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Where does the FDI jobs multiplier of 1:1 come from?


clearmurk

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I've been listening to government recently promoting the importance of Foreign Direct Investment for jobs. After all, when it comes to corporate taxation, they'd rather not go there.

A ratio that seems to come up again and again is 1:1 - the ratio of indirect jobs created for every FDI job. Indeed, I believe I heard Minister Richard Bruton quoting this figure again recently.

So I thought I might look into this a little. The best I can come up with is an IDA figure from 2010 given to the Joint Committee on Enterprise, Trade and Employment of 1:0.7, that is 30% less.

Arising from our approach, we have set some high-level goals for the five-year period, targeting the creation of 62,000 new jobs in foreign direct investment companies, both existing and new. The impact of this in the economy will be the creation of 105,000 jobs. Indecon has done some work for us that shows the multiplier effect is approximately 0.7 in respect of every new job created.
Joint Committee on Enterprise, Trade and Employment - 23/Mar/2010 Horizon 2020 Strategy: Discussion with IDA Ireland.

Can anyone do any better?
 

Watcher2

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I've been listening to government recently promoting the importance of Foreign Direct Investment for jobs. After all, when it comes to corporate taxation, they'd rather not go there.

A ratio that seems to come up again and again is 1:1 - the ratio of indirect jobs created for every FDI job. Indeed, I believe I heard Minister Richard Bruton quoting this figure again recently.

So I thought I might look into this a little. The best I can come up with is an IDA figure from 2010 given to the Joint Committee on Enterprise, Trade and Employment of 1:0.7, that is 30% less.



Joint Committee on Enterprise, Trade and Employment - 23/Mar/2010 Horizon 2020 Strategy: Discussion with IDA Ireland.

Can anyone do any better?
You see, your first mistake is in your first sentence. Never listen to politicians. It's bad for your health and there is no benefit in it at all, quite the opposite.

I have no clue of the ratio.
 

wombat

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Depends on the industry, pharma, it could be up to 5 to 1, no idea about IT. Its hard to measure spinoff, a lot of companies started as dependent on FDI but now export.
 

EUrJokingMeRight

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refer to 'excuses 101' for dummies;

A)They were rounding up to the nearest '1', happens all the time.

B)It was an 'adminstrative error' by the office temp covering for the regular secretary who is on maternity leave.

C) etc, etc.
 

The Old Woman

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I have two questions

Even if we were to accept our politicans claim of 1:1 nonsense what has it cost the state to create these jobs - include in that cost figure - all incentatives direct and indirect, the pro rata ratio of costs for running the IDA, EI, etc that must be factored in in accessing the viablity of our FDI programme.

What idiots thought it was financially clever idea to promote at all costs FDI while not ensuring Direct outward investment out paced FDI? -

Every time one of our "esteemed" politicans run to the media heralding the merits of FDI without counter balancing that issue with growth in DOI - the best thing we could do for the country is never vote for that idiot again!!!!!!
 

SPN

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What is "Direct Outward investment", and where does the money come from to make the investment?
 

Porkypie

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Depends on the industry, pharma, it could be up to 5 to 1, no idea about IT. Its hard to measure spinoff, a lot of companies started as dependent on FDI but now export.
It could be? and it could be not? There are figures and its not difficult to measure. Publication of figures are "not allowed". "It could be" 1 to 5
 

storybud1

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Duh ? it always depends on what local materials they need to source, Google etc will not require much as their product is information, manufacturing will require a lot more local materials & services.

On the other hand manufacturing jobs are being lost to Asia but information jobs are steady (just look at the latest)

Zurich Insurance group to create over 100 jobs at two technology hubs - Independent.ie

During the boom I remember the figure of 18 to one, that is you could get 18 Chinese/Vietnamese guys for the same money as one Irish guy doing similar manufacturing jobs. The Chinese know this and so do the Germans.
 

clearmurk

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Duh ? it always depends on what local materials they need to source, Google etc will not require much as their product is information, manufacturing will require a lot more local materials & services.

On the other hand manufacturing jobs are being lost to Asia but information jobs are steady (just look at the latest)

Zurich Insurance group to create over 100 jobs at two technology hubs - Independent.ie

During the boom I remember the figure of 18 to one, that is you could get 18 Chinese/Vietnamese guys for the same money as one Irish guy doing similar manufacturing jobs. The Chinese know this and so do the Germans.
The Zurich jobs are indeed good news - what we need now is a Foreign Direct Import measure, to assess the proportion of new jobs "created" that in fact are used to employ staff from other economies.
 

Orbit v2

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The principle isn't hard to understand, though how they arrive at specific figures is harder to justify maybe.

At one end of the scale, FDI jobs that are pure service exporters bring money into the economy and that money is spent here, paying the wages of doctors, pharamacists, solicitors, teachers etc.

At the other end, you have FDI jobs in manufacturing which require supporting businesses that employ more people.

I'd have thought that 1:1 is a conservative estimate, and it could be a lot higher.
 

Trainwreck

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Economic activity is trade.

Trade creates links and hence this rather misguided concept of "employment multipliers".

Flexible real wages brings full employment. End of.
 

SPN

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The Zurich jobs are indeed good news - what we need now is a Foreign Direct Import measure, to assess the proportion of new jobs "created" that in fact are used to employ staff from other economies.
As long as they work here, pay income tax here, live here, and spend some of their income into the economy here, then we are quids in.


The problem our economy faces, and always has faced, is how to get money into the economy.

The boom occurred when the banks found a way to pump €1.1 billion a week of nett new money into the economy for four years.

The bust occurred when the banks could no longer pump €1.1 billion a week of nett new money into the economy and we only had earned money available to sustain us.


Getting money into the economy, and keeping it in the economy, is all that matters. If we do that the jobs will follow.
 

cashinhand

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Flexible real wages brings full employment. End of.
Flexible real wages brings full penury, except for those who pay the wages of course!

Cut to: starving hordes eating stale bread trundling to callcentre flexijobs.
 

Orbit v2

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I'd be in to flexible employment markets myself, but flexible real wages bringing full employment could only be done by eliminating the minimum wage and unemployment benefit, and maybe providing free tickets for the ferry to Holyhead as well.
 

ergo2

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There have been a lot of theories over the years about multipliers.

From observation and discussions over the years I suggest a FDI employing say a 1000 would create or sustain a 1000 jobs in the country.

That is counting goods and services supplied to the projects, and the spending of the employees - assuming that without the project they might have left the country
 

The Old Woman

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What is "Direct Outward investment", and where does the money come from to make the investment?
It is th oppose of forward direct investment and the funding comes from the same source as FDI.

On FDI we continuely hear the the job story and that is important but there is a blank from both politicans and media it seems to look at the broader picture. FDI core returns go out of the country in the main - if it exceeds our growth outwards and this must be grow were parent company returns are to the irish echequer then net results returns are continually volatile. Add in contiually erosion on core domestic businesses ( domestic irish retailers- closing down) this gives rise to further pressure on the exchequer in social welfare and further disruption in core taxation as their is less domestic competition with the day to day spending going through out-side multi national business.
On FDI we continually look at the job creation and not at the behind the scenes consequences.
 

SPN

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It is th oppose of forward direct investment and the funding comes from the same source as FDI.
FDI investment comes from foreign sources.

The reason we do this is because we have such limited resources internally. It is the same reason why the government uses Pan-European PPP projects to bring in finance for infrastructure projects such as schools and roads.




On FDI we continuely hear the the job story and that is important but there is a blank from both politicans and media it seems to look at the broader picture. FDI core returns go out of the country in the main - if it exceeds our growth outwards and this must be grow were parent company returns are to the irish echequer then net results returns are continually volatile. Add in contiually erosion on core domestic businesses ( domestic irish retailers- closing down) this gives rise to further pressure on the exchequer in social welfare and further disruption in core taxation as their is less domestic competition with the day to day spending going through out-side multi national business.
On FDI we continually look at the job creation and not at the behind the scenes consequences.
Retail is a parasitic activity. It depends on someone else to go out and earn the money in the first instance, and then they look to get some of that money by selling them things.

And I say that as a former retailer.

We need money coming into the Country. The recession we are experiencing is the transition from an economy built on €3.5 Billion a week of earned money and €1.1 Billion of borrowed money back to an economy that only has the income from the earned money.

That's a 25% drop in income.

To get out of the mess we have to get our income back up.

Whether it is inward investment, or export sales, we have to go for it baldheaded.
 

clearmurk

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It is th oppose of forward direct investment and the funding comes from the same source as FDI.

On FDI we continuely hear the the job story and that is important but there is a blank from both politicans and media it seems to look at the broader picture. FDI core returns go out of the country in the main - if it exceeds our growth outwards and this must be grow were parent company returns are to the irish echequer then net results returns are continually volatile. Add in contiually erosion on core domestic businesses ( domestic irish retailers- closing down) this gives rise to further pressure on the exchequer in social welfare and further disruption in core taxation as their is less domestic competition with the day to day spending going through out-side multi national business.
On FDI we continually look at the job creation and not at the behind the scenes consequences.
I'm not sure I fully understand this, but at the very least it seems you are saying there should be more support for indigenous exporting activity. Can't disagree with that.

There seems to be a move within government at present to convert us into the San Francisco or San Diego of Europe - where innovation and start-up energy thrive. But if you actually go looking into the myriads of supports here, there is a big hole that the US plugs almost as a matter of culture - initial start-up or angel investor capital. The capital that is being deployed by our state in this area seems to be being captured by the enterprise agencies, academic institutions and professional consultants, who are making a nice living out of the enterprise game.

For example, if you want to conduct a feasibility study into an idea, and need support, what is the story? You may get moral support, but the actual income associated with the work will go to professional advisers - who in the process will have a nice opportunity to gain access to possibly innovative intellectual capital.

This area needs to be addressed.
 

hiding behind a poster

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Mar 8, 2005
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The Zurich jobs are indeed good news - what we need now is a Foreign Direct Import measure, to assess the proportion of new jobs "created" that in fact are used to employ staff from other economies.
Friend of mine took voluntary redundancy in his job recently, in order to take up a job with Zurich.
 
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