It’s the Global Economy, Stupid

On Thursday came a report from The Wall Street Journal about the narrowing education gap between US parents and their children, suggesting the American dream was in jeopardy.

Friday we got two more intriguing pieces on related topics—or topics that may seem unrelated, until you look into them.

In the first, the  Journal (subscription required) pointed out something most of us already know—big-name US multinationals aren’t hiring here, but are instead looking to fill jobs abroad. Three-quarters of all the new jobs added were overseas:

Those companies, which include Wal-Mart Stores Inc., International Paper Co., Honeywell International Inc. and United Parcel Service Inc., boosted their employment at home by 3.1%, or 113,000 jobs, between 2009 and 2011, the same rate of increase as the nation’s other employers. But they also added more than 333,000 jobs in their far-flung—and faster-growing— foreign operations.

The key word there is “faster growing.” The main reason companies invest overseas, particularly in emerging markets, is because those economies are growing faster than ours is. As new consumers enter the middle class in places like China, Brazil, and Indonesia, the multinationals want to sell goods and services to them.  The US is a mature market, so growth is slow.

Samsung booth at electronics show in 2010. Photo: Adriano Castelli /

But here’s a really interesting twist. This is not happening just in the US, but in South Korea, of all places, as the Financial Times reported. South Korean students are having trouble getting jobs with the country’s dominant multinationals, known as chaebol. They include world-class brands like Samsung and Hyundai.  That’s why unemployment for those under 30 is 8.3%.

Most worryingly for young Koreans,…the big names of Korean industry are increasingly forging their new growth abroad.

Samsung Electronics is to build a $7bn memory chip factory in the Chinese city of Xian. It is the latest of more than 140 production, research and retail units that Samsung runs in China. Hyundai Motor’s newest big plant is in Brazil, joining those it has in the US, Russia, India and China. Increasingly, large Korean businesses are now heading to south-east Asia.

Young Koreans shun working in smaller enterprises, which provide 90% of the jobs. They want the prestige and “security” of the chaebol. They’ll have to change their expectations.

But they are the single best educated population in the developed world and they face the same problems as young Americans, who rank 15th in that area.

The more I look at it, it’s not about regulation, red tape, government policy, and certainly not about taxes. It’s all about growth and globalization, no matter where you live in this increasingly small world.

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