A C T A U N I V E R S I T A T I S L O D Z I E N S I S
FOLIA OECONOMICA 182, 2004
Janina W itkow ska*
T H E IM P A C T O F F O R E IG N D IR E C T IN V E S T M E N T O N T H E P O L ISH L A B O U R M A R K E T IN T H E C O N T E X T O F T H E EU
E N L A R G E M E N T
1. F oreign D irect In vestm en t and the L ab ou r M ark et in the C on text o f the E U E n larg em en t
The impact o f foreign direct investm ent (FDI) on the labour m arket o f a host country is diverse. T he scope o f that direct and indirect im pact (quantitative, qualitative and locational) depends on several factors. T he m ost im portant are (W itkow ska 2000, pp. 647-668):
- the volum e o f FDI and the way the investor em barks on the host m arket, i.e. the form o f investm ent (fusions, takeovers, greenfield investm ents),
- the sector / branch structure o f foreign investm ent,
- strategies o f transnational corporations, together with the extent to which they replace hom e production with the production o f the w hole transnational, and the extent to w hich they cooperate with local com panies,
- the host country’s policy concerning FDI (w hich should aim at supporting the positive im pact o f FD I on the labour market).
The FDI im pact on the labour market is different when the host country participates in the process o f the EU enlargem ent (W itkowska 2001, pp. 122-128). The accession to the custom s union may stim ulate not only additional investm ent from third countries but also investm ent seeking best localisation in the integrating area. A ccessing to the custom s union results m ainly in the creation and m ovem ent o f investment. C hanges within the integrating area trigger co m panies’ reactions such as defensive investm ent instead o f import, offensive investm ent instead o f im port, investm ent in reorganisation and rationalised investm ent.
The process o f form ing a single internal m arket makes com panies face the vital issue o f reorganising their production in order to boost their com petitiveness. R em oving physical, technical and fiscal barriers makes that reorganisation even more urgent in the context o f the custom s union. C haracteristic features o f a given industry also influence that process. In the ‘developed’ branches o f industry, the countries abounding in sem i-qualified or general labourers may attract new efficiency seeking investm ent. In technologically intensive industries, which seek qualified engineering and, potentially, researchers working on innovation processes, such type o f production may be moved to more econom ically developed areas.
C onsum er preference and barriers within a com pany also influence the reorganisation process. D iffering consum er preference, as well as linguistic and psychological barriers, helps to m aintain the segm entation o f national m arkets. It results in the ‘presence effect’, when a transnational corporation feels a need to keep its branch offices on national markets and to stay close to the custom er. C onsum er preference and required m odification o f a product may inhibit the reorganisation o f production in transnationals at the E uropean scale.
The form ation o f a single internal m arket dem ands that transnational corporations reorganise their production in a much deeper way than in the case o f the custom s union. It means that em ploym ent can be reduced in som e host countries and increased in others, because o f m oving production to better localisations. W hile the whole integrating area may suffer a slight reduction o f em ploym ent, that reduction may be radical in individual countries which close their branch offices and consolidate transnationals’ activities. If these countries offer advantageous localisation however, em ploym ent may increase.
It can be estim ated that the European integration process forces transnational corporations to accelerate the process o f replacing the stand-alone strategy with the strategy o f sim ple and deep integration1. In less developed countries direct investm ent, seeking new sources o f effectiveness, may result in an increase o f the labour-absorbing FDI and an em ploym ent o f sem i- and less qualified labourers. Such investm ent may elim inate local com panies (local alternatives of using labour force) from the market; generally though they create m ore jobs. O bviously, the localisation advantage created by the low er cost o f labour factor disappears w hen salaries increase. Activities aim ing at the free m ovem ent o f persons w ithin the single internal m arket will help to equal the labour factor cost in the EU. N evertheless, taking into account that w orkers’ m igration is limited by cultural, institutional and territorial factors, this equalisation will be neither easy nor fast. The resultant o f the im pact o f those opposite forces will push foreign investors into subsequent reorientations o f activity.
1 For those strategies, see: W orld Investm ent R eport 1994. Transnational C orporation s,
As for investm ent in technologically intensive industries aim ing at their access to innovation and human resources, quantitative im pact on em ploym ent may be concentrated in som e places within the integrating area. Such investm ent also produces indirect results such as dissem ination o f know ledge; it triggers learning processes am ong labourers. In case investm ents in technologically intensive industries take place in a less developed country o f the integrating area (which seem s probable), they usually have no real dom estic alternatives. They rather create jo b s than reduce them in the host country. Since investm ents in technologically intensive industries tend also to be capital-absorbing, the quantitative im pact on em ploym ent may be limited.
Out of the predicted results of introducing the economic and m onetary union, foreign investors will appreciate the reductions in the cost o f transaction owing to the comm on currency and in the cost o f gaining capital due to decreasing interest rates and gradual convergence o f inflation rates in order to attain the lowest ones within the EU. Foreign investors from third countries w ho em bark on the monetary union will profit (just as local producers) from the above-m entioned results. This may stimulate additional investment in the integrating area.
The im pact which the activities o f transnational corporations have on em ploym ent within the integrating area will still be influenced by the above-m entioned results o f integration. It seems that saving on cost o f transaction will also stim ulate direct investm ent within the EU. Such a tendency has already been observed in the single internal m arket. It m eans that the potential effect o f ‘m oving jo b s ’ into the m onetary union will be intensified at the cost o f third countries, provided favourable conditions (the branch structure o f FDI and the way the foreign investor em barks on the com m on m arket).
T o sum it up, participating in the integration processes seem s to reinforce the positive FDI im pact on the labour market.
2. T h e In flu en ce o f F oreign D irect In vestm en t on the P olish L ab our M arket in the P re-accession Period
T here has been a continuous inflow o f foreign capital in the form o f foreign direct investm ent (FD I) in Poland since 1992. No sooner than in 1996 though that inflow was significant enough to enable Poland to surpass H ungary and the Czech R epublic in the annual stream s o f FDI. T he N BP (N ational Bank o f Poland) data, included in the UN CTA D report, show that until the end o f 2001 direct foreign investm ent in Poland am ounted to 42.4 billion USD, while the annual stream o f FDI that year am ounted to 8 . 8 billion U S D 2. For the first time
2 W orld Investm ent R eport 1994. Transnational C orporation s a n d E xport C om petitiven ess,
The data above can be com pleted with the statistics com piled by the GINB (G eneral Inspectorate o f Banking Supervision), concerning em ployees o f com m ercial banks. It dem onstrates that banks with dom inant foreign capital em ployed 63.4 thousand people in 2001, which m akes a 3.6-tim es rise in em ploym ent com pared to 1998. It was not only related to creating new jo b s but rather to m oving som e part o f em ploym ent from ‘the sector o f banks with dom inant Polish ca p ita l’ to ‘the sector o f banks with dom inant foreign ca p ital’. In the same year the num ber o f those em ployed in banks with dom inant Polish capital am ounted to 86.2 thousand and was 1.5-times sm aller than in 1998 (see Tab. 3). This im portant change o f ratio must have resulted from the liberalisation o f the flow o f capital in order to meet the liabilities tow ards the OECD.
Table 3. Number o f employees" o f commercial banks
Specification 1993 1994 1995 1996 1997 1998 1999 2000 2001 Banks with dominant Polish capital 119045 127708 134048 129102 130 823 131266 86 199 59 821 57 774 Banks with dominant foreign capital 688 997 2000 15 099 16 272 17 801 63 439 84 416 81 050 “ Measured as full time em ploym ent
S o u r c e : the G INB data, quoted after: K. Dąbrowska, M. Gruszczyński (2 0 0 1 , p. 76; Рас 1999, p. 35).
C om paring the num ber o f em ployees in com panies with foreign capital with the total em ployed in econom y proves that those com panies provide 17.5% of total em ploym ent in industry, 20% in industrial m anufacturing, 13.11% in transport, storing business and com m unication, 1 1.8% in hotel industry and catering trade, 7.7% in com m erce and repairs. T hese are obviously significant shares in the context o f the w hole economy.
A v ailable data concerning productivity o f labour facto r (Tab. 4) and salaries in com panies w ith foreign capital (T able 5) help to com p lete - with qualitativ e elem ents - the description o f the im pact o f FDI on the P olish labour m arket (C hojna 1999, p. 35). In 1997-2000, p ro du ctiv ity in com p anies with foreign cap ital, m easured as total activity incom e p er em ployee, w as tw ice as high as the average o f all P olish enterprises. In the cro ss-sectio n o f the section o f the PC A , pro d u ctiv ity was p articularly high in financial interm ed iation com panies (0,764 m illion PLN per em ployee) as well as co m m erce and repairs (0.764 m illion PLN per em ployee). C om pared w ith the average ind icato r for all com pan ies w ith foreign capital, productivity o f lab ou r in those sections o f the EC A (E uropean C lassificatio n o f A ctivity) was 3 -3 .6 -tim e s higher.
Table 4. Productivity o f labour factor in com panies with foreign capital em ployin g 10 or more people in 20 0 0 (according to the PCA classification)
Specification Total activity income (m illions PLN)
Number o f the em ployed
Income per em ployee Total enterprises in national
econ om y (sending in their balance sheets)
1 194 794.5 4 7 1 4 863 0.253
C om panies with foreign capital 405 755.8 925 827 0 .438 including:
agriculture, hunting, forestry industry industrial manufacturing 1 035.7 209 058 .0 204 795.1 4 846 548 923 535 323 0.213 0 .3 8 9 0.383 Building industry 11 527.0 25 996 0.443
Commerce and repairs 122 812.3 160 575 0.7 6 4
Hotels and catering 2 611.4 26 642 0.098
Transport, storing, com m unication 34 853.9 101 805 0.342 Financial intermediation 3 370 .6 3 639 0 .9 2 6
Real estate service 18 770.8 45 594 0.411
Education 146.0 576 0.253
M edical and social services 104.3 1028 0.101
Other services, municipal, social and individual activities
1465.8 6203 0 .2 3 6
S o u r с с: A s same as Tab. I .
The data concerning the average salary in com panies with foreign capital in 1999, presented in Tab. 5, were 1.4-times higher than total salaries in Polish econom y and 1.5-times higher than in the private sector.
Table 5. Average gross salary in Poland, according to property sectors (euro)
Specification 1995 1998 1999“
Total 2 20.4 3 1 4 .2 401.5
Public sector including property: 240.4 346.8 4 3 3 .7
state 248.1 363.3 4 63.3
local authority 198.3 289.8 366 .4
Private sector including property: 191.1 285.5 374.5
private dom estic 173.2 250.8 325.2
foreign 286.9 421 .7 564.5
" The 1999 data involve obligatory social security contributions (pension, retirement pension and sick pay); the 1999 data cannot be compared with the data concerning preceding years.
S o u r c e : A s same as Tab. 1.
A part from the above-m entioned direct im pact on the labour m arket, the inflow o f FD I has also the indirect - positive and negative - im pact. W e can observe the positive indirect impact when, due to the inflow o f FDI, new jobs
are created in com panies cooperating with those with foreign capital. It can be estim ated that such an im pact takes place e.g. in production o f m eans of transport (car industry), where Polish com panies jo in cooperation networks. To that direct qualitative im pact we can add the indirect im pact o f 2 0 -2 5 % o f total jobs created by com panies with foreign capital.
M oreover, foreign investors help to a great extent to create the so-called human capital, especially in less developed countries. C ontinuously im proving their qualifications, em ployees are trained to perform new, more com plicated tasks. A ccording to available data, foreign em ployers invest in Polish human capital for instance by offering training schemes and sending em ployees to parent or associated com panies abroad. The m igration o f em ployees between com panies provides local enterprises with already qualified staff, so that they do not have to incur expenditure. Com pany environm ent has also been changing: local com panies adapt to the standards o f their foreign counterparts.
The inflow o f FDI in the Polish labour m arket has the negative indirect impact when the pressure o f foreign investors’ com petition and their excessive import replacing dom estic production elim inate local com panies and thus reduce jobs. This result is difficult to estim ate. The continuously increasing share of foreign com pan ies’ import in total Polish import (60.7% in 2001) (D urka 2002, p. 60) seem s to confirm such a scenario.
The above analysis refers to total FDI in Poland, FDI from the EU included. The EU investors take a vital part in jo b creation since they increasingly contribute to total FDI in Poland.
3. F oreign D irect Investm ent and the Polish L ab ou r M ark et in the C on text o f P o la n d ’s A ccession to the EU - P rojection o f R esults
T he experience o f the EC m em ber states dem onstrates that subsequent accession waves and w ider integration have entailed tw o basic phenom ena: the creation and m oving o f investm ent, both significant for the labour market. Less developed countries such as Portugal and Spain used to attract investm ent which was evident in the absolute increase o f the FDI stream s from other m em ber states and the increase o f their share in total FDI o f those tw o countries. O ther states such as Ireland began to attract third-countries investors, e.g. Am erican ones. T hose countries used to have a big unem ploym ent rate (Ireland and Spain in particular) and eventually won the difficult struggle against it. Foreign investm ent played an im portant role in helping to overcom e that problem .
It can be expected that Poland’s accession to the EC will entail the results sim ilar to those in less developed m em ber states in the process o f the EC
enlargem ent. Poland would then be able to participate in the creation and m oving o f investm ent since after accession it would strengthen its localisation advantages and becom e more attractive for foreign investors from the EC mem ber states and third countries. The scope o f stim ulation o f the FDI stream s and the subsequent benefit for the labour m arket will nonetheless depend on the GNP grow th rate. T he correlation between the FDI stream s and the G N P growth is widely known. In highly developed countries, in the long term , the period of the 1% increase (or decrease) o f real G N P was accom panied by the 3.4% increase (or decrease) o f real FDI (Julius 1990, pp. 2 8 -2 9 ). In the case o f a less developed country, that correlation may slightly differ, yet undoubtedly the m ultiplier m echanism w orking up and down gets activated.
Supposing that the econom ic growth in Poland continues to go up (w hich is possible), we can expect that the annual inflow o f FDI will am ount to 9 -1 0 billion USD. Since privatisation opportunities are expiring, most o f that would be greenfield investm ent creating tens o f thousands o f new jo b s a year. The case studies preceding my analysis in this book prove that foreign investors already settled in Poland make further investm ent plans w hich should in result create m ore jobs. T o this num ber one should add jo b s created (or m aintained) around com panies with foreign capital (approxim ately 40% o f the num ber of those com p anies’ em ployees). One should how ever keep in mind the possibility o f elim inating local com panies from the m arket (due to increasing com petition) and o f reducing jo b s due to that process.
T he EU budget for 2 0 0 4-200 6 includes financial m eans for structural activities which can play a vital part in m odernising farm s and in revitalising rural regions. A coherent state policy and an im m ense organisational effort to attract and effectively use the financial m eans from the EU budget will be the condition sine qua non for the im provem ent o f the situation in agriculture and rural areas.
As a result o f the negotiations in the “A griculture” dom ain, Poland gained m ore favourable conditions that those initially offered by the European Union; unfortunately, som e o f its essential postulates were rejected. Thus both during the transition period, i.e. 2004-2006, and in subsequent years, Polish agriculture will have to change a lot in order to become com parable w ith and to com pete with the agriculture o f the EU countries.
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B E Z P O Ś R E D N IE IN W E ST Y C JE Z A G R A N IC Z N E A R Y N E K PRACY
W POLSCE
W pływ bezpośrednich inwestycji zagranicznych (BIZ) na rynek pracy kraju przyjmującego m oże być bezpośredni lub pośredni, przy czym zależy on od w ielu czynników o charakterze ilościow ym , jakościow ym i terytorialnym. Szczególn ego znaczenia nabiera zależn ość pom iędzy BIZ a rynkiem pracy kraju uczestniczącego w procesie integracji europejskiej. W artykule przeprowadzona została analiza poziom u i struktury zatrudnienia w edług ważniejszych branż w przedsiębiorstwach z udziałem kapitału zagranicznego na tle pozostałych przedsiębiorstw w Polsce w latach 1993-2001 z próbą określenia spodziewanych efektów w zakresie strumieni BIZ po w ejściu Polski do Unii Europejskiej.
