“There’s a huge difference between what is good for American companies versus what is good for the American economy,” says Robert Scott, chief economist for the Economic Policy Institute, but I think that’s a rather shallow analysis. Outside of cronyism and other sorts of convenient government/business incest, what’s good for American companies is what’s good for the American economy.
If American companies couldn’t cut overhead by outsourcing parts of their businesses to countries with cheaper labor pools and friendlier tax/regulatory environments how much more would the goods and services American citizens buy cost? How many more American jobs would be lost if these companies couldn’t hold down costs during time of recession?
The answer to both questions is “a lot.”
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 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 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 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.
“There’s a huge difference between what is good for American companies versus what is good for the American economy,” says Scott.
I know that “corporate profits” is a dirty word in some circles, but profits mean healthy businesses. Healthy businesses mean jobs and commerce. Without these companies holding down overhead and turning a profit America would be worse off economically than it already is. And don’t forget, all the investors and pension funds, etc. that are invested in these companies have an interest in seeing profits as well.
But if the protectionist crowd that sees outsourcing as bad for America really want to fix things, then let’s cut America’s second-highest-in-the-world corporate tax rate. Let’s scale back some of the unnecessary and overbearing business regulation our federal and state governments have pushed onto American businesses. End laws that give unions unfair advantages over businesses (not to mention workers who don’t want to join the union).
If we want to keep these companies from moving part or all of their operations overseas then we should get the government and the unions to stop pushing them overseas.