The Evolving Profile of Corporate
by Kate Bronfenbrenner and Stephanie
Multinational Monitor, December
In late 2003, Accenture LLP - formerly
Andersen Consulting, a spin-off of Arthur Andersen - announced
that it planned to increase employment in India from 4,300 people
to 10,000 employees by the end of 2004.
On January 27, 2004, the corporation announced
that it would lay off 90 of its 450 workers in its Wilmington,
Delaware office. When announcing the layoff, an Accenture spokesperson
said that the company had been asked by a client to shift some
of work to other locations, and noted that the jobs may be moved
In April and May 2004, the company filed
WARN (Worker Adjustment and Retraining Notification Act) notices
in Pleasanton, California, announcing it would lay off 129 workers.
By March 2004, the company was building
a second facility in southern India, in Chennai, although the
firm would not confirm that the Pleasanton jobs were in fact being
moved to India.
Such white-collar and service industry
job shifts to India are becoming increasingly common, but as publicity
around the trend grows, companies are becoming more circumspect
about announcing their plans.
"Politically, it's a little insensitive
to get press releases out about pushing jobs off shore,"
explained an executive with Lionbridge, an outsourcing firm with
many employees in India, on a conference call with shareholders
discussing the company's fall 2003 performance. "So we're
finding that people are less enthusiastic about announcing significant
contracts and so I think that we're just going to have to communicate
our numbers and our performance," he added, in remarks reported
by Fair Disclosure Wire.
For all of the increase in international
trade and rising concern about shifting of manufacturing and service
jobs away from the United States, there is remarkably little detailed
data on the scope of outsourcing. In part that reflects corporation's
reluctance to announce plans to shift production or office work
overseas. Even more, it is a consequence of the U.S. government's
failure to collect data on the phenomenon.
This article reports on the results of
a study intended to fill this information gap. Our research involves
a combination of online media tracking and corporate research
and the creation of a database including information on all production
shifts announced or confirmed in the media during a specified
period. The study examines production shifts from January 1 through
March 31, 2004.
Among the study's key findings:
* There has been a major increase in production
shifts out of the United States in the last three years, particularly
to Mexico, China, India and other Asian countries.
* With 58 shifts to China, the United
States is the primary source of production shifts into China.
However, this is followed closely by Europe, which had 55 shifts.
There were 33 shifts from other Asian countries to China, primarily
from Japan, Taiwan, the Philippines and Singapore.
* Extrapolating from reported production
shifts in the first quarter of 2004, the data suggest that in
2004 as many as 406,000 jobs will be shifted from the United States
to other countries compared to 204,000 jobs in 2001.
* Unionized workplaces are being disproportionately
affected by U.S. production shifts.
* The companies shifting jobs from the
United States to China tend to be large, publicly held, highly
profitable and well established.
The geography of offshoring
We found a total of 255 facilities with
announced or reported job shifts from the United States to other
countries in January-March 2004.
Of these, the largest share - 69 shifts,
or 27 percent of all production shifts out of the United States
- were to Mexico. The second most common destination, with 58
shifts, was China, followed by 31 shifts to India. No other single
country stands out as a large destination for U.S. jobs. Rather,
Asia as a whole, except China and India, was the destination for
39 shifts, and Latin American and Caribbean countries, except
Mexico, were the destination for 35 shifts. Finally, six announcements
were for shifts to Eastern European countries, and 17 to other
countries in Europe, the Middle East or Canada or Australia.
These findings represent a significant
increase in production shifts to China as compared to three years
prior. In contrast to the 58 production shifts from the United
States to China and 69 production shifts to Mexico announced or
reported in the first quarter of 2004, there were only 25 announced
or reported production shifts to China and 30 to Mexico in the
first quarter of 2001, just after Congress passed PNTR (Permanent
Normal Trade Relations with China).
As many as 99,000 jobs will be shifted
from the United States to China and 124,000 jobs will be shifted
to Mexico in 2004, compared to approximately 85,000 jobs to each
country in 2001.
The number of production shifts out of
the United States to India (31 in the first quarter of 2004) has
greatly increased since 2001, when only one company announced
a production shift to India between January and March. Still,
given the intense media coverage regarding outsourcing of white-collar
jobs to India in 2004, the number of shifts to India from the
United States might seem lower than expected. In part this may
be because the negative public reaction to the white-collar outsourcing
issue has made companies reluctant to make public announcements
about job shifts. Thus, corporations that lay off workers in the
United States and expand operations in India may try to deny or
obscure a direct link between the two events.
Consider the case of computer giant IBM.
In January 2004, the Wall Street Journal, based on leaked internal
IBM memos, broke the story that IBM was planning to send 5,000
U.S. programming jobs to countries with lower labor costs. The
company later announced that the total number of jobs sent overseas
would be 3,000. The memos make clear that IBM is very much aware
of the potentially bad publicity associated with the move. For
example, a memo to managers on how to notify employees says: "Do
not be transparent regarding the purpose/intent." It also
warns managers that the "Terms 'On-shore' and 'Off-shore'
should never be used." In addition, the memo instructs that
any written materials about the layoffs must be "sanitized"
by people in the human resources and communications department
before being handed out.
Another possible explanation for the limited
number of India cases is that the attention given to outsourcing
to India is simply overrated. In 2000-2001, despite the large
media focus on China, more jobs were still moving to Mexico than
to China. Three years later, the number of shifts to China has
increased, but still trails Mexico. It is possible that the trend
in shifts to India will follow a similar course.
The data suggest that the number and extent
of production shifts out of the United States has increased significantly
since 2001. Not only are more companies announcing production
shifts out of the United States than three years ago, but they
are also shifting production to more, and often shifting production
to multiple, offshore and nearshore destinations at the same time.
The story of outsourcing and production
shifts is not a U.S.-China story, but a global one. China is the
largest destination in terms of global production shifts. For
January through March 2004, 154 shifts from all countries went
to China, which accounted for 33 percent of all global shifts.
These trends hold in terms of the total
number of jobs shifted. Mexico is by far the largest destination
for U.S. jobs, with 23,396 jobs that were reported or announced
moving from the United States to Mexico in January-March 2004.
China was the second largest destination for jobs, with 8,283
total jobs. They were followed closely by other Latin American
countries (5,511 jobs), other Asian countries (4,419 jobs), and
India (3,895 jobs). If jobs lost in shifts to other countries
in Europe, Canada, and Australia are included, the total number
of jobs that left the United States between January and March
2004 reaches 48,417.
These are the reported figures. Our estimates
of overall job loss reflect adjustments for shifts not reported.
These job loss numbers are also limited
to the actual number of jobs lost in the specific facility where
production is being shifted out of the community to another country.
They do not capture the larger tipple effect that plant shutdowns
and major layoffs can have on the larger community.
THE INDUSTRY RACE ABROAD
The production shift story varies by industry.
Production shifts in the communications
and information technology industries have received a lot of media
attention, and indeed the largest number of jobs lost (7,756)
was in this industry. The auto parts industry was the second largest
category, with 6,490 jobs leaving the country, followed by food
processing with 6,265. Together, these three industries accounted
for approximately 45 percent of all jobs shifted out of the United
States in January-March 2004. Other industries with significant
numbers of jobs lost included electronics and electrical equipment
(5,871), appliances (5,371), industrial equipment and machinery
(3,508), household goods (2,956), metal fabrication and production
(2,836), and chemicals and petroleum (2,245).
Many industries are sending more production
to China than any other destination country. For example, all
production shifts in sporting goods and toys went to China, as
did 40 percent of production shifts in electronics and electrical
equipment, and 38 percent of shifts in apparel and footwear. Approximately
one-third of all production shifts in aerospace, appliances, household
goods, and wood and paper products went to China.
Despite these trends, certain industries
remain much more likely to move production to Mexico. Sixty-eight
percent of the auto parts shifts went to Mexico, as did 58 percent
of plastics, glass and rubber; 56 percent of appliances; 53 percent
of industrial equipment and machinery; and 50 percent of wood
and paper products.
All of the shifts in finance and insurance
went to India, and 59 percent of production shifts in communications
and information technology (mostly computer programming and call
centers) went to India and other Asian countries, primarily the
Philippines. Thirty-two percent of the communications and information
technology work also went to Latin America, with call center work
going to Central American countries (for marketing to Spanish
speakers) and computer programming going to Brazil.
The scope of the call center shifts from
the United States to India and other Asian countries is best captured
by the story of EarthLink, an internet service provider (ISP)
based in Atlanta, which closed four call centers, laid off 1,300
workers, and shifted production to India, Jamaica and the Philippines.
The 1,300 workers who lost their jobs came from both the closure
of call centers in San Jose, Pasadena, and Roseville, California,
and Harrisburg, Pennsylvania, as well as staff reductions at EarthLink's
call center in Atlanta.
The data reveal other notable elements
of the offshoring trend:
* Markets. While some of the production
shifts are intended to capitalize on foreign markets, it is clear
that the majority of the U.S.-based multinational corporations
shifting production to China are not simply targeting the Chinese
market. For example, U.S.-based Amerock announced in February
2004 that it would shut down its Rockford, Illinois cabinet and
window manufacturing plant after 75 years in operation. The company
plans to move 450 jobs from Illinois to China and Mexico - not
to sell hardware to the Chinese and Mexican markets, but in an
effort to reduce production prices and stay competitive in the
U.S. market. This is true for a wide variety of products that
will be produced in China to sell back to the U.S. market by companies
such as Carrier Corp. (air conditioners), Levis (jeans), Werner
Co. (ladders for Home Depot), Union Tools Inc. (lawn and garden
tools) and Remington Products Company (electric shavers).
Some companies are explicitly outsourcing
production to Chinese subcontractors that will produce entirely
for export to the U.S. market. One such company is Whirlpool,
which announced in January that it was going to outsource about
80 jobs producing ice makers for Whirlpool refrigerators from
its Fort Smith, Arkansas plant to a subcontractor in China.
* Union status: Even though only 8 percent
of U.S. workers in the private sector belong to unions, 29 percent
of production shifts out of the United States are from unionized
facilities, including 44 percent of firms moving jobs from the
United States to Mexico and 29 percent of firms moving jobs to
China. This is a notable jump from 2001, when only 14 percent
of companies moving to China, and 26 percent of those shifting
production to Mexico were unionized.
Seventeen percent of production shifts
to other Latin American countries and 15 percent of production
shifts to other Asian countries were in unionized workplaces.
It is only among the firms moving to India (7 percent) where we
found unionization levels close to the national average.
Overall, 39 percent of all jobs leaving
the United States are union. (It is possible that the data overstate
the proportion of unionized jobs leaving the United States, given
that the data on union jobs may be more reliable. However, it
is clear that the absolute number of union jobs shifting out of
the United States is quite high - almost 20,000 in three months.
It seems difficult to deny a systematic pattern of firm restructuring
that is moving jobs from union to nonunion facilities within the
country, as well as to non-union facilities in other countries.)
* Industry sector: Although there is a
rise in service sector offshoring, most is still occurring in
the manufacturing sector. Overall, 83 percent of the production
shifts were in manufacturing industries.
* Company characteristics and structure:
The overwhelming majority of companies that shifted production
out of the United States between January-March 2004 were ultimately
owned by extremely large, profitable, U.S.-based, publicly-held
multinationals. At the same time, many of the facilities where
work had been moved out of the country had been in operation for
several decades, yet had relatively recently been taken over by
their current ownership. Many of the companies where production
shifts had taken place had been bought and sold, merged and acquired,
or taken public or private multiple times in the years prior to
the work being shifted.
In combination, the data emphasize that
it is not a story of good jobs being stolen from U.S. workers
by low-wage workers in Latin America and Asia, especially China,
with whom U.S. workers can never hope to compete. Instead it is
a story of the world's largest multinational corporations buying
and selling companies and pieces of companies, opening and closing
plants, downsizing and expanding operations, and shifting employment
from one community to another, all around the world.
Kate Bronfenbrenner is director of labor
education research at the New York State School of Industrial
and Labor Relations at Cornell University. Stephanie Luce is an
assistant professor at the University of Massachusetts, Amherst,
and research director at the Labor Center at U. Mass-Amherst.
This article is based on a report prepared by Bronfenbrenner and
Luce for the U.S. -China Security Commission, which is available
at <www. uscc.gov/researchpapers/2004/cornell_u_mass _report.p
df>. The full report details the methodology they used in conducting
the research which forms the basis for this article.
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