FDI boosts American employment: Report

01 Mar '16

3 min read

Foreign Direct Investment (FDI) is good for the economy of the US. That's what new report that details the employment impact of FDI in the US, says. The report, prepared by the International Trade Administration's Office of Trade and Economic Analysis, was released by US Under Secretary of Commerce for International Trade Stefan M. Selig. It attributes 12 million jobs – 8.5 per cent of the total American labour force – to FDI.

"This landmark study is the first of its kind to estimate the larger impact that attracting foreign investment into the United States has on our economy," said Under Secretary Selig. "This report reinforces the critical role that attracting foreign direct investment into the US plays in the lives of US workers, and supports President Obama's commitment to expand FDI through the Select USA initiative."

The report builds on official Bureau of Economic Analysis data, which states that 6.1 million people were directly employed by foreign-owned firms in 2013, the latest year this data is available. It uses the United States Applied General Equilibrium (USAGE) model to estimate the total number of jobs – including jobs in foreign firms' supply and distribution chains, jobs stimulated by increased incomes and jobs generated by the economic benefits of technology spillovers. These indirect jobs total an additional 5.9 million jobs attributable to FDI.

The report examines two channels through which indirect jobs are attributable to FDI. First, the report finds that 2.4 million indirect jobs are attributable to the economic activity generated by FDI in the US. These include jobs in supply and distribution chains related to foreign-owned enterprises and jobs stimulated by increased incomes.

Second, the report estimates the number of jobs attributable to productivity growth associated with FDI. These jobs include opportunities spurred on by the economic benefits of technology spillovers. Technology spillover occurs, for example, when a US firm hires an executive from a foreign company and the executive implements new processes from a previous employer that improves productivity. Productivity growth from technology spillovers in the manufacturing sector alone accounts for 3.5 million US jobs.

"FDI continues to be a key economic driver for the US. This report reinforces the significance of FDI in US economy and highlights that for every direct job attributable to FDI an additional job is indirectly attributable," Selig said. (SH)

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