Foreign direct investment and its effect on wages and working conditions

The activities of multinationals abroad have inspired both praise and criticism: Praise for the potential benefits they impart and criticism for social concerns they arouse. Do multinationals largely exploit their workers abroad with regard to wages and working conditions or are these criticisms unfounded? This paper surveys the existing literature on this subject in order to evaluate the impact of foreign direct investment on host countries, most particularly in the area of wages and working conditions. The final analysis concurs with previous research and suggests that, on the whole, multinational enterprises have a positive effect on wages, albeit more in developing countries than in developed countries. The evidence regarding working conditions is not as clear. While there is some evidence to demonstrate that multinational companies provide better working conditions than their domestic counterparts, opposing evidence demonstrating poor conditions or comparable conditions to that of domestic firms is much stronger.