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Deloitte Think Tank Reveals The Secret To US Job Growth – Insourcing

Deloitte Think Tank Reveals The Secret To US Job Growth – Insourcing

Lisa Chapman,

December 6, 2010

We read in the Wall Street Journal today, that two Deloitte experts Mr. Robert Kimmitt, independent chairman of the Deloitte Center for Cross-Border Investment and Mr.  Matthew Slaughter an adviser to the Deloitte Center revealed their secrets to increasing employment within the US and reversing the doggedly upward-trending US unemployment rate (now 9.8% with the economy adding only 39,000 jobs in November 2010).

Their secret?  

Not outsourcing, which leads to a reduction in American jobs.


But insourcing, the employment of US based workers by U.S. operations of multinational firms based abroad.


The authors claim that this was an accidental revelation.


In November 2010, a Survey of Current Business report by the U.S. Bureau of Economic Analysis showed a promising new approach (perhaps accidentally, say the authors) – a dynamic set of companies that create high-paying American jobs based on significant capital investment and export prowess.


In 2008, these companies employed 5.6 million Americans, 4.7% of total private-sector employment; and accounted for 11.3% of capital investment ($187.5 billion), 14.3% of research and development ($40.5 billion), and 18.1% of goods exports ($232.4 billion). In 2008, total U.S. compensation at these companies was $408.5 billion—a per-worker average of $73,023. That s about one-third more than the average for all other U.S. workers. And insourcing companies now employ more than twice the number of Americans they employed in 1987. Not only that, these companies continue to see US growth opportunities in that 50% plan to increase U.S. employment over the next 12 to 18 months, and just 22% plan to reduce it.


And to aid the hiring process, lawmakers should focus on three issues quite distinct from macroeconomic tools like quantitative easing and federal stimulus spending.


First, taxes.

Insourcing CFOs say their top concern is the U.S. corporate tax rate, which, at 35%, is one of the world s highest, which inhibits hiring and investment in all U.S. firms. Policy makers should act on these proposals as quickly as possible to reduce the uncertainty that is inhibiting businesses hiring and investment.


Second, trade.

The more U.S. policy makers engage in free-trade agreements, the more insourcing companies will be able to expand their exports and related jobs.


Third, tone.

72.2% of insourcing CFOs say that the environment for doing business in America deteriorated over the last year. The "Buy American" provisions of the 2009 American Recovery and Reinvestment Act indicates a protectionist tone which belies the reality that America today is in a new era of global competition.


So, there you have it, the secret to pushing down the unemployment rate now highlighted and analyzed by Deloitte’s economic experts. Make it easy for non-US multinationals to operate in the US and then become their employees.  Not that there is not enough evidence for this, consider all the Japanese automakers with huge car plants in the South, or Koreans with their semiconductor and automotive factories, Europeans companies who have been operating in the US for centuries, and more recently Middle Eastern, Chinese and Indian companies.


Looked from another perspective, this is outsourcing for foreign multinationals – in a bizarre way, hiring US employees for their non-domestic operations robs the domestic labor force of high-paying jobs. Consider the tons of Japanese executives residing in the US in the eighties, now all but gone.


Nonetheless, there is a good point to be had here, in this age of globalization, it’s where you work, and not who you work for that matters. In that sense, insourcing is a great tool to increase employment in the US – is it the secret – perhaps not the only one, but good thinking on the part of Deloitte to get news from an accidental disclosure, sometimes the best things in life are not the obvious ones.
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