More jobs taking foreign vacations

and not coming back home.

I took this quote from Economist's View (ht NC), in part, because while I was away, the delivery of my Wall Street Journal seems to have been interrupted.  I am guessing that it is at least in part due to the tornadoes, so I will not make a fuss.  Of course it is also possible I may not have noticed it without their help.

Big U.S. Firms Shift Hiring Abroad, by David Wessel, Commentary, WSJ

U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization's effect on the U.S. economy.

The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere... [graph]

The data ... underscore the vulnerability of the U.S. economy, particularly at a time when unemployment is high and wages aren't rising. Jobs at multinationals tend to pay above-average wages and, for decades, sustained the American middle class. ...

While small, young companies are vital to U.S. economic growth, big multinationals remain a major force. A report by McKinsey Global Institute ... estimates that multinationals account for 23% of the nation's private-sector output and 48% of its exports of goods.

These companies are more exposed to global competition than many smaller ones, but also more capable of taking advantage of globalization by shifting production, and thus can be a harbinger of things to come. ...

And there is more:

Michael Spence (a Nobel Laureate) and Sandile Hlatshwayo have a paper out that focuses on current employment trends.

It is discussed in a Washington Post Column here:  Key to job growth, equality is boosting tradable sector of economy, Steven Pearlstein, The Washington Post, March 12, 2011. Reuters also had an article on it: Capitalism is failing the middle Class, Chrystia Freeland, Reuters, April 15, 2011.

And found here and through that site as a pdf here: link.

There study runs from 1990 to 2008, so it is about immediate trends, not really long term trends.

They found that job growth came in the non-tradable areas of the economy:  government, and health care.  And that jobs declined across a very broad range of areas within the tradable areas, particularly manufacturing.

Although employment declined, there was a slight edge in production growth (output) in the tradable sectors.

What this means is that one area had a lot of new jobs but little productivity, while another area lost jobs but added a lot of productivity.

From the report:

The trends in value added per employee are consistent with the adverse movements in the distribution of U.S. income over the past twenty years, particularly the subdued income growth in the middle of the income range. The tradable side of the economy is shifting up the value-added chain with lower and middle components of these chains moving abroad, especially to the rapidly growing emerging markets. The latter themselves are moving rapidly up the value-added chains, and higherpaying jobs may therefore leave the United States, following the migration pattern of lower-paying ones.

As the Washington Post column concluded:

Companies in the tradable sector, under the pressure of global competition, are busily outsourcing low- and mid-skilled work to other countries to become more competitive and more productive. The higher-skilled Americans who remain in those firms share in the benefits of that shift through wages and salaries that started higher and have been growing faster.

In the untradable sector, the story is one of rapidly rising employment but not so rapid a rise in output, which has translated into stagnant wages and benefits, both because of the slower growth in productivity and the increased competition in the labor market from all those workers laid off by the tradable sector. Moreover, now that the credit bubble has burst and households and government have had to cut back on their debt-financed consumption, much of the job creation that has gone on in the non-tradable sector is unlikely

As Chrystia Freeland of Reuters put it:

Taken together, here’s the big story…: Globalization and the technology revolution are increasing productivity and prosperity. But those rewards are unevenly shared – they are going to the people at the top in the United States, and enriching emerging economies over all. But the American middle class is losing out.

To Americans in the middle, it may seem surprising that it takes a Nobel laureate and sheaves of economic data to reach this unremarkable conclusion. But the analysis and its impeccable provenance matter, because this basic truth about how the world economy is working today is being ignored by most of the politicians in the United States and denied by many of its leading business people.

Chrystia Freeland