The ILO Working Paper, FDI, global value chains and labour markets mentions that Multinational Enterprises (MNEs) have supported approximately 125 million direct jobs worldwide by 2021, marking a 12% increase since 2012. While employment is heavily concentrated in high-income regions and China, the report highlights the critical role of indirect employment, where every direct job created by an MNE activates approximately two indirect jobs within the host economy.
For middle-income countries like India, Foreign Direct Investment (FDI) serves as a vital bridge for integration into Global Value Chains (GVCs), particularly in manufacturing and services sectors which account for over 40% of MNE-supported jobs globally. However, the benefits remain unevenly distributed, necessitating proactive policy focus on leveraging FDI for skills enhancement, domestic supply chain integration, and sustainable “green and digital” growth to prevent regional marginalization.
Key Pillars of the FDI-Labour Integration Framework
Global Employment Growth: MNE-supported direct jobs rose to 125 million by 2021, reflecting the deepening of global production networks and expansion of Global Value Chains (GVCs).
The 1:2 Multiplier Effect: MNEs generate significant indirect employment through domestic supply chains and multiplier effects. For every direct job created by MNEs, approximately two indirect jobs are activated, with 55.7% of these jobs demanded from domestic firms.
Sectoral Dominance in Services: Over 40% of global MNE jobs are in the services sector, although manufacturing remains the core driver for middle-income economies.
Countering Regional Marginalization: Addressing the geographic concentration of FDI to ensure that developing regions are not excluded from high-value production and trade.
Sustainable Future Investments: Shifting the focus toward “green” and “digital” FDI to ensure that structural transformation aligns with long-term climate and developmental goals.
What is the “1:2 Indirect Employment Multiplier”? The 1:2 Indirect Employment Multiplier refers to the economic phenomenon where for every single individual directly employed by a foreign affiliate (FA), an additional two jobs are created or supported within the domestic economy. These indirect jobs are activated through an MNE’s demand for local raw materials, logistics, and professional services (supply chain effects), as well as the broader economic activity generated by the spending of MNE employees. For India, this means that the strategic value of attracting a large-scale MNE is tripled, as it strengthens the local MSME ecosystem and provides a broad-based stimulus to the labour market.
Policy Relevance
The February 2026 ILO findings represent a transition from volume-based FDI to “High-Impact” labour integration, ensuring that global capital directly supports India’s formal job creation and GVC ambitions.
Strategic Impact:
Scaling ‘Make in India’ via GVCs: Utilizing FDI to integrate Indian manufacturing—specifically in machinery and electronics—into global networks can help India capture a larger share of the 125 million direct MNE jobs.
Maximizing Domestic Supply Chains: Strengthening the linkages between MNEs and local MSMEs allows India to fully capture the 1:2 indirect job multiplier, preventing the “leakage” of economic benefits to overseas suppliers.
IT and Services Sector Leadership: Given that services account for 40% of global MNE employment, India’s strong service export capabilities position it as a primary beneficiary for further digital and professional service FDI.
Promoting Equitable Growth: Developing regional investment corridors can help address the “geographic concentration” risk, ensuring that FDI benefits reach beyond tier-1 cities into underdeveloped industrial clusters.
Follow the full report here: ILO: FDI, Global Value Chains and Labour Markets
