Call it trickle-down job growth.
Robust overseas job growth at American multinational companies indirectly benefits workers here in the United States, although the impact would be magnified if these big businesses reinvested more of their overseas profits into the domestic economy.
Although corporate profits recently have hit historic highs, the economy's sluggish 2.2 percent GDP growth doesn't reflect this.
"While the United States has had some recovery, it's been pretty slow, whereas in the emerging economies, growth has been very rapid," said Robert Lawrence, professor of international trade and investment at Harvard University. American companies have gone where the profits are.
A Wall Street Journal analysis of 35 companies based in the United States that employ more than 50,000 people found that they collectively added 446,000 jobs between 2009 and 2011, around three quarters of which were overseas. During that period, 60 percent of their revenue growth came from overseas.
Labor economists say this presents a mixed bag for American workers. The approximately 334,000 jobs created overseas aren't coming at the expense of the domestic labor market, as in the case of offshoring. They were probably responsible for some job creation here.
"Jobs will be added both places and not at the expense of each other," said Hal Sirkin, a senior partner at Boston Consulting Group. "A lot of the know-how is in the United States, so it will create domestic jobs because you'll hire people to manage" the overseas expansion, he said.
While other countries, such as Germany, tend to produce goods in-country for export, the United States has traditionally established outposts in local markets to produce goods for those markets. While those new facilities obviously are employing few if any Americans, opening stores or plants in other countries generally means hiring more people in the United States to provide management and other support for that growth.
"The hope is that if U.S. companies do well, they'll bring their profits back home to the United States and invest in expanding," said Howard Rosen, economist at the Peterson Institute for International Economics. Unfortunately, this usually doesn't happen. The downside to American companies' foreign growth is that they tend to plow their profits back into those overseas operations rather than reinvesting them here.
Rosen said American companies' investment in domestic plants and equipment as a percentage of GDP is 10.3 percent, low by historical standards. "At barely above 10 percent, the ratio of private investment in P&E to GDP helps explain why the ratio of total employment to the working age population remains low," he wrote in a recent paper. This ratio is up slightly since the first quarter of 2010, when it was 9.3 — the lowest it had been since 1964.
This dynamic has led to an ongoing debate about whether the government should declare a tax holiday for U.S. companies to repatriate their profits. Proponents say the money will be invested in operations that will yield jobs. Opponents counter that a holiday will only encourage companies to sock away more profits offshore in anticipation of future holidays, and that repatriated funds will be used for stock buybacks or other activities that don't create jobs.