Conference Agenda

This paper analyses global patterns of foreign direct investment (FDI) from 2012 to 2020, examining its implications for employment creation and structural shifts in labour markets. We integrate comprehensive FDI flow and stock data from the OECD's Activities of Multinational Enterprises (AMNE) database. To estimate the employment impacts of multinational enterprises (MNEs), we employ a multi-regional input-output (MRIO) model that combines the OECD Inter-Country Input-Output Tables — capturing the production structures of domestic and foreign firms — with labour statistics from the International Labour Organization's ILOSTAT database. This approach enables us to quantify both direct and indirect employment effects across countries and sectors, shedding light on how global value chains influence job creation and labour market transformations.

In the second stage, we develop a general equilibrium gravity model to project FDI trends through 2030. These projections are integrated into the MRIO framework to estimate the potential for employment creation at national and sectoral levels. By providing forward-looking employment estimates, our study contributes to discussions on the future of work in an evolving macroeconomic environment, where technological advancements, demographic shifts, and global trade dynamics play a crucial role.

Our findings underscore the growing role of FDI in shaping labour market structures, emphasising its potential to generate employment while also raising questions about the quality of jobs created. In line with the congress theme, this study provides insights into policy interventions that can maximize the employment benefits of FDI, particularly in developing economies where informal work remains a challenge. By offering a detailed analysis of the employment effects of FDI, our research contributes to the wider debate on economic policy strategies that are intended to encourage decent work in the face of changing global economic and demographic trends.

The Impact of Foreign Direct Investment on Sustainable Employment Policies in Labor-Intensive Sectors : Case of Vietnam

This research examines the multifaceted impact of Foreign Direct Investment (FDI) on sustainable employment within Vietnam's labor-intensive sectors, specifically textiles, footwear, electronics and wood processing. While FDI has been a key driver of job creation, particularly for young, low-skilled workers, it presents significant challenges to long-term employment stability.

The study investigates three research questions:

(i) What are the opportunities and risks associated with FDI-driven job creation? This analysis highlights two critical threats to sustainable employment : FDI relocation towards countries with lower production costs and technological disruption.

(ii) What challenges do aging workers and labour-intensive industries face in ensuring workforce stability? Labour-intensive sectors struggle to accommodate aging workers who cannot meet physical job demands but are not yet eligible for retirement. Furthermore, the lack of career progression and insecure prospects also discourages younger workers from entering these industries, compounding long-term recruitment challenges.

(iii) How can the Government address labour challenges to ensure sustainable employment? The study examines the roles of Government and enterprises, emphasizing corporate social responsibility (CSR) initiatives, promoting vocational training programs and employment guarantees, and identifying policy gaps that hinder effective cooperation.

Methodology: This research utilizes a mixed-methods approach combining statistical data analysis with qualitative interviews with key stakeholders, including workers, training centers, policymakers, and FDI enterprises. Additionally, comparative case studies from other developing countries are included to inform policy recommendations. This approach provides an understanding of intergrating quantitative and qualitative data to analyze the impact of FDI on the Vietnam labor market.

Key Findings: The study identifies critical gaps in current policies, emphasizing the need for:

(i) Proactive Workforce Reskilling: Implementing comprehensive training programs to equip workers with the skills necessary to thrive in an automated environment.

(ii) Strengthening Social Safety Nets: Providing adequate support and retraining opportunities for workers displaced by automation or FDI relocation.

(iii) Improving the Attractiveness of Labor-Intensive Sectors: Implementing strategies to enhance career pathways and job security to attract and retain a skilled and motivated workforce.

Policy Implications: This research contributes to the RDW 2025 agenda, particularly Track I on "Decent Employment Now," by providing actionable recommendations for policymakers to balance the short-term economic benefits of FDI with the long-term imperative of sustainable employment. The findings offer a roadmap for enhancing workforce resilience and aligning with the objectives of SDG 8 (Decent Work and Economic Growth).

Export is the prominent driver of economic growth and employment. Individuals with quality employment can contribute to economic productivity, secure income, and improve their living standards. On the other hand, unemployment affects an individual's well-being and macroeconomic performance. At the individual level, unemployment leads to financial hardship, reduced living standards, and psychological stress. At the macroeconomic level, unemployment reduces income, weakens demand, and limits economic growth. High unemployment also increases poverty, generates inequality, and creates social unrest. Employment or unemployment is determined by various factors, such as economic growth, investment climate, labor market regulations, educational status, the availability of a skilled workforce, demographic trends, and fiscal and monetary policies. Besides these factors, industrial structure and globalization also determine the employment rate. Globalization through exports has transformed labor markets, creating new job opportunities. The present study examines the impact of exports on the structure and nature of employment across manufacturing, services, and retail firms. We use cross-sectional data of about 44,771 firms from around 94 countries over 2016-2023, provided by the World Bank Enterprise Survey. We employ Pooled Ordinary Least Square (POLS), Instrumental Variables (IV)-based two-stage Least Square (2SLS), and IV-based two-stage Generalized Methods of Moments (GMM) to evaluate the impact of exports on aggregate labor, gender- and skill-based labor employment. Confirming the neo-classical trade theories with empirical literature, we find that the firms’ expansion in exports raises aggregate labor employment. Additionally, our results support Becker's discrimination and the Ricardo-Viner models and observe the disproportionate impact of exports on gender-, and skill-based employment. The rise in exports increases the permanent production-related semi- and low-skilled female laborers compared to males, with minor variations across income levels and firm sizes. These results imply that females are mostly employed for semi- and low-skilled production-related activities. On the other hand, firms across the globe prefer male employees over females for highly skilled production-related activities. Therefore, the government should be flexible in its trade regulations and give subsidies to exporting industries, increasing female employment and reducing gender inequality. The government should also focus on vocational training programs to increase female workers' skill levels. This will result in hiring more female workers as high-skilled workers.

This paper examines the relationship between firm productivity, wage dynamics, and employment patterns in Ethiopia’s manufacturing sector, using firm-level data from the Large and Medium Manufacturing and Electricity Industries Survey (LIMMS) for 2018–2020. It explores how key firm characteristics—including size, age, and ownership—shape employment trends and wage-setting practices.

The study addresses two key research questions: (1) To what extent does productivity growth translate into wage increases in Ethiopia’s manufacturing sector? (2) How do firm characteristics mediate this relationship, particularly in terms of employment expansion and wage inequality? Using regression analysis, the paper estimates firm-level wage-productivity elasticity, controlling for sectoral, regional, and firm-specific factors.

Findings reveal that a 1% increase in value added per worker leads to only a 0.2% rise in real wages, suggesting that only 20% of productivity gains are passed on to workers. Wage-productivity elasticity also varies significantly across subsectors, with industries such as beverages and textiles exhibiting stronger pass-through effects compared to food production. Additionally, the study highlights gender and regional wage disparities, with firms employing a higher share of female workers paying systematically lower wages and certain regions demonstrating high productivity but persistently low wages.

This paper contributes to the literature on wage-setting mechanisms and labor market dynamics in developing economies by providing empirical evidence on the weak link between productivity growth and wage increases. These findings underscore the need for targeted policies that enhance firm-level productivity while ensuring that gains translate into equitable wage growth, stronger SME participation, and reduced labor market disparities—key factors for fostering inclusive industrial development in Ethiopia.