Report | Trade and Globalization

The Hidden Costs of Insourcing: Higher Trade Deficits and Job Losses for U.S. Workers

Issue Brief #236

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Public officials have frequently claimed that foreign companies making direct investments in the United States, or insourcing, are creating employment here. In 2006, former Treasury Secretary John Snow said, “We know that investment in America lies at the heart of creating good jobs….Indeed, 5.3 million U.S. workers alone are directly employed by U.S. affiliates of international companies” (U.S. Department of the Treasury 2006). Treasury Secretary Henry Paulson recently said that “U.S. affiliates of foreign companies bring investments to our shores, creating jobs and revitalizing communities” (U.S. Department of the Treasury 2007).

But insourcing can destroy jobs and communities, too. In fact, total U.S. payroll employment of foreign multinationals declined by 50,000 jobs in 2005, and 600,000 jobs between 2000 and 2005. Including job losses from layoffs by firms that are taken over by multinationals, employment in firms that are spun off, and jobs created in new multinational startups, these firms have reduced their overall payroll employment by 4 million jobs since 1990.

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