Increasingly, the factory down the street may be owned by a foreign company. Foreign direct investment into the U.S. has tripled over the past two years, leading to a heated debate over the pluses and minuses of foreign ownership. Do foreign companies set up low-paying operations in the U.S., or does foreign investment create new opportunities that benefit workers?
The upbeat view of foreign investment gets support from a new study by economists Brian Aitken of the International Monetary Fund, Ann Harrison of Columbia University, and Robert E. Lipsey of the National Bureau of Economic Research. The three discovered that in Mexico, Venezuela, and the U.S., workers employed by foreign-owned businesses tend to have higher wages than other workers in the same industry.
In the U.S., this wage differential comes to about 10%. But the economists note that there's a spillover effect. In the U.S., higher wages in foreign-owned businesses seem to push up wages in domestic-owned competitors as well. That's a welcome development at a time when wages seem to be lagging.