CUED
Center
for Urban Economic Development
University of Illinois at Chicago
Transnational Investment and Job Loss: The Case of Chicago
Project Number: 350-A
Report Date: October 1992
Author(s): Dave Ranney
This report estimates the job loss associated with transnational investment policies of firms based in Chicago at the beginning of the 1980's decade. We examine that magnitude in several ways. First, we develop an estimate of the number of jobs lost because of factory closings or major layoffs by corporate parents of Chicago firms. We include those parents who were engaged in significant international operations at the time they reduced or eliminated production in Chicago. Our estimate is 79,744 jobs eliminated in the City of Chicago between 1980 and 1990.
Secondly, we estimate the impact of the initial job loss on Cook County. These estimates include the loss of direct and indirect jobs, personal income, and the value of gross regional product in Cook County. Losses of 106,200 jobs, $3.2 billion in personal income and $5.4 billion in gross regional product were generated by transnational corporate parents during the decade of the 1980'S. The model also distributes that job loss among industry groupings and shows that only half was in the manufacturing industry. Cook County lost 19% of the 106,200 jobs in the wholesale and retail trade industry and another 22% in services.
Thirdly, we attempt to track the job reductions in Illinois by firms with operations in Mexico's "maquiladora" program. This program makes use of special U.S. and Mexican laws that enable U.S. based firms to export intermediate products to Mexico, assemble final products there and import them back to the U.S., paying duties only on the value added by the Mexican assembly operation. These laws can be considered a test case for the proposed North American Free Trade Agreement. Our study accounts for 67,088 jobs lost in the State of Illinois to firms with operations in maquiladoras in Mexico. Over 47,000 of these were in the Chicago metropolitan area. Adding the indirect job loss to the state total brings the loss to nearly 98,300 jobs.
The paper concludes that greater attention needs to be given to assessing local costs of trade agreements and other international finance policies that effect the mobility of capital. It further argues for legislation that forces corporations to compensate workers and communities for the job losses. Future trade agreements need to be tied to such legislation. Finally, we conclude that labor and community activists should focus their efforts on the development of international standards with respect to the environment, worker rights, health and safety. These efforts should be in accord with coalitions forming for this purpose in Mexico and Canada.
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