SCDigest Editorial Staff

Recently released research from the Manufacturers Alliance/MAPI, on the surface appears to show a continued drain of US employment from Multi-National Corporations, but the data in a sense leave as many questions as answers.

Multi-National Corporations (MNCs) are US companies that have company-owned foreign divisions or manufacturing operations. The MAPI analysis, based in large part on data from the US Bureau of Economic Analysis as analyzed by Dan Meckstroth, Chief Economist and Director of Economic Research at MAPI, says that there are just about 1100 manufacturing-based US MNCs out of a total population of some 280,000 total US manufacturers.

The percent of MNC employees working in the foreign operations continues to grow as a share of the total. The 11000 MNCs had global employment of 12.3 million workers in 2008 (the most recent year of available data), combining 7.1 million workers at the United States parent and 5.2 million workers in majority owned foreign affiliates.

Those 5.2 million foreign workers represent 42% of the MNC's total, up from 34% in 1999.

However, the MAPI report says although "foreign share of employment is rising, it would be wrong to attribute the decline in parent employment to a substitution of foreign for domestic employees."

MAPI cites data that shows 89% of foreign affiliate sales are in the country where they reside or to other foreign countries, not back to the US - though this seems somewhat surprising to SCDigest.  But the explanation may be that more than 50% of the foreign employees are not connected with offshore manufacturing operations, but rather with sales and service divisions in other countries.

Finally, the report notes that growth in foreign affiliate employment (600,000) since 1999 would only account for one-third of the total job loss of the US parent companies (1.9 million) in the same period.

(Manufacturing Article - Continued Below)

That suggests to us that the US job losses were primarily the result either of increased efficiencies/productivity (blue and white collar), or that a significant portion of offshoring was done to non-company owned operations (such as outsourcing electronic product production to China's Foxconn).

Shift of Employment to Fast Growth Countries

Not surprisingly, the report finds that the most rapid growth in foreign affiliate employment has been in the fastest growing economies of the world. Foreign employment in developing Asia increased 66% over the nine years ending in 2008. Developing Asia’s share of foreign employment increased from 14.7% in 1999 to 21.5% in 2008, a 6.8 percentage point increase.

This is an important change. In the past, most direct foreign investment by US companies was in large, mature countries such as Canada, Europe, Japan, and Australia. That is changing dramatically, as the share of foreign employment in those countries fell 5.7 percentage points, from 60.8% of total offshore employment in 1999 to 55.2% in 2008.

Surprising to us, the Latin American share of foreign employment fell 1.5 percentage points since 1999 from 21.7% of the total to 20.2%.

The report notes there are big differences in the percent of foreign workers in MCSs depending on the specific vertical industry they are in, as shown in the graphic below.

As can be seen in the column 2 of the graphic, the semiconductors and other electronic components industry has 59% of its employees in foreign affiliates, the largest proportion among any manufacturing sector. The least foreign-engaged industry, furniture and related products, still had a relatively large 23 percent of its total employment abroad.

What's your reaction to this MAPI data? Does it seem right, or are there factors that are masking the real numbers? Let us know your thoughts at the Feedback button below.

SCDigest is Twittering!

  Follow us now at https://twitter.com/scdigest