Viewing offline content

Limited functionality available

Dismiss
Deloitte South Africa
  • Services

    What's new

    • Deloitte Digital

    • Deloitte Africa Centre for Corporate Governance

      The Deloitte Africa Center for Corporate Governance offers a number of resources for executives, directors, and others who are active in governance.

    • Corporate Reporting Reform

      View our latest events on corporate reporting reform.

    • Audit & Assurance

      • Audit & Assurance Insights
      • Centre for Corporate Governance
    • Consulting

      • Strategy
      • Customer and Marketing
      • Core Business Operations
      • Human Capital
      • Enterprise Technology & Performance
      • Managed Services
      • Growth Platforms
    • Financial Advisory

      • Mergers & Acquisitions
      • Turnaround and Restructuring
      • Forensics
    • Risk Advisory

      • Internal Control & Assurance
      • Regulatory Risk
      • IT & Specialised Assurance
      • Cyber Risk
      • Analytics
    • Tax & Legal

      • Outsourced Tax Compliance
      • Tax Technology Consulting
      • Tax Advisory and Transactions
      • Mobility, Payroll, Immigration
      • Workforce, Analytics
      • Reward, Employment Tax
      • Legal Services
      • South African Budget
      • Tax News and Trends
    • Deloitte Private

  • Industries

    What's new

    • Deloitte perspectives

      Leadership perspectives from across the globe.

    • Future of Mobility

      Learn how this new reality is coming together and what it will mean for you and your industry.

    • Deloitte Africa Insights

      Access the latest thought leadership on industry insights, country reports and economic developments in Africa.

    • Consumer

      • Automotive
      • Consumer Products
      • Retail, Wholesale & Distribution
      • Transportation, Hospitality & Services
    • Energy & Resources

      • Energy & Chemicals
      • Mining & Metals
      • Power, Utilities & Renewables
      • Industrial Products & Construction
    • Financial Services

      • Insurance
      • Banking & Securities
      • Investment Management
      • Actuarial & Insurance Solutions
      • Real Estate
    • Life Sciences & Healthcare

      • Life Sciences
      • Health Care
      • The Africa Deloitte Health Equity Institute
    • Government and Public Services

      • Infrastructure, Transport & Regional Government
      • Central Government
      • Defence, Security & Justice
      • Health & Human Services
    • Technology, Media & Telecom

      • Technology
      • Media & Entertainment
      • Telecom, Media & Entertainment
      • Predictions
  • Insights

    Deloitte Insights

    What's new

    • Deloitte Insights Magazine

      Explore the latest issue now

    • Deloitte Insights app

      Go straight to smart with daily updates on your mobile device

    • Weekly economic update

      See what's happening this week and the impact on your business

    • Strategy

      • Business Strategy & Growth
      • Digital Transformation
      • Governance & Board
      • Innovation
      • Marketing & Sales
      • Private Enterprise
    • Economy & Society

      • Economy
      • Environmental, Social, & Governance
      • Health Equity
      • Trust
      • Mobility
    • Organization

      • Operations
      • Finance & Tax
      • Risk & Regulation
      • Supply Chain
      • Smart Manufacturing
    • People

      • Leadership
      • Talent & Work
      • Diversity, Equity, & Inclusion
    • Technology

      • Data & Analytics
      • Emerging Technologies
      • Technology Management
    • Industries

      • Consumer
      • Energy, Resources, & Industrials
      • Financial Services
      • Government & Public Services
      • Life Sciences & Health Care
      • Technology, Media, & Telecommunications
    • Spotlight

      • Deloitte Insights Magazine
      • Press Room Podcasts
      • Weekly Economic Update
      • COVID-19
      • Resilience
      • Top 10 reading guide
  • Careers

    What's new

    • Job search

    • Experienced Hires

    • Executives

    • Students

    • Life at Deloitte

    • Alumni

  • ZA-EN Location: South Africa-English  
  • ZA-EN Location: South Africa-English  
    • Dashboard
    • Saved items
    • Content feed
    • Profile/Interests
    • Account settings
    • Subscriptions

Welcome back

Still not a member? Join My Deloitte

The geography of jobs, part 3: Mapping the effects of international investment flows

by Patricia Buckley, Peter Viechnicki, Lara Wigmore
  • Save for later
  • Download
  • Share
    • Share on Facebook
    • Share on Twitter
    • Share on Linkedin
    • Share by email
Deloitte Insights
  • Strategy
    Strategy
    Strategy
    • Business Strategy & Growth
    • Digital Transformation
    • Governance & Board
    • Innovation
    • Marketing & Sales
    • Private Enterprise
  • Economy & Society
    Economy & Society
    Economy & Society
    • Economy
    • Environmental, Social, & Governance
    • Health Equity
    • Trust
    • Mobility
  • Organization
    Organization
    Organization
    • Operations
    • Finance & Tax
    • Risk & Regulation
    • Supply Chain
    • Smart Manufacturing
  • People
    People
    People
    • Leadership
    • Talent & Work
    • Diversity, Equity, & Inclusion
  • Technology
    Technology
    Technology
    • Data & Analytics
    • Emerging Technologies
    • Technology Management
  • Industries
    Industries
    Industries
    • Consumer
    • Energy, Resources, & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Tech, Media, & Telecom
  • Spotlight
    Spotlight
    Spotlight
    • Deloitte Insights Magazine
    • Press Room Podcasts
    • Weekly Economic Update
    • COVID-19
    • Resilience
    • Top 10 reading guide
    • ZA-EN Location: South Africa-English  
      • Dashboard
      • Saved items
      • Content feed
      • Profile/Interests
      • Account settings
      • Subscriptions
    27 January 2015

    The geography of jobs, part 3: Mapping the effects of international investment flows

    27 January 2015
    • Patricia Buckley United States
    • Peter Viechnicki United States
    • Lara Wigmore United States
    • Save for later
    • Download
    • Share
      • Share on Facebook
      • Share on Twitter
      • Share on Linkedin
      • Share by email

    Manufacturing and professional, scientific, and technical services stand out as industries where foreign direct investment in the United States has had a surprising impact on job creation.

    Geography of Jobs Part 3: spot art

    Countries continue to find the United States an attractive investment, and their investments create US jobs. However, this important job generator should not be taken for granted: The United States competes with the rest of the world for investment.

    As companies look to grow, one of their major considerations is location: Where should production take place, and where should service providers be located? For service businesses, the availability of a quality workforce is generally the critical factor. With production facilities, the location decision is more complex because of the fixed capital investment that is generally required. In addition to making sure that an appropriately trained and educated workforce is available, decision makers must consider many additional factors related to the movement of goods, including transportation infrastructure, supply chain considerations, the business and regulatory environment, the availability of suitable real estate, risk, and quality of life (particularly for expatriates).

    A nation’s attractiveness to expanding businesses—both foreign and domestic—is key to its economic growth. Within countries, there is substantial competition at the sub-national level to attract foreign as well as domestic investment and the employment it brings. In the United States, states and localities actively promote investment through a variety of means, with economic development offices touting the quality of local workers and infrastructure and offering tax and other financial incentives.

    Just as we saw how job creation and wage growth vary among US states in the first two “Geography of Jobs” reports, this third report chronicles the varied impact of foreign direct investment (FDI) on state job generation.

    View the related infographic

    Click here.

    Investment flows to the United States

    The United States is a major recipient of international investment dollars, although the proportion of world FDI flowing to the United States has lessened over the years. As shown in figure 1, the absolute dollar amount of foreign investment that the United States attracts has been relatively level over the last 15 years, averaging just under $200 billion per year. This is in stark contrast to FDI in the European Union, which has been on a downward trajectory since 2007—the year prior to the start of the financial crisis—with no obvious signs of recovering. However, over the same period, investment flows to the rest of the world, especially to China, grew rapidly. In the early 2000s, China received less than 10 percent of world FDI. More recently, that proportion has risen to between 15 and 20 percent. Because of this rapid growth in annual flows, the stock of foreign-owned investment in China rose rapidly from 3.7 percent in 2004 to 9.5 percent in 2012, making China second only to the United States, which held 13.4 percent of world foreign direct investment as of 2012.1

    The United States is a major recipient of international investment dollars, although the proportion of world FDI flowing to the United States has lessened over the years.

    DUP1117_Figure1

    The stock of FDI on a historical cost basis is the sum of a country’s annual FDI inflows (which can be negative if enterprises withdraw investment). With its fairly constant level of inflow, the stock of US FDI has been rising steadily over time. In the recession/post-recession period of 2007 to 2013, FDI in the United States increased by 38.7 percent and totaled $2.8 trillion in 2013.2 However, this amount is substantially less than the asset value that FDI generates. The total asset value of majority-owned foreign multinational enterprises (MNEs) in the United States was $12.7 trillion in 2012 (the latest date for which data are available), based on FDI of $2.6 trillion (2012).

    Europe continues to be the largest source of inbound investment to the United States (figure 2). However, in recent years, investments originating in the Asia-Pacific region have been growing in importance due to increased investment from Japan. Investment in the United States by China is still at very low levels.

    DUP1117 Figure 2

    The changing US FDI market basket

    As mentioned above, the United States has attracted a total FDI stock of $2.8 trillion, on a historical cost basis. Three sectors account for three-fourths of the investment:

    1. Manufacturing
    2. Other industries
    3. Finance and insurance

    As shown in figure 3, manufacturing was the largest and fastest-growing industry in dollar terms for foreign investment. FDI in US manufacturing grew by $288 billion, or 44.4 percent, between 2007 and 2013, and it now totals $936 billion. Within manufacturing, the sectors attracting the most FDI include chemicals, petroleum extraction and refining, motor vehicles and parts, primary and fabricated metals, food, and computers and electronic products. The second-largest industry in terms of FDI was “other industries,” which consists primarily of nonbank holding companies (attracting 39 percent of the total FDI in “other industries”), mining (25 percent), and utilities (11 percent); overall, FDI in “other industries” totals $590 billion. FDI in finance and insurance grew slightly more slowly than the “other industries” category, making finance and insurance currently the third-largest industry recipient of FDI.

    DUP1117_Figure3

    Although smaller in size, the two industries with the highest percentage gain were retail trade and professional, scientific, and technical services, both of which saw the amount of FDI they attracted almost double during the period.

    Investment by foreign enterprises gains in value over time and is an important job generator. In fact, US employment tied to FDI fared better in the aftermath of the recession than did employment in general. Employment by majority-owned US affiliates of foreign MNEs numbered 5.8 million in 2012, an increase from its 2007 level of 5.6 million.3 In contrast, overall employment in the United States was still 3.8 million below its 2007 level in 2012.4

    Among the US states, energy suppliers were the big winners in FDI-driven employment on a percentage basis between 2007 and 2012, with states such as North Dakota, West Virginia, Louisiana, and Texas getting a high proportion of their FDI-related jobs from oil and gas extraction. However, some manufacturing states, such as Michigan, are also high on the list. In terms of the number of jobs gained, Texas has been the big “winner,” with a gain of 53,800 jobs related to foreign MNE employment. Michigan, Georgia, Oklahoma, Pennsylvania, and Arizona also showed substantial gains in the number of foreign MNE-related jobs between 2007 and 2012 (figure 4).

    DUP1117_Figure4

    However, FDI investments in the various industries do not create jobs in proportion to the number of dollars invested. Figure 5 shows the proportion of total FDI invested and the proportion of employment tied to that investment.5 At the two extremes are retail trade, which has only 2 percent of total FDI stock but 9 percent of the employment supported by FDI, and finance and insurance, which accounts for 22 percent of total US FDI but only 7 percent of FDI employment. Therefore, when considering the impact of FDI on job generation at the state level, it is critical to consider both the dollar amounts of the investments and the industries in which the investments take place.

    DUP1117_Figure5

    Because the most recent Bureau of Economic Analysis (BEA) data on employment supported by FDI comes from 2012, the remainder of the discussion is supplemented by data from another source, FDI Markets. These data differ from the BEA data in some very important respects. Specifically, the BEA tracks actual investments by foreign enterprises as the investments are made; it also tracks actual employment at facilities at majority-owned foreign entities. Additionally, the BEA estimates of FDI include investments related to mergers and acquisitions as well as new or “greenfield” investments and expansions. In contrast, the FDI Markets data consist of announced investments culled from press reports, and they include greenfield and expansion investments only. Since the employment estimates in the FDI Markets data reflect the projected number of jobs companies plan to generate when the investment is completed, there is no way of knowing exactly when or ultimately how many jobs will be created. However, given the focus on jobs in this series, the FDI Markets data offer interesting insights.

    The next sections consider two industries where FDI, and the employment generated by FDI, have run counter to expectations:

    • Manufacturing
    • Professional, scientific, and technical services

    Manufacturing: Scraping the rust off the rust belt?

    In 2012, US manufacturing employment stood at 2 million below where it was in 2007—a 14 percent decline.6 However, during the same period, manufacturing employment in US-based foreign MNEs grew by 123,100, or 6 percent, as FDI flowing to the manufacturing sector increased by $207 billion.7 Many of the states with the largest increases in foreign MNE employment (figure 4) saw a large part of the gain come from manufacturing. For example, over half of the increase in foreign MNE employment in Texas was in manufacturing, and manufacturing more than accounted for Michigan’s increase in foreign MNE-related employment. Manufacturing was also the major driver of Georgia and Oklahoma’s increases in foreign MNE employment. Other states, such as Illinois, experienced a net loss of total FDI jobs but gained FDI-related manufacturing jobs.

    Figure 6 shows the change in MNE manufacturing employment from 2007 to 2012 in both absolute and percentage terms. Each state is shaded to indicate the role that MNE manufacturing employment plays relative to total FDI employment.

    DUP1117_Figure6

    The recovery in US manufacturing is being driven by several factors, including new manufacturing methods that lower the bar for scale,8 rising production costs in competitor countries, increased labor productivity through greater skills and capital intensity, and the overall resurgence in domestic demand. When we examine the types of manufactured products receiving announced foreign investment in more detail, we find that automotive components was the most attractive subsector for foreign MNEs between 2010 and 2014. This subsector led the manufacturing industry in FDI jobs created in three out of the past five years, averaging 10,832 FDI-created jobs per year, with Michigan leading the states in four out of the past five years.9

    A bright spot in FDI: Professional, scientific, and technical services

    Professional, scientific, and technical (PST) services makes up only a small part of our total FDI market basket, but it is growing fast. In fact, this sector showed the second-fastest employment growth rate among inbound FDI-related jobs between 2007 and 2012. This pattern is interesting because it goes against the prevailing wisdom that PST jobs are largely being offshored. Conventional wisdom holds that the inexorable pressure to move everything from “back office” processing to research and development facilities offshore to countries that pay lower wages is costing the United States jobs. According to the data since 2007, however, these losses may have bottomed out, and employment in PST, at least, may be starting to climb again. In 2013, the White House’s Council of Economic Advisors reported that wage inflation in some countries has exceeded productivity growth, which may help explain the growth in US-based PST jobs.10 Two states exemplifying this growth are California and Virginia, which saw FDI employment in the PST sector increase by 7,600 and 6,300, respectively, between 2007 and 2012.

    Figure 7 shows the change in foreign MNE PST employment from 2007 to 2012 in both absolute and percentage terms. States are shaded to indicate the role that foreign MNE PST employment plays relative to total FDI employment.

    DUP1117_Figure7

    This growth pattern seems to be continuing into 2013 and 2014, according to data from FDI Markets. These data show steady growth in FDI business services projects, which are on track to create an average of 8,600 jobs per year in business services since 2010.11

    When we look closely at the types of recent PST projects that are attracting foreign investors, our expectations are again confounded by the type and location of these projects. The largest announced PST projects over the past four years in terms of capital investment are distributed among sectors such as custom computer programming, retail banking, and financial services. The four PST FDI projects claiming to create the largest numbers of jobs were undertaken by Indian MNEs creating custom computer programming jobs; they were located in Wisconsin, Michigan, and Ohio, states with mid-range average wages.12 These projects appear to be examples of US process efficiencies and skill levels trumping potentially lower wages offshore for certain types of services.

    Outlook

    The fact that jobs tied to FDI actually managed to increase while total employment still languished demonstrates the power that long-term foreign investment can bring to the US economy. That Korea ranks ahead of the United States, and that the United Kingdom is nipping at our heels, in the World Bank’s Ease of Doing Business rankings should give US policy-makers pause13—and hopefully renew their focus on making the United States the best place to live and do business.

    The fact that jobs tied to FDI actually managed to increase while total employment still languished demonstrates the power that long-term foreign investment can bring to the US economy.

    To explore further the interactions between FDI employment in different industrial sectors in different states, we invite you to visit our interactive graphics page and discover additional insights yourself.

    Credits

    Written by: Patricia Buckley, Peter Viechnicki, Lara Wigmore

    Cover image by: Joanie Pearson

    Endnotes
      1. Organization for Economic Cooperation and Development (OECD), “Foreign Direct Investment (FDI) Statistics—OECD Data, Analysis and Forecasts,” http://www.oecd.org/corporate/mne/statistics.htm. View in article
      2. This figure refers to the balance of payments and direct investment position data for majority-owned foreign MNEs on a historical cost basis from the Bureau of Economic Analysis. View in article
      3. Bureau of Economic Analysis (BEA), US Department of Commerce International Data, Direct Investment and MNE, http://bea.gov/iTable/index_MNC.cfm. View in article
      4. US Bureau of Labor Statistics, Current Employment Statistics. View in article
      5. Data on employment supported by FDI are only available through 2012. View in article
      6. US Bureau of Labor Statistics. View in article
      7. US Bureau of Economic Analysis. View in article
      8. Mark Cotteleer, “3D opportunity: The course on additive manufacturing for business leaders,” online course available from October 19, 2014 to November 22, 2014. View in article
      9. FDI Markets. Data were taken from announcements reported by FDI Markets where industry activity was classified as “manufacturing.” Eight months of 2014 data were projected to 12 months using straight-line methods. View in article
      10. US Department of Commerce and White House Council of Economic Advisors, “Foreign direct investment in the United States,” October 2013. View in article
      11. FDI Markets. Data were taken from announcements reported by FDI Markets where industry activity was classified as “business services.” Eight months of 2014 data were projected to 12 months using straight-line methods. View in article
      12. US Bureau of Labor Statistics, Current Employment Statistics. View in article
      13. World Bank, “Ease of Doing Business Indicators,” http://www.doingbusiness.org/rankings. View in article
    Show moreShow less

    Topics in this article

    Issues by the Numbers , Manufacturing , Economics

    Deloitte Consulting

    Learn more
    Download Subscribe

    Related

    img Trending

    Interactive 3 days ago

    Patricia Buckley

    Patricia Buckley

    Director | Deloitte Services LP

    Patricia, Deloitte Services LP, is the managing director for Economics with responsibility for contributing to Deloitte’s Eminence Practice with a focus on economic policy. She regularly briefs members of Deloitte’s executive leadership team on changes to the US economic outlook and is responsible for the US chapter of Deloitte’s quarterly Global Economic Outlook and produces “Issues by the Numbers,” a data-driven examination of important economic policy issues.

    • pabuckley@deloitte.com
    • +1 703 254 3958
    Peter Viechnicki

    Peter Viechnicki

    Manager | Deloitte Services LP

    Peter is a strategic analysis manager and data scientist with the Deloitte Center for Government Insights, where he focuses on developing innovative public sector research using geospatial and natural language processing techniques.

    • pviechnicki@deloitte.com
    • +1 571 858 1862
    Lara Wigmore

    Lara Wigmore

    Senior Manager | Real Estate & Location Strategy

    Lara is a senior manager in Deloitte Consulting LLP’s Real Estate & Location Strategy practice with more than 15 years of management consulting experience and 10 years of experience focused on corporate real estate strategy, facilities management strategy, and global site selection for capital intensive projects involving HQ and manufacturing assets. Lara is the product manager for Deloitte’s Social Impact Measurement Model (SIMM), which can help measure and predict the incremental effect of a large corporate investment on up to 75 social impact measures at a location-specific level. Lara’s location strategy experience includes: footprint optimization; site selection for US headquarters redeployment, storefronts, distribution centers, and manufacturing facilities; and impact assessments and research and analytics to drive effective incentives negotiation outcomes. Lara’s real estate and facilities management experience includes analysis of real estate portfolios, campus planning, relocation strategy design and execution, and facility management strategies.

    • lwigmore@deloitte.com
    • +1 312 486 2855

    Share article highlights

    See something interesting? Simply select text and choose how to share it:

    Email a customized link that shows your highlighted text.
    Copy a customized link that shows your highlighted text.
    Copy your highlighted text.

    The geography of jobs, part 3: Mapping the effects of international investment flows has been saved

    The geography of jobs, part 3: Mapping the effects of international investment flows has been removed

    An Article Titled The geography of jobs, part 3: Mapping the effects of international investment flows already exists in Saved items

    Invalid special characters found 
    Forgot password

    To stay logged in, change your functional cookie settings.

    OR

    Social login not available on Microsoft Edge browser at this time.

    Connect Accounts

    Connect your social accounts

    This is the first time you have logged in with a social network.

    You have previously logged in with a different account. To link your accounts, please re-authenticate.

    Log in with an existing social network:

    To connect with your existing account, please enter your password:

    OR

    Log in with an existing site account:

    To connect with your existing account, please enter your password:

    Forgot password

    Subscribe

    to receive more business insights, analysis, and perspectives from Deloitte Insights
    ✓ Link copied to clipboard
    • Contact Us
    • Submit RFP
    • Media enquiries
    Follow Deloitte Insights:
    Global office directory Office locations
    ZA-EN Location: South Africa-English  
    About Deloitte
    • Home
    • Newsroom
    • Code of Conduct
    • Report unethical conduct
    • Office locator
    • Global Office Directory
    • Press releases
    • Submit RFP
    • Contact us
    • Deloitte Insights Blog
    • Social Media
    • About Deloitte in Malawi
    • About Deloitte in Zimbabwe
    • About Deloitte in Mozambique
    • About Deloitte in Botswana
    • About Deloitte in Zambia
    • https://sacoronavirus.co.za
    Services
    • Audit & Assurance
    • Consulting
    • Financial Advisory
    • Risk Advisory
    • Tax & Legal
    • Deloitte Private
    Industries
    • Consumer
    • Energy & Resources
    • Financial Services
    • Life Sciences & Healthcare
    • Government and Public Services
    • Technology, Media & Telecom
    Careers
    • Job search
    • Experienced Hires
    • Executives
    • Students
    • Life at Deloitte
    • Alumni
    • About Deloitte
    • Terms of use
    • Privacy
    • Cookies
    • PAIA Manual
    • About Deloitte Africa
    • Avature Privacy
    • Standard terms for the provision of goods and services to Deloitte & Touche

    © 2023. See Terms of Use for more information.

    Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities.  Please see www.deloitte.com/about for a detailed description of DTTL and its member firms.