Multinational Companies from all over the globe have been calling Ireland home for decades. 'Multinationals produce a significant amount of Ireland’s output and they make a massive contribution to income’ (Coffey, 2015). They are the keystones of the Irish economy and Ireland is too dependent on multinational companies, they not only bring advantages but also disadvantages. This paper will further examine the benefits and drawbacks of multinational companies and also investigate how multinational companies impact society, employment, small businesses and culture.
Throughout this paper, the term MNC will refer to multinational companies and the term FDI will refer to foreign direct investment.
Ireland created its own reasons for establishing MNCs on the island. However, before examining the benefits and drawbacks of multinational companies in Ireland, one needs to comprehend why these MNCs have chosen to establish in Ireland in the first place. MNCs have been in Ireland since T.K. Whitaker and the tax reform which dates back to 1960’s and the reason behind MNCs choosing Ireland as an operation base is Ireland’s sensible economic policies and reforms. These policies include economic openness, low corporate tax rates and investment in education (Dorgan, 2016). There is a significant positive correlation between Ireland’s policies on corporate tax and MNCs. Currently, Ireland has a 12.5% Corporate Tax Rate – one of the lowest tax rates in Europe. This rate attracts United States based companies to settle in Ireland because the tax rate is %35 in the United States (IDA Ireland). MNCs prefer Ireland also because Ireland has one of the most educated and skilled workforces in the world, according to the Organisation for Economic Co-operation and Development, 52% of 25-34 year-olds have a third level qualification(OECD, 2015). One of the other reasons why MNCs are here is the common language factor. Although Gaelic is recognised as the first official language of the Republic of Ireland, English is more commonly used and this attracts United States-based companies to move their headquarters to Ireland.
MNCs highly influence Irish society. However, the influence is not always positive. MNCs, are bringing globalisation to Ireland and that can be a drawback for the country, since it may lead society to degenerate and be more ‘Americanised’. People are now adjusting to a new individualist lifestyle -because MNCs created inflation and that led prices to go up and now living is much more expensive for one than it used to be- and that is a great loss for a country which its culture lies in its plurality (Kearney,1988). For instance, the current birth rate in Ireland is not sufficient to replace the population. The statistics show that the bird rate has fallen for a fifth successive year. In 2015, 65.536 children were born, that was the lowest number of births since 2006. (CSO, 2015)
Globalisation can also improve the food scene and new cuisines can be found in the city. For instance, if a United States based MNC comes to Ireland, there will be demand for American food by the workers of the MNC and new American restaurants will open, for example you can find lots of different food options including fast food such as McDonalds and Starbucks in Dublin. Compared to the past the number of Starbucks shops have increased immensely. There are now 51 Starbucks in Dublin.
MNCs also have impacts on students in Ireland. Nowadays students in Ireland are more interested in studying, pharmaceutical sciences, IT related subjects or business and finance, one of the reasons behind this is that big multinational companies in Ireland are companies related to these areas, such as Pfizer, GSK, Apple and IBM. The country is really successful in these industries as we can see from famous companies. Also, this means that new job opportunities are emerging every day, thanks to these companies.
Looking at the Central Statistics Office’s data shows that the low rate of unemployment which was 6.1% in September 2017 (CSO, 2017) in Ireland is associated with MNCs because according to the International Development Agency numbers 1/5 is now employed by MNCs. (The Irish Times, 2015)
Multinational companies are a huge source of wealth for the Irish people, they pay €6 billion wages to Irish employees. Beside the wages they pay, MNCs have other contributions than employment, when a multinational company starts operating in Ireland, they need other services, for example, catering, cleaning, accommodation, security, so that means there is also second-round benefits and effects of MNCs. They are not only creating wealth and jobs for their own employees, but also for other industries and companies in Ireland to be more precise about the second round effects they spend nearly €4 billion a year on these services(The Irish Times, 2015)
All over the world, countries are suffering from brain drains. The emigration of highly qualified young people is mostly due to the unemployment. However, in Ireland, MNCs create job opportunities for young people and thanks to MNCs ‘Ireland has the youngest population in Europe with 1/3 of the population under 25 years old.’ (IDA Ireland, 2006).
On the other hand, with the higher wages paid by multinationals -looking at Central Statistics Office’s data gives a better understanding of the aspect; In 2015, Average wage for a domestic company employee is €32,022 while it’s €47,913 for Foreign-Owned MNCs employees- the inflation rate increases which means exports, goods became too expensive for people and especially for tourists, as a result, less tourist comes to visit the country and the tourism income decreases.
MNCs not only has effects on the individuals but also on small Irish businesses. MNCs like Google, HP, Dell, IBM, LinkedIn, Pfizer, and GSK dominate the markets and possess much more power than local businesses. The prices of the MNC’s goods are cheaper than the prices of local businesses because big companies have economies of scale/scope and can produce in bulk. This causes small, local businesses to make less profit and less sales. Turning to the positive aspects of MNCs on local businesses in Ireland ; there is a program called ‘Plato’ a peer to peer support business forum for owner-managers(Oifig Fiontair Áitiúil). MNCs such as Microsoft, IBM, Ericsson and Dell have all signed up to the Plato Dublin, a program in which group leaders from big companies partner up with owners of small Irish businesses to provide management expertise and advice. According to a recent survey of Plato participants by the DCU Business School, 93% of small businesses are better equipped to plan particular management practices, thanks to the advice of bigger companies. Big MNCs also benefit local businesses by bringing new technologies and techniques of production to the host country (DCU Business School).
The contribution of MNCs to Ireland is massive, without them Irish economy would not be as powerful as it is now, their contribution can not be taken for granted. They provide income and employment. However, there are some potential drawbacks, one of the most important drawbacks is that these MNCs came to Ireland for commercial reasons and they can leave Ireland if better commercial offers are made by other countries, and this would cause a downturn in the Irish economy, since they are currently too dependent on MNCs. Precautions should be taken in order to avoid a recession or a downturn. However, I firmly believe that MNCs must stay in Ireland in order to maintain the current developments, but there should be a balanced approach for the economy.