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'In-Sourcing' Creates Jobs in US Economy - 2004-04-21

The U.S. economy may be recovering, but there are still not enough jobs. Critics blame the practice of out-sourcing, moving factories and offices to India, Honduras and other lower wage countries. But not all jobs are going overseas.

Executive Deirdre Gillespie loves her new offices in Boston. "You may be able to hear that echo as we talk because we have ceilings here that are at least 20 feet [6 meters] and in part of the building 30 feet [9 meters]high. We're in the old city hall in the financial district in Boston," she says.

It's just the place, Ms. Gillespie says, to expand her British-based biotech company, Oxxon Therapeutics. Its 30 employees in Oxford England have discovered a new way to stimulate the immune system to fight diseases like AIDS, hepatitis and cancer. To develop that research, the company's come to the United States.

"We'll have perhaps eight to 10 people in the next two to three years but perhaps more importantly we're going to be using a lot of the resources by contracting out," explains Ms. Gillespie.

Ms. Gillespie says her company will outsource a number of jobs - legal and financial advisers, recruiters, scientists to help run clinical trials - to the United States. Because of that, Massachusetts officials have rolled out the red carpet.

Barbara Berke, who runs the state's Office of Business and Technology, likes to invite foreign executives to her 21st floor office overlooking the gold-domed state capitol, and point out the hospitals, universities and other facilities that make Boston such an attractive business location.

"You can look out of my window and you can see laid out before you, Mass General, across the Longfellow bridge you can see Kendall square and all the biotech industry, beyond it there's MIT and Harvard," she said.

Massachusetts has done a good job selling itself. A quarter million of its residents are employed by foreign corporations. That's seven percent of the state's work force.

"In-sourcing supports about 6.4 million American jobs. One of the other figures that I think is interesting is the amount of compensation: about $350 billion in total compensation for those jobs," said Todd Malan of the Organization for International Investment, adding that about 5.5 percent of American workers are employed by foreign companies with offices in the United States - that's more than double the percentage of 15 years ago. He notes that these in-sourced jobs generally pay better than most jobs with American companies and they don't necessarily require advanced degrees. "If you look at T-Mobile setting up call centers in Texas, Idaho and Washington state, that's about 1500 new jobs that are not requiring a Ph.D.," he said.

Other examples include Samsung's expanded semi-conductor plant in Texas and the Nissan Motor Company's new operation in Mississippi. According to Todd Malan, the United States has a lot to offer: well-trained workers, a culture of innovation, and of course, venture capital. That's why the Swiss drug company Novartis moved its world headquarters to Massachusetts, and why Oxxon Therapeutics has a new office in Boston. The biotech firm's chief Medical Officer, Frank Malinowski says it was the right move.

"We're in a global community to be quite honest about it, and the diseases we're talking about know no borders and respect no borders, and we need to bring the best and the brightest of all the world together to be able to combat these," he said.

Supporters of in-sourcing say gathering the best and the brightest will also foster innovation, promote prosperity and create job opportunities at all levels of the U.S. economy.