4.13.4 Employment effects
Jobs are created in the host country. Notwithstanding the possibility of compensatory rises in employment in the production of capital goods and complementary products, the fact is that jobs at the same skill level as those created in the host country will be lost to the home country. This was one of the fears of the union leaders in the US with the inauguration of NAFTA (North American Free Trade Agreement) - that jobs would be lost to both Canada and especially to Mexico .
This is an appropriate spot to pause and read from Hill (2005) on benefits and costs of FDI to the home country.
In your text
Hill 2005, Chapter 7, pp. 252-254.
To conclude the discussion of the benefits and costs of FDI, see the summary matrix shown in Table 4.2.
Table 4.2 Benefits and costs of FDI
|
Benefits |
Costs |
Host country |
Financial resources of MNEs Access to new technology Training of local managers Job creation Capital inflows BOP credits from exports BOP credits from local production of parts |
Competition of local producers BOP debits on repatriated earnings BOP debits on MNE imports on components Perception of loss of national identity |
Home country |
BOP credits from earnings Creation of jobs in higher skill categories Exposure to new markets, managerial expertise and technology Protects market share in competition with other MNEs |
Initial investment a capital outflow BOP debits from input of low-cost goods Loss of exports for which FDI is a substitute Job losses in low skill areas |
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