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Back to Outsourcing Introduction

"INSOURCING" - When Foreign Companies Establish
Jobs in the U.S.

The North Carolina Example

THE NEWS & OBSERVER (RALEIGH, NORTH CAROLINA)
February 2, 2004 Monday, FINAL EDITION
SECTION: EDITORIAL/OPINION; Pg. A13; Point of View

A POTENT 'INSOURCE' OF U.S. JOBS by Michael L. Walden, William Neal Reynolds distinguished professor of agricultural and resource economics at N.C. State University

RALEIGH -- Recent headlines have raised concerns about "outsourcing," or the movement by U.S. companies of jobs to foreign countries. Some prominent tech companies are considering moving thousands of well-paying programming positions overseas, and we've also heard about customer service jobs being sent to India.

While outsourcing has captured current attention, it is not a new phenomenon. If the term is defined as jobs operated by U.S. companies in foreign countries, the current total is 10 million positions, or 7 percent of domestic U.S. employment. Further, there's been an upward trend in the number of outsourced jobs since the mid-1990s, when trade barriers were significantly reduced following the signing of the NAFTA and GATT agreements.

What is less well publicized and understood is that "insourcing" also occurs in our economy. Insourcing happens when foreign companies establish jobs in the United States.

The latest statistics show insourcing accounts for over 6.5 million jobs nationwide. Although this is less than the number of outsourced jobs, the gap has actually narrowed in the past quarter century. That is, there's been a recent trend of foreign companies adding jobs in the U.S. faster than U.S companies have increased jobs in foreign countries.

Consider what's happened in heavy manufacturing, which includes the manufacturing of vehicles, computers, electronics and other machinery. Since the mid-1990s, foreign companies have added 400,000 jobs in these industries in the U.S. Over the same time period, U.S. companies moved 300,000 jobs to foreign countries in the same sectors. The insourced jobs in these industries are also high-paying, with average compensation per employee of over $ 65,000.

Insourcing also plays an important role in the North Carolina economy. The most recent data show 240,000 insourced jobs in North Carolina, with 100,000 in manufacturing. And the total number of insourced jobs in North Carolina has risen in recent years.

With an increasingly globalized economy, more and more jobs will be candidates for both outsourcing and insourcing. The jobs most vulnerable for outsourcing are those performing routine tasks, not requiring close supervision, and where lower-cost foreign labor is readily available.

For example, 20 years ago computer programming was a new and cutting edge job. Today, many programming tasks are straightforward and routine, and millions of workers worldwide have been trained to do them. These are the kind of technical jobs that can go to foreign nations with lower costs.
But as the recent experience with heavy manufacturing indicates, the U.S. is still an attractive location for the siting of plants matching advanced technology and equipment with highly skilled labor and modern research. Foreign companies looking for such ingredients know they can be found in the U.S. and, I might add, in North Carolina.

The scorecard on job outsourcing versus job insourcing has actually moved in the favor of the U.S. in recent decades, and policy-makers must consider both when evaluating the worldwide movement of jobs. Jobs increasingly are up for grabs in a new world without economic borders.

Yet the implication for American workers is the same as my father gave me years ago: to get a good-paying, you must get an education. The updated version is: to get and keep a good-paying job, you must get more and more education.