Foreign Investment - More Exact Numbers
THE facts on foreign investment in the United States have until recently been somewhat nebulous. Debates over the dangers (or benefits) of foreign corporate takeovers and foreign direct investment in new plant and equipment have been conducted with hazy numbers.
Now, as a result of 1990 federal legislation, improved, more detailed statistics have become available, even if somewhat dated. A recent study by the Commerce Department shows that as of 1987:
* Foreign-owned businesses had a 1 percent share of the total number of US businesses. These foreign enterprises had 3.3 million employees, accounting for 4 percent of the employment of US businesses. In manufacturing, the share was 7 percent.
(By the last quarter of 1990, the number of employees had grown to 4.7 million, accounting for 5.2 percent of total private employment, according to preliminary data released last month by the Bureau of Labor Statistics.)
* More than one-fourth of the employment by foreign business was in three states - California (376,000 employees), New York (335,000), and Texas (218,000). The foreign business share of total state employment was largest in Delaware (13 percent) and Hawaii (7 percent).
* Foreign businesses tend to be in industries that rely more on larger amounts of capital (investment in plant and equipment) and skilled labor than the average of US businesses. For example, the share of employment of foreign companies in the 50 most capital-intensive manufacturing industries was 15 percent, compared with only 4 percent in the 50 least capital-intensive industries.
* Foreign-owned establishments tend to be concentrated in the US industries with the most research-and-development activity.
* The payroll per employee of foreign businesses was 29 percent higher ($25,106 per year) than that of US-owned enterprises ($19,416). In manufacturing, it was 12 percent higher. Average payroll per employee increases from $18,933 in 35 industries with zero employment by foreign businesses to $27,380 in the 29 industries with most foreign investment activity. To some extent, the higher average payroll per employee for foreign firms merely reflects the concentration of these businesses in industries with higher-than-average pay.
The Bureau of Labor Statistics' estimate for 1990 found that foreign businesses in the US were paying their workers about $2,500 per month on average, or 22 percent more than workers in all US establishments in the private sector.
* British-owned business had the largest number of employees (662,000 or 20 percent of the total employed by foreign businesses) among the various foreign investors. Canadian businesses had 540,000 (17 percent), followed by German firms with 392,000 (12 percent), and Japanese with 296,000 (9 percent).
* Among the major industries, foreign businesses' share of total employment was biggest in mining (14 percent), manufacturing (7 percent), and wholesale trade (6 percent). They employed only 1 percent each in agricultural services, forestry, fishing, and construction; 2 percent in transportation, public utilities, and services.
As for manufacturing, foreign owners are biggest in chemicals (21 percent) and petroleum and coal products (16 percent). Their share of total employment in automobile and truck manufacturing was only 5 percent in 1987. The proportion likely has gone up since then as new foreign auto transplants have opened.
The Commerce Department study resulted from a debate in Congress at the end of the 1980s on foreign investment. Rather than requiring foreign companies separately to provide additional information on themselves, Congress decided to allow a merger of the detailed, confidential data compiled every five years by the Bureau of the Census (on some 10 million business plants and offices in the US) with a foreign direct investment data base compiled by the Bureau of Economic Analysis. The result was an 800-page
volume. This was summarized by Commerce officials Ned Howenstine and William Zeile in Commerce's latest Survey of Current Business. More up-to-date information will be published late next year.