FINANCE-U.S.: More U.S. Workers Employed by Foreign Firms

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Feb 19 1997 (IPS) - In a sign of the increasing globalisation of the U.S. economy, a new study has found that the number of U.S. workers employed by affiliates of foreign firms has more than doubled over the past 17 years.

The report, released here by the Organisation for International Investment (OFII), found that 4.9 million U.S. workers — or almost five percent of the total workforce — were employed in 1994 by U.S. affiliates of the more than 12,500 foreign firms which do more than one million dollars’ worth of business here each year.

That number has since almost certainly increased as foreign direct investment has flooded into the United States at record levels over the last two years.

Moreover, the rate of employment by foreign-owned U.S. firms is growing faster than that of the economy as a whole, according to the report. While employment at all U.S. businesses increased by almost nine percent from 1988-1994, the number of jobs made available by foreign firms here grew by more than 26 percent.

OFII, a lobby group for 57 mainly European and Japanese multinational corporations, claimed that most of their U.S. workers are also paid at higher rates than their U.S. counterparts. The average monthly wage paid by the affiliates was close to 26 percent higher than that paid to workers at other U.S. businesses, it said.

“International investment means good-paying jobs for American workers,” said Richard Goldstein, OFII chairman and president of Unilever United States, Inc.

“The facts are clear: more American workers are being paid higher wages because their jobs are with U.S. subsidiaries of foreign parent companies,” he added.

One reason for the higher wages may be that foreign companies have invested especially heavily in the U.S. manufacturing sector, one of the last strongholds of labour unions. Almost 25 percent of all foreign-owned U.S. companies have collective bargaining agreements with their workers, compared to only about 14 percent for the U.S. workforce as a whole, according to Ned Howenstine of the U.S. Department of Commerce.

Unlike widespread public concern about U.S. companies’ investment in low-wage countries abroad, rising levels of foreign investment here have caused little worry.

Earlier in the decade, when Japanese companies bought up Rockefeller Center and Columbia Pictures, Congress considered imposing new regulations on foreign investment, but, as Japan fell into recession and the U.S. economy began surging in 1993, those concerns have largely faded.

More recent flaps about foreign investment have dealt with such issues as Mitsubishi’s treatment of minorities and women in its U.S. plants and the contributions by U.S. affiliates of foreign firms to the 1996 political campaign.

The acceptance by President Bill Clinton’s campaign of millions of dollars from officers of U.S. affiliates of Indonesian, Taiwanese, and Chinese companies have raised concerns over the impact of these contributions on U.S. foreign policy.

The latter will be taken up by Congress this year. Clinton’s Democratic Party has already announced that it will not accept contributions from U.S. affiliates of foreign firms, and the Republicans are under pressure to adopt a similar policy.

This has rankled the OFII. “This threatens to disenfranchise the 4.9 million U.S. workers employed by these subsidiaries,” says Nancy McLernon, director of economic and legislative affairs at the agency. “It means that a worker employed at a (Swiss- owned) Nestle plant here does not have the same privileges as a worker at (U.S. chocolate company) Hershey.”

The report, which is based on figures compiled by the U.S. Commerce and Labour Departments, found that two million U.S. workers were employed by foreign-owned affiliates in 1980. That came to roughly 2.7 percent of the U.S. workforce at that time. The increase in the number of workers came to 140 percent between 1980 and 1994.

All of the 12,523 foreign firms covered in the study, ‘Investing in American Jobs,’ had over one million dollars in assets, annual sales, or net income during 1994.

Of these foreign firms, about 43 percent, are based in Europe and about 25 percent are Japanese. Canada accounts for another 1,300, or about 11 percent; while non-Japanese Asian companies and Latin American and Caribbean firms account for about eight percent each, according to the U.S. Commerce Department figures on which the study was based.

The Middle East, led by Israel, Saudi Arabia and Kuwait, accounted for only 381 companies with substantial affiliates in the U.S., while Africa had only 68.

British companies are the top foreign employers in the United States, accounting for more than one million jobs in 1994. They were followed by companies from Japan (757,000 employees), Canada (682,000), Germany (584,000), France (369,000), and the Netherlands (323,000).

A breakdown of employment by foreign-owned companies by state suggests that competition for foreign investment among the states is having some effect.

Foreign-owned firms in California and New York, both of which impose tighter regulations on companies than many other states, still employ the most workers, but affiliates in anti-union southern states, which have aggressively sought foreign investment over the last 20 years, provide more jobs as a percentage of the smaller populations of their host states .

Roughly half of all U.S. affiliates of foreign companies — accounting for more than two million jobs — are in manufacturing, according to the Department of Commerce.

While employment at all U.S. manufacturing businesses fell by more than five percent from 1988 to 1994, according to the report, manufacturing employment at U.S. subsidiaries grew by nearly 32 percent. Foreign-owned companies now provide more than 11 percent of all U.S. manufacturing employment, up from eight percent in 1988.