💼 Jobs and wages
A TNC factory creates jobs. Workers earn wages and spend them in local shops, cafes and markets. This helps other local businesses to grow.
Impacts of Globalisation » TNCs: Costs and Benefits for Host Countries
What you'll learn this session
Study time: 30 minutes
Edexcel spec: 8.2 (a)
- How globalisation affects different groups of people
- The benefits of hosting a TNC for a country
- The costs of hosting a TNC for a country
- How to interpret photographs and newspaper articles
Remember, this is part of the optional Globalisation and Migration topic. In Paper 2 Section C you answer only one of the three global issues.
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Unlock This CourseWho is affected by globalisation?
Globalisation does not affect everyone in the same way. Some people gain a lot. Others lose out. This lesson looks at what happens when a country hosts a TNC, which you met in the lesson on WTO, IMF and TNCs.
Key terms:
- Host country: the country where a TNC sets up a factory, office or shop away from its home country.
- Tax revenue: money the government collects from people and companies, which it spends on services such as roads and schools.
- Working conditions: how safe, healthy and fair a job is, including hours, pay and safety.
Different groups of people are affected in different ways:
- Workers get jobs, or may be paid too little.
- Local businesses can sell to the TNC, or lose customers to it.
- The government collects tax, but may have to give the TNC good deals to attract it.
- The local community gets new roads and services, but may suffer pollution.
- Consumers can buy goods that are cheaper and have more choice.
Benefits for host countries
🎓 Skills and technology
Workers can be trained to use modern machines and methods. They can take these skills to other jobs or start their own businesses later.
💰 Tax revenue
The government collects tax from the TNC and its workers. It can spend this on schools, hospitals and roads.
🚢 Trade and infrastructure
TNCs often need good roads, ports and electricity. These improvements help everyone nearby. The goods made can also be sold abroad, bringing money into the country.
Costs for host countries
🚫 Low pay and poor conditions
Some TNCs choose a host country because wages are low. Workers may have long hours, low pay or unsafe workplaces if rules are weak.
💵 Profits leave
Most profits go back to the TNC's home country, not into the host country's economy.
🏪 Pressure on local businesses
Small local firms may not be able to compete with a big company's low prices. Some close down.
🏭 Environmental damage
Factories can cause air, water and noise pollution, and use up land and water that local people need.
There is also a risk of dependence. If the TNC closes its factory and moves to a cheaper country, many people lose their jobs at once.
Skill: interpreting photographs and newspaper articles
In the exam you may be given a photograph or a newspaper article about a TNC. Use these steps:
- Read the title, caption or headline first. It tells you the main topic.
- For a photograph, describe what you can see: people, buildings, machines, rubbish, traffic.
- For an article, pick out the facts, such as numbers of jobs, wages or complaints.
- Decide if each detail is a benefit or a cost, and for which group.
- Quote or point to the evidence in your answer.
Worked example
This is an invented newspaper extract, written for practice.
"New phone factory brings hope to Riverton"
"The factory has created 2,000 jobs in a town where work was hard to find. Workers say they earn more than on local farms. A local baker says sales have doubled. But some workers say they work 12-hour shifts, and residents complain that the river now smells of chemicals."
Benefits: 2,000 jobs, higher pay than farming (workers), doubled sales (local business). Costs: 12-hour shifts (workers' conditions), river pollution (local community). The article gives evidence for both sides, so the effects are mixed.
Worked example: a photograph
Imagine a photograph with the caption "Clothing factory, Dhaka". It shows a large building, lines of workers at sewing machines, and a queue of lorries outside under a hazy sky. Benefits: many jobs (workers) and goods ready to sell abroad (the country). Costs: a crowded workplace, which may mean poor working conditions (workers), and a hazy sky that may suggest air pollution (local community). Always say "the photo shows..." and then link what you see to a group of people.
Common mistakes
Common mistakes
- Only writing benefits, or only costs. Good answers give both.
- Not saying who is affected. Name the group, such as workers or the government.
- Explaining what a TNC is. That was covered in the lesson on WTO, IMF and TNCs.
- Not using the source. When given a photo or article, use details from it.
- Saying all TNCs are good or all are bad. The effects depend on the company and the rules in the host country.
Exam-style question
(a) Give two benefits to a country of hosting a TNC. [2 marks]
(b) Explain one cost to a host country of a TNC building a factory there. [2 marks]
(c) Look at the Riverton newspaper extract above. Use it to explain why different groups may have different views about the factory. [3 marks]
Model answer
(a) It creates jobs and wages for local people (1). The government collects more tax to spend on services (1).
(b) Most of the profits go back to the TNC's home country (1), so less money stays in the host country's economy to help it develop (1).
(c) Workers who earn more than they did on farms may support the factory (1). Residents may oppose it because the river smells of chemicals (1). Workers doing 12-hour shifts may also be unhappy about their working conditions (1).
Exam tip
When a question says "use the source", quote a fact from it, such as "2,000 jobs", and say which group it affects.