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 From 2001 to 2013, inflation-adjusted revenue at 100 of the
largest publicly traded companies grew 71 percent and
inflation-adjusted operating profit rose 150 percent. Global
headcount reported in company financial filings rose 31 percent.
Their headcount grew faster globally than overall employment in the
United States, but it is unclear from corporate disclosures how much
of the hiring took place outside the United States.
Information from individual companies suggests a lot of the new jobs
were created overseas, especially given that in this period there
was offshoring and outsourcing of work that was done previously
in-house and in the U.S. There was also substantial growth in sales
in foreign markets and a resulting expansion of operations overseas.
The data highlight a central question that officials in the Obama
administration and at the U.S. Federal Reserve confront: has the
nation's ability to generate well-paying jobs in manufacturing and
other sectors been fundamentally scarred by changes in the global
economy that may predate the 2008-2009 economic crisis but were more
starkly revealed in its aftermath. The answer could have major
implications for economic policy decisions, such as how long the Fed
keeps interest rates at very low levels to stimulate jobs growth.
At the Fed, Chair Janet Yellen has spoken of the steady drift in
national income "away from labor and towards capital," while some
policymakers worry the full depth of the changes are not yet clear.
"We have to understand what structurally is going on ... Is the
country really changing in a fundamental way?" Atlanta Federal
Reserve Bank President Dennis Lockhart said last month, citing the
possibility that "polarized labor markets" could become entrenched.
That would mean a workforce based on large numbers of lower paid
workers, with a few highly paid managers, professional and
technology workers, and a permanent hollowing out of the middle
class. This would be a potential drag on overall purchasing power
and economic growth.
Data on the 150 publicly traded companies with the largest sales was
collected from Thomson Reuters' Eikon system. Banks and financial
firms were excluded because the way they report results isn’t
comparable to other companies and to tie the analysis more closely
to the production of goods and services.
Several companies, such as energy investment company Energy Transfer
Equity, were excluded because their records did not extend back far
enough or were complicated by corporate maneuvers, such as breakups.
The resulting list of 100 large companies covers a range of
industries, from consumer giants Wal-Mart <WMT.N> and McDonalds
<MCD.N>, to old-line industrials such as Caterpillar <CAT.N> and
General Motors <GM.N> as well as technology giants like IBM <IBM.N>
and Microsoft <MSFT.O>.
Google was included but its public records did not include employee
headcount for 2001 and 2002 and it declined to provide data for
those years. The search company reported fulltime employment of
47,756 for 2013.
The collective headcount of the 100 fell in only one of the years
included in the study, dropping 1.33 percent in 2009, the year in
which the financial crisis and accompanying recession had the most
savage impact.
TYSON WORKFORCE DROPS
But 30 of the companies actually cut jobs between 2001 and 2013 -
even while managing, in some instances, very big increases in profit
and revenue growth.
For example, between 2001-2013, Verizon <VZ.N> continued reshaping
itself from a provider of landline phones to focus on wireless
telephony and network services. Annual inflation-adjusted operating
profit more than doubled while the workforce shrank more than 30
percent.
 Meat provider Tyson Foods <TSN.N> grew through the efficiencies of
scale that came through a series of strategic acquisitions, as well
as technology that, for example, has pushed up the amount of meat
that a beef carcass yields. Its operating profit increased an
inflation-adjusted 20 percent between 2002 and 2013, and its revenue
by an inflation-adjusted 14 percent. Yet, its headcount dropped 4.2
percent over that time. (Tyson's purchase of rival IBP in 2001
wasn't fully reflected in its public accounts until 2002).
Though fast-growing technology companies led employment growth over
the period, that may not be sustained as those firms get bigger. The
pace of hiring at Apple <AAPL.O> and Amazon <AMZN.O>, for example,
has slowed after a 12-year spell in which both companies boosted
headcount roughly ten fold.
Robert Litan, a Brookings Institution scholar who has been studying
employment at the country's older companies, said the recession in
2001 marked a turning point when firms began managing headcount more
aggressively through the use of more efficient global supply chains,
technology and other methods such as outsourcing U.S. work.
A recent analysis he co-authored with economist Ian Hathaway found
the U.S. economy and employment increasingly dominated by older
companies - suggesting that the workforce decisions of large, legacy
firms may be growing more important to employment overall.
That could be a problem in itself. The United States’ capacity to
produce new jobs may take a hit if the country does not find ways to
encourage more start-ups and find ways to help young companies
succeed and grow.
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"We cannot count on the Fortune 500 to absorb all our workers. That
is not what they do. They make more out of what they've got," Litan
said. MASKING CHANGES
Company officials and outside analysts say several complementary
forces are at work: globalization and outsourcing, investments in
labor-saving technology, and the more traditional efficiencies
gained through takeovers and scale.
Much of this has been positive for the U.S. and global economies –
for example by manufacturing more goods in China using lower-cost
labor the prices for computers and TVs has plunged in the past 20
years, a benefit for consumers. But this may only partially offset
the impact on many families of a loss of higher-paid manufacturing
and other jobs.
Some of the employment trends began many years ago but may not have
been obvious because they were masked by changes in demographics.
The increasing numbers of women in the workforce, for example, kept
family incomes growing through the 1990s, White House economic
adviser Jason Furman recently noted.
Some analysts caution that it is difficult to draw broad conclusions
based on data from the largest companies.
Through the 1990s, firms shed "non-core" operations, such as
in-house security, something that boosted jobs at smaller companies,
noted David Chavern, president of the U.S. Chamber of Commerce's
Center for Advanced Technology and Innovation.
Advances in global trade and logistics allowed companies like Apple
to rely on contractors such as China's Foxconn for their production
of iPhones, iPads and other products.
To that extent, Apple's formal headcount does not reflect many of
the people who rely on the company for jobs. Apple's headcount
skyrocketed more than eight-fold over the last 12 years to more than
80,000. But reported headcount at Hon Hai Precision Industry Co Ltd
<2317.TW>, the Taiwan listed name for the Apple contractor Foxconn
Technology Group, has grown even faster, to more than 1 million
workers from just 1,528 in 2001. Foxconn does work for a lot of
companies but a significant part of its growth is because of orders
from Apple.
The U.S. economy is also one where small- and medium-sized firms
drive much of the job growth. Verizon, for example, cut call center
staffing as Internet startups began providing 411 directory
assistance service for free, often financed by advertising. Some
jobs, such as web design and technology consulting, also lend
themselves to freelance careers as much as working inside a large
company.
Technology may allow top companies to perform well but also "opened
up other venues of success for labor that we would be thrilled
with," said Joel Prakken, a senior managing director at the
Macroeconomic Advisers consulting firm.
HIGHER-PAID JOBS
Companies are not required to include payroll data in their
financial filings so the analysis could not include wage trends.
But amid overall wage stagnation there is concern about a growing
divide. According to Bureau of Labor Statistics data, the number of
people employed in the top ten highest paying job categories fell 4
percent from 2001 to 2013 while their pay rose 28 percent on an
inflation-adjusted basis. The number of people employed in the
lowest ten paying jobs expanded nearly 15 percent, while their
inflation-adjusted wages fell 5.5 percent.
Some of the high-end manufacturing and research industries often
seen as critical for U.S. job and wage growth are also those where
revenue and profit have become more clearly divorced from the need
for more workers.
Retailers like Wal-Mart - which by their nature are more labor
intensive and pay lower wages - were among the businesses where
employment and financial performance increased more in-line with one
another, according to the analysis.
"Whether you like it or not what the global economy is delivering is
that the productivity growth that has been realized has been earned
by a small fraction of highly skilled people and returns to
capital," said Matthew Slaughter, a management professor at
Dartmouth's Tuck School of Business.
(Reporting by Howard Schneider; Editing by Martin Howell)
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