Tax Analysts Blog

Multinationals and Jobs

Posted on Feb 5, 2010

In Wednesday’s Wall Street Journal Matthew Slaughter of Dartmouth Business School unloaded a broadside against the proposed $100 billion-plus tax hike on U.S. multinationals (“How to Destroy American Jobs,” February 3, 2010.) Slaughter cites aggregate data from the U.S. Commerce Department as “ultimate proof” of complementarity between U.S. and foreign jobs. He points out that between 1988 and 2007 employment in foreign affiliates of U.S. multinational corporations grew by 5.3 million (83 percent) while U.S. employment by these same multinational increased by 4.3 million (24 percent).

The latter figure is not particularly supportive given that U.S. population growth between 1988 and 2007 was also 24 percent. In other words, controlling for population growth, U.S. multinationals kept an even keel while rapidly expanding employment abroad.

A look at the more recent data tells a different story. Most of the U.S. jobs growth cited by Slaughter took place in the first of the two decades of his analysis. The figure below focuses on the period 1999 through 2007. (Anyway, inconsistencies in the data before and after 1999 make comparisons to earlier periods unreliable). It does not look like foreign activity is helping create U.S. jobs. If anything, the opposite appears true: while U.S. multinationals reduced employment by 1 million in the United States they increased employment abroad by 2.5 million.

There are good arguments on both side of the international tax debate. As anybody who has worked with economic data for more than a few minutes can tell you, empirical estimates are almost always ambiguous. Analyses that claim clear conclusions are more advocacy than scholarship.

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