impact of mncs on the local economy

Question 1

what are the positive impacts on local labour?

Answer 1

• MNCs pay higher wages than average non MNC business (World Bank estimate 6%)
• Positive multiplier –they spend this money
• Creates jobs
• Training for workers is substantial AND there is skill transfer to other labour/businesses improving economy overall
• Corporate standards are set in relation to worker conditions (need to seem fair / corporate social responsibility)

Question 2

what are the negative impacts of local labour?

Answer 2

• Lack of Trade Union representation (if it does develop, this isn’t in MNC interests)
• Job cuts for those working in local competitors
• Profit pressure reduces quality of working conditions

Question 3

positive impacts on local businesses

Answer 3

• Technology transfer improving working practices (efficiency and competitiveness)
• Supplementary businesses – supply the MNC so creates growth (supply chain)
• Opportunities for partnerships / joint ventures
• Forces innovation

Question 4

negative impacts on local businesses

Answer 4

• creates shortage of workers for other local businesses
• cant compete with the mnc and potentially go out of business
• Methods become outdated and lose ability to entice workers

Question 5

positive impacts on the local community/environment

Answer 5

• Corporate Social Responsibility drives support programs, investment into projects by the MNC
• Ethical sourcing, Fair Trade to support producers and protect MNC reputation / brand
• Scrutiny from pressure groups and consumers

Question 6

negative impacts on local community/environment

Answer 6

• Pressure of low costs / high profit causes unethical decisions/actions