pacific region grew 50 percent, triple the U.S. rate.

DuPont's work force reflects the shift in its growth: In a presentation on emerging markets, the company said its number of employees in the United States 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.

"We 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."

While most 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.

A 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.

"All of the growth over the next 10 years is happening in Asia," says Homi Kharas, a senior fellow at the Brookings Institution and formerly the World Bank's chief economist for East Asia and the Pacific.

Coca-Cola 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 United States in 2009, down from 19 percent five years ago.

The company 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 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 Serbia.

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.

Other 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 United States is falling in most global rankings for higher education while others are rising.

"We are not fulfilling the educational needs of our young people," Sachs says. "In a globalized world, there are serious consequences to that."

Times staff writer Jeff Harrington contributed to this Associated Press report.

Companies' jobs flow overseas 12/28/10 [Last modified: Monday, November 7, 2011 1:51pm]

Copyright: For copyright information, please check with the distributor of this item, staff.
    

Join the discussion: Click to view comments, add yours

Loading...