What is the local multiplier effect of a new distribution centre?

Wages paid at the centre are spent in local shops and services, raising their revenue and employment, so the total rise in local income exceeds the wage bill itself.

Give two reasons a multinational may pay above the local going wage in a developing economy.

It needs to attract and keep scarce skilled workers away from other employers, and it wants to protect its brand from accusations of exploitation.

Why might a multinational's presence worsen working conditions at local competing firms?

Local firms facing lower-cost competition may try to survive by lengthening hours, using casual contracts or cutting spending on safety.

Edexcel A-Level Economics B 9EB0

Scarcity, Choice and Potential Conflicts

Topic overview Scarcity and the economic problem Choice, trade-offs and opportunity cost Profit maximisation, sales maximisation and satisficing Survival, market share and other business objectives Stakeholders and their objectives Stakeholder conflicts and corporate social responsibility

Enterprise, Business and the Economy

Topic overview The entrepreneur and creative destruction Adding value Entrepreneurial motives Factors of production Division of labour and specialisation The wider economic environment and the firm

Introducing the Market

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The Role of Credit in the Economy

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Market Failure and Government Intervention

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Revenue, Costs, Profits and Cash

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Introduction to Macroeconomic Policy

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Globalisation

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Economic Factors in Business Expansion

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Impact of Globalisation on Global Companies

Topic overview Globalisation and glocalisation Ethnocentric, polycentric and geocentric approaches to global markets Price and non-price competition in global markets Branding and differentiation in global markets Cultural and language barriers in global markets Adapting marketing strategy for niche and mass markets

Impact of Globalisation on Local and National Economies

Topic overview Multinational corporations and local labour markets Multinational corporations and local firms Multinationals, the local community and the environment Foreign direct investment, growth and the balance of payments Technology transfer, skills and business culture Multinationals and consumers Tax revenues and transfer pricing Stakeholder conflicts, pay and working conditions Emissions, waste disposal and supply chain ethics Ethical marketing: labelling and promotion Controlling multinational corporations

Global Labour Markets

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Inequality and Re-Distribution

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Competition and Market Power

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Market Power and Market Failure

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Market Failure Across the Economy

Topic overview Merit and demerit goods Factor immobility and information failure Externalities and social costs and benefits Environmental externalities and environmental change Policies to correct market failure

Macroeconomic Policies and Impact on Firms and Individuals

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Risk and the Financial Sector

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Impact of Globalisation on Local and National Economies

Multinational corporations and local labour markets

3 things to know
Papers 2 and 3

Overview

Multinational corporations and local wages, direct and indirect job creation, the local multiplier effect, paying above the going wage, pressure on local employers' conditions, footloose capital and plant closures, job quality, health and safety standards, working-condition criticisms, expatriate managers, cyclical output, and dependence on one employer.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

What is a multinational corporation?

Key term

How can the arrival of a multinational's factory raise wages in the local labour market?

Key term

Distinguish between direct and indirect job creation when a multinational opens a plant in a region.

Questions from this subtopic

Each one with the model answer underneath.

1
What is a multinational corporation?
Model answer
A firm that owns or controls production, service or distribution facilities in more than one country, usually run from a headquarters in its home country.
2
How can the arrival of a multinational's factory raise wages in the local labour market?
Model answer
The multinational adds to the demand for labour in that area, and where local labour supply is relatively inelastic the extra demand bids the local wage rate up.
3
Distinguish between direct and indirect job creation when a multinational opens a plant in a region.
Model answer
Direct jobs are those on the multinational's own payroll, while indirect jobs are created in local suppliers and in the shops and services that the new wages support.
4
What is the local multiplier effect of a new distribution centre?
Model answer
Wages paid at the centre are spent in local shops and services, raising their revenue and employment, so the total rise in local income exceeds the wage bill itself.
5
Give two reasons a multinational may pay above the local going wage in a developing economy.
Model answer
It needs to attract and keep scarce skilled workers away from other employers, and it wants to protect its brand from accusations of exploitation.
6
Why might a multinational's presence worsen working conditions at local competing firms?
Model answer
Local firms facing lower-cost competition may try to survive by lengthening hours, using casual contracts or cutting spending on safety.

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