Good for Obama’s jobs council, good for America?
By Jia Lynn Yang,
Some of the powerful executives who advised President Obama on Monday about how to solve the unemployment problem in the United States are themselves focused overseas for growth.
Five of the biggest companies on Obama’s jobs council, General Electric, Citigroup, Intel, Procter & Gamble and DuPont, rely on foreign revenues for a majority of their sales — a shift that’s occurred just in the past several years for most of these firms. As other countries’ economies recover more quickly, these corporations have taken advantage. Earnings at GE were up 77 percent in the latest quarter. Intel is enjoying record profits.
A central assumption in Obama’s economic plan is that private-sector growth will translate into more jobs in this country.
But that strategy could be less potent as decades of globalization have loosened the connection between the health of large U.S. firms and the economy, analysts say.
As a whole, U.S. multinational firms reduced their workforce in this country by 2.9 million between 1999 and 2009, according to recent data from the Commerce Department. Meanwhile, they added 2.4 million workers overseas.
Corporate profits have largely returned to their levels from before the financial crisis, and executive pay has come roaring back. But income for most workers has been stagnant and the unemployment rate remains stubbornly high at 9.1%.
“The bottom line is, U.S. companies can do very well,” said Clyde Prestowitz, president of the Economic Strategy Institute and an adviser to the Commerce Department during the Reagan administration. “That doesn’t mean the U.S. economy is doing well.”
The 26-member jobs council, which the president formed in January, set a goal Monday for companies to create 1 million jobs within two years.
“There’s no one silver bullet on job creation,” said Jeffrey Immelt, GE’s chief executive. “This is going to be dozens of programs with metrics and accountability.”
The group presented ideas that members said would help U.S. businesses, such as streamlining regulations, improving vocational training, and speeding up the process for tourist visas to draw more foreign travelers to the United States.
“Job growth is going to be driven by the private sector but we can make some smart decision to encourage businesses to feel like this is the right time to invest and that America’s the right place to invest,” Obama said at the council’s meeting.
The United States is facing stiff competition from foreign governments who already offer rich incentives to lure U.S. companies — and the jobs they create.
For decades there has been a connection between corporations and the rest of the economy. As the saying went in Detroit: “What’s good for GM, is good for America.”
Multinational firms added millions of jobs here and abroad in the 1990s. But those companies cut back on hiring in the United States in the past decade.
“In the last couple recoveries, and especially in this one, you’ve seen corporate profits improve and even reach their pre-recession levels much quicker than the labor market,” said Josh Bivens, an economist at the left-leaning Economic Policy Institute. Multinationals “can latch on to a global economy where parts of it are doing much better than the U.S.”
Immelt, the leader of the Jobs and Competitiveness Council, represents a company that counts overseas sales for 53 percent of its revenues, compared with 36 percent 10 years ago. In developing countries alone, GE’s revenues have more than tripled in the past decade, from $11 billion to $37.5 billion.
Roughly 46 percent of GE’s 287,000 employees work in this country, according to company filings, compared with 54 percent in 2000.
And in another measure of the company’s focus abroad, $94 billion of GE’s earnings has been indefinitely reinvested outside the United States as of the end of last year, $10 billion higher than 2009.
“What’s good for GE is not necessarily the same thing as what’s good for the U.S. It doesn’t mean that GE is evil,” said Prestowitz, the Economic Strategy Institute president.
GE spokesman Andrew Williams said that in 2010 and 2011, the company will add 16,000 U.S. jobs including in manufacturing and high-tech services. That’s less than 6 percent of its workforce.
Some of the companies represented on the council are further along in the trend toward globalized sales than others.
Intel depends on overseas sales for three-quarters of its revenues. At the same time, three-quarters of the company’s investments, including manufacturing and research, are in the United States, spokeswoman Lisa Malloy said. More than half the firm’s employees are based domestically.
Xerox relies on this country for 64 percent of its revenues. More than half of the company’s employees are U.S.-based, according to spokesman Bill McKee. Other chief executives on the council represent companies including Southwest Airlines, Facebook and Boeing. There are also a handful of union representatives and academics.
“There’s no law of physics that says the United States has a lock on these good jobs and good wages that these global companies tend to create,” said Matthew Slaughter, an associate dean and professor at the Tuck School of Business at Dartmouth.
Multinationals still benefit the rest of the economy because their U.S. jobs tend to be higher paying, and they often make large purchases from smaller U.S. companies, according to Slaughter, who has done research at the behest of the Business Roundtable, a powerful group of multinational chief executives.
He added, however, that “the dynamism of these global companies doesn’t benefit everyone,” meaning the United States needs to provide a strong enough safety net for those who don’t see the rewards.
Staff writer Perry Bacon Jr. contributed to this report.