Insourcing: Workforce Expansion in the States

Insourcing is a practice that reverses the trend of multinational corporations operating overseas. Businesses increasingly are choosing to relocate to the United States, and in some cases, foreign-owned corporations are employing American workers for the first time. Insourcing saves and creates jobs, and state policy can play a pivotal role in affecting businesses’ decisions to locate stateside.

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Insourcing by foreign-owned companies provides good jobs for American workers, especially in the manufacturing industry. Additionally, insourcing investments bolster supply chains, creating more jobs and growing the economy.

  • U.S. subsidiaries of foreign-owned businesses, referred to as insourcing firms, employ more than 5.6 million American employees—accounting for 5.4 percent of the full-time private sector workforce—including more than 2 million people employed in the manufacturing industry.1
  • The recession did not affect employment by insourcing firms; those jobs have grown steadily from 5.58 million employees in 2007 to 5.64 million employees in 2011.
  • Insourcing firms pay employees an average of 22 percent higher than the U.S. median, and provide 13 percent of all U.S. private sector employee benefits.1
  • Insourcing firms reinvested $99 billion into the United States economy in 2012, $40 billion of which came from manufacturing.2 
  • Insourcing firms buy from American suppliers, accounting for 20.3 percent of all purchases of American-made intermediate goods.1
  • For every new job at an insourcing firm, an estimated three additional jobs are created. These jobs come from the supply chain or through the new employee spending money and bring the total number of jobs created by insourcing firms to 21 million.1
  • Insourcing firms have increased their U.S. output—as measured by their value added to the gross domestic product—from $680 billion in 2007 to $736 billion in 2011. Insourced manufacturing accounts for $337 billion added to the GDP. 

A 2014 survey of 101 chief financial officers at insourcing firms by the Organization for International Investment suggests continued positive trends in insourced jobs.3

  • Sixty-four percent of the CFOs plan on their companies increasing investment in the next year, while 51 percent anticipate making new hires in that time period. Seventy-two percent of the surveyed manufacturing CFOs expect their American production to increase in the next five years.
  • More than 80 percent of the respondents assessed the U.S. business climate as getting better year-to-year, and only 17 percent were concerned about the business climate for insourcing businesses.
  • Slightly less than 60 percent lauded the U.S. climate for insourcing companies as best among advanced nations, up from under 25 percent in the organization’s 2011 survey. 
  • Asked to identify the most attractive features of locating in the states, insourcing CFOs ranked availability of a skilled workforce behind only low energy costs.

Working with economic development agencies to create comprehensive policy agendas—including tax incentives, education programs, workforce initiatives and identifying industry clusters, or geographically concentrated businesses in the same industry—can help attract global investment in states.

  • Florida created tax incentives aimed at high-value industries and workforce programs like the Quick Response Training Program, which uses state educational institutions and grant money to help new and incumbent businesses train new employees, and the Incumbent Worker Training Program, which serves to keep the existing workforce globally competitive.4
  • Georgia’s QuickStart program builds free customized training programs for businesses looking to expand into the state. QuickStart in the 2013 fiscal year designed 133 training programs, which created 9,431 jobs and saved an additional 2,997 jobs. Relying on a new QuickStart program, Baxter International recently began construction on a $1 billion bio manufacturing facility in the state.5
  • Focusing on the manufacturing industry cluster, Pennsylvania implemented a policy agenda including infrastructure improvement, low energy costs and the “Adopt-a-School” program to connect manufacturers to local schools, ensuring a pipeline of skilled labor.6 
  • In March 2014, Wisconsin Gov. Scott Walker approved $35 million to expand the Wisconsin Fast Forward Program, part of which will unite school districts, technical colleges and businesses to help students earn industry certification in high-demand careers.7

REFERENCES
1 Organization for International Investment. "Insourcing Companies: How They Raise Our Game."
2 Bureau of Economic Analysis data.
3 Organization for International Investment. Insourcing Survey
4 Enterprise Florida. Incentives
5 Quickstart News, Winter 2014. 
6 Governor’s Manufacturing Advisory Council. Recommendations to Encourage Growth in Pennsylvania’s Manufacturing Sector
7 State of Wisconsin Department of Workforce Development. Blueprint for Prosperity