Globalization And Private Sector Job Creation

The conventional wisdom may well celebrate the private sector for its job creating abilities, but economic trends don’t provide support for this celebration.  In fact, private sector job creation has been on the decline for many years now–even during periods of economic expansion. 

This development is well illustrated by the chart below taken from Businessweek.  Each data point shows the percentage change in private sector job creation over the preceding decade. 


The declining trend from the mid-1980s, and especially after 2001, means that, year-by-year, fewer private sector jobs were being created.  Michael Mandel sums up the situation as follows:

Between May 1999 and May 2009, employment in the private sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period. It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years.

One likely explanation for the especially poor private sector job creation performance over the last decade: the global profit strategy of U.S. multinationals.  As the Wall Street Journal explains:

U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization’s effect on the U.S. economy.

The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That’s a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad. . . .

The data also underscore the vulnerability of the U.S. economy, particularly at a time when unemployment is high and wages aren’t rising. Jobs at multinationals tend to pay above-average wages and, for decades, sustained the American middle class.

This employment trend is illustrated below:


General Electric is one of the companies that has led the way in charting this globalization strategy and its corporate leaders are not shy about defending it.   Significantly, President Obama recently appointed Jeffery Immelt, GE’s current chief executive, to be head of the President’s Council on Jobs and Competitiveness.

In this light it is well worth watching the 3 minute video interview with the author of the above cited Wall Street Journal article.  At the end of the video we learn that Immelt’s advice to the U.S. government for reversing the loss of U.S. jobs is more tax cuts for corporations and better efforts to improve the nation’s education and infrastructure.  One can only wonder how he proposes to pay for the latter–there was no mention of slashing the military budget, for example.  It is hard to take this kind of advice seriously.  

So, what does all of this mean?  In broad brush: while continued reliance on profit driven market activity may well boost corporate earnings, it won’t do much for working people.   If job creation is important to us, we are going to have to transform our economic system.


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