Foreign firms pay more

OECD Observer

Foreign-controlled manufacturing firms tend to pay their workers more than the national average. This is the case in every country for which the data are available. The compensation differentials are narrower in the United States and certain Nordic countries (Sweden, Finland), but they do exist nonetheless. In Hungary, Japan and Turkey foreign firms pay a lot more than local firms, 124% more in the latter’s case. The main reason is that foreign affiliates in these countries are much bigger than the average domestic firm.

Furthermore, the jobs created or maintained by foreign affiliates in the host countries are significantly higher-skilled than the national averages, since the sectors involved – chemicals, pharmaceuticals, electronics, computers and automobiles – are technology-intensive. In some countries, such as Hungary and Ireland, compensation paid by foreign affiliates accounts for over 53% of the manufacturing sector’s aggregate wage bill, whereas those same affiliates account for just 13% and 16% of the total number of their countries’ manufacturing firms. Another point about foreign firms is that they account for a large share of R&D, with 12% of the total spent in the United States, nearly 20% in France and as much as 40% in the United Kingdom.

Bibliography

Measuring Globalisation: the Role of Multinationals in OECD Economies, OECD, 1999.

©OECD Observer No 220, April 2000




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