MNCs Impact on Local Economies

Impact of MNCs on the Local Economy

• The arrival of MNCs in local communities is generally welcomed due to job creation, supply chain work, boosting the local economy, and providing opportunities for new skills.

Local Labour and Job Creation

• MNCs create jobs, offering full-time employment with training, regular income, financial security, and career development.
• In 2014, Tenneco-Walker® opened a factory in South Wales, UK, creating 220 local jobs in an area with high unemployment (7.3% in 2018, above the national average of 4.1%).

Wages and Working Conditions

• Wages in the locality may increase due to the higher demand for workers when a large business opens.
• Jobs created may have favorable working conditions due to MNCs' modern approach to business development, new facilities, latest technologies, and internationally recognized standards of health and safety.
• In 2017, Foxconn® opened a factory in Wisconsin, USA, promising good wages, with workers projected to have an average annual salary of $53,875 plus benefits.

Criticisms of MNCs

• MNCs are sometimes criticized for creating low-value jobs that require little training or expertise.
• Skilled personnel may be transferred from home countries, limiting opportunities for local workers to develop high-level skills.
• Some MNCs have been criticized for exploiting workers in supplier factories in countries like India and Bangladesh.
• Workers reported being paid wages that were too low, not being paid legal overtime, having deductions made without permission, payments being made late, and not receiving any payment for their work.
• Some workers in India were made to work Sundays and national holidays in very hot conditions, without breaks and without access to clean drinking water.
• The opportunity to earn money in factories can be better than working in the primary sector in these countries, where many people often live in severe poverty.

Local Businesses

• MNCs can positively impact local businesses during the construction phase and by creating demand for materials, components, services, and utilities.
• Local businesses may experience increased trade, higher revenues, and more profit, potentially needing to recruit more workers.
• Increased spending from new employees of MNCs can also boost local businesses like retailers, restaurants, and service providers.
• Negative effects can occur if MNCs attract workers from other businesses with better conditions or offer products that compete directly with local businesses. The competition from MNCs might put pressure on local businesses to make improvements, potentially leading to more efficient and innovative local enterprises.
• Walmart planned to open 50 new stores in India in the coming years. Although this will create more employment, this will be at the expense of local rivals

The Local Community and Environment

• Local communities are likely to welcome MNCs if the benefits outweigh the drawbacks.
• MNCs might invest in local infrastructure such as providing electricity, water and gas supplies, schools, hospitals and other public amenities in order to build trust within the community.
• These investments in infrastructure are likely to improve the quality of human capital in the area.

Other Contributions

• Businesses in some countries pay local taxes to local authorities, and MNCs are likely to do the same.
• Some MNCs build strong links with the local community, participating in local cultural or sporting events, donating to charities, or giving locals access to company facilities.

Negative Impacts

• Some MNCs may have a negative impact on the local community as a result of environmental damage.
• Mining industries can lead to environmental harm from oil pollution, impacting the health and activities of local people, especially farming and fishing.