Question

Why might foreign direct investment in low income countries not raise the wages of low skill workers? Why should it?

Answer 1

Nature of FDIs taking place in low income countries are of capital intensive that demands skilled workers. Hence, these FDIs benefit highly skilled workers, but do not help lowly skilled workers and their wages remain at low level. Further, capital intensive FDIs do not demand these low skilled worker in high paying jobs and it does not help in raising their wage level.

Though, it should demand lowly skilled workers, because they are the factors of production in abundance in the low income countries and government should have a regulation such as minimum wage policy. FDI is not only meant for exploration of resources, rather it should also focus upon the development of local communities. So, jobs for these workers should be created and it should be mandated by the government.