Local News

'Insourcing' Jobs Drop, But Foreign-Owned Firms Step Up U.S. Investment, Report Shows

Posted September 27, 2006

— Employees of foreign-owned companies operating in the United States continue to earn far higher wages on average than most workers of U.S. owned firms. Unfortunately, their ranks are thinning nationally as well as in the Carolinas and Georgia, a new report has found.

But despite a drop in jobs in 2005, North Carolina State University economist Michael Walden says there is no reason to panic. For example, Walden said a substantial increase in direct investment in U.S. operations by foreign owners reflects the value of those plants and operations.

"That's saying the value of the investment is going up while the number of people is going down," Walden said, "That's exactly what you see when a sector is changing and is becoming more productive."

Net financial inflows for foreign direct investment in the United States in 2005 totaled $128.6 billion, up from $106.8 billion in 2004.

The number of so-called "insourced" jobs (vs. out-sourced U.S. jobs shipped overseas) shrank 2.4 percent in 2005 from 2004 to 5.12 million, according to the Organization for International Investment (OII). The report utilizes U.S. Department of Commerce data.

Insourced jobs have dropped each of the last four years since reaching a peak of 5.66 million in 2000.

Of those insourced jobs, some 31 percent are in manufacturing. Improvement in productivity is a major reason why the number of workers has dropped at many manufacturing firms regardless of ownership, Walden said.

"Manufacturing jobs have been declining primarily not because companies aren't producing as much but reflect productivity changes," Walden said. "Today's plants are using more technology, more automation and fewer people. My take is not one of alarm."

Foreign-owned firms paid $324.5 billion, or an average of $63.428 per job, in salaries in 2005. That wage figure is 32 percent higher than average wages paid by U.S. firms, the report said. Walden said that differential was not new and also helped stress the importance the foreign firms place on its U.S. work force.

"That's typically been the case," Walden said of the wages. "Many of the foreign-owned firms are in pharmaceuticals, some in chemicals and some in motor vehicles. These tend to be higher valued-added manufacturing jobs."

North Carolina ranks 10th, Georgia 12th and South Carolina 16th in workers who are employed with internationally owned companies.

In North Carolina, insourcing job rolls fell by 5,800 to 198,000.

"These new data show that North Carolina can't assume global companies will always continue to invest and employ people in the state," said Todd Malan, chief executive officer of the OII, in a statement. The institute is a Washington, D.C.-based business group representing U.S. subsidiaries of foreign companies. "The challenge for policymakers is to ensure the state remains a competitive location for investment," he added.

Walden concurred with Malan.

"We need not take any kind of investment for granted," Walden said. "We are in a worldwide competition now. We have to constantly take a look at a whole array of factors from workforce training to taxes to infrastructure to quality of life.

"I see no reason why we can't compete and no reasons why we can't be successful in the future to attract investment in all areas, foreign and domestic," he added.

In Georgia, insourced workers fell by 8,000 to 175,900.

In South Carolina, insourced jobs dropped to 121,700, a decline of 5,100.

The top 20 states ranked in order of insourced jobs:

1. California, 547,000 2. New York, 377,000 3. Texas, 341,200 4. Florida, 238,400 5. Illinois, 235,600 6. Pennsylvania, 225,600 7. New Jersey, 219,700 8. Ohio, 203,600 9. Michigan, 201,000 10.

North Carolina

, 198,000 11. Massachusetts, 182,900 12.


, 175,900 13. Virginia, 133,700 14. Indiana, 132,500 15. Tennessee, 126,900 16.

South Carolina

, 121,700 17. Connecticut, 102,700 18. Maryland, 101,100 19. Wisconsin, 86,900 20. Kentucky, 84,700

In North Carolina, the insourced workforce makes up 6 percent of the state's private sector workforce. Of those jobs, 40 percent are in manufacturing. Foreign-owned firms operating in North Carolina include: AEGON USA, Akzo Nobel, Alcatel, Denso US, Electrolux, Food Lion, GlaxoSmithKline, Michelin, Miller Brewing Co., Novartis, Oldcastle Inc. and Qimonda.

In Georgia, insourced workers make up 5 percent of the private sector workforce. More than 59,000 - or 34 percent - of the insourced jobs are in manufacturing. Foreign-owned firms operating in Georgia include: Akzo Nobel, Allianz, AMEC, APL, Denso US, Deutsche Telekom, Electrolux, Food Lion, France Telecom North America, Lafarge North America Inc., Maersk Inc., Miller Brewing Co., Nestlé USA, Inc., Nokia and Novartis.

In South Carolina, insourced workers make up nearly 8 percent of the private sector workforce. That ranks first nationally. Over 50 percent, or 60,700, of the jobs are in manufacturing. Foreign owned companies operating in the state include: DaimlerChrysler, Electrolux, Food Lion, Fuji Photo Film Inc., GlaxoSmithKline, Michelin, Nestlé USA, Inc., Oldcastle Inc., Rexam, Roche, Saint Gobain, Siemens and Sodexho.

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