NCPA - National Center for Policy Analysis

Insourcing: The Secret to Job Growth

December 8, 2010

U.S. policymakers are fiercely divided over how to support job growth, say Robert M. Kimmitt, former deputy secretary of the Treasury, and Matthew J. Slaughter, a member of the council of economic advisers from 2005 to 2007. 

Last month a Survey of Current Business report by the U.S. Bureau of Economic Analysis suggested a promising new approach.  The report documented a dynamic group of companies that create high-paying American jobs based on significant capital investment and export prowess -- precisely the kinds of jobs America desperately needs to build a sustainable recovery.

  • In 2008, these companies employed 5.6 million Americans, 4.7 percent of total private-sector employment.
  • In the U.S. private sector that year, these companies accounted for 11.3 percent of capital investment ($187.5 billion), 14.3 percent of research and development ($40.5 billion) and 18.1 percent 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.

So which companies are these?  Ones that "insource" -- that is, the U.S. operations of multinational firms based abroad.  

To boost the hiring prospects of insourcing companies (and of many others as well), policymakers should focus on three issues quite distinct from macroeconomic tools like quantitative easing and federal stimulus spending.

  • First, taxes -- America's high corporate tax rate inhibits hiring and investment in all U.S. firms, big and small alike.
  • Second, trade -- the more U.S. policymakers enact free trade agreements with other nations, the more insourcing companies will be able to expand their exports and related jobs.
  • Third, tone -- a worrisome 72.2 percent of insourcing chief financial officers say that the environment for doing business in America deteriorated over the last year.

Source: Robert M. Kimmitt and Matthew J. Slaughter, "Insourcing: The Secret to Job Growth," December 6, 2010.

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