*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Towards an Indicative List of FDI Sustainability Characteristics", “The
Importance of Negotiating Good Contracts", "A New Challenge for Emerging
Markets: the Need to Develop an Outward FDI Policy”, "China Moves the G20
toward an International Investment Framework and Investment Facilitation", "The
Rise of Self-judging Essential Security Interest Clauses in IIAs", "Can
Host Countries have Legitimate Expectations?", "The Next Step in
Governance: The Need for Global Micro-regulatory Frameworks", and "The
Evolving International Investment Law and Policy Regime: Ways Forward" *are*
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 213  November 20, 2017
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*Parsing the myth and reality of employment creation through resource
* <#m_-2611335496946523543__edn1>
Perrine Toledano, Olle Östensson and Kaitlin Y. Cordes**

Employment creation is often claimed by both investors and governments as
an important benefit of investment in mining and large-scale agriculture.
However, this benefit sometimes falls short of expectations. A closer look
at employment tied to these investments provides greater clarity on the
challenges of estimating employment effects and optimizing employment
outcomes. Moreover, it can help contextualize policy recommendations
focused on linking employment from natural resource investments to
sustainable economic development.

Assessing or comparing employment impacts is complicated: there is no
universal standard for measuring direct (on-site), indirect (in the supply
chain) and induced (resulting from spending by direct and indirect
employees) job creation. Moreover, in both mining and agriculture,
location- and context-specific factors—such as skill levels in the local
economy, the commodity/crop, or the level of mechanization/automation[1]
<#m_-2611335496946523543__edn3>—influence the potential employment
generated by any particular project. These factors, combined with different
measurement approaches (such as input-output models or computable general
equilibrium models[2] <#m_-2611335496946523543__edn4>, limit
generalizations regarding job creation from mining and agricultural
investments, and constrain efforts to develop reliable numbers regarding
employment impacts.[3] <#m_-2611335496946523543__edn5>

While job numbers are sometimes more readily available for a specific
industry or investment project, these numbers, too, should be treated with
caution. Employment numbers for industries or projects do not always
specify whether indirect and/or induced employment are covered. Public
statistics refer solely to direct employment, although indirect and induced
employment are usually more relevant for policy. Estimates of future
employment effects are even more uncertain, and may be inflated by
governments or investors. Industry structure and duration of natural
resource investments can exacerbate these difficulties.

Moreover, focusing on formal employment opportunities ignores opportunities
for informal sector employment created by natural resource investments, as
well as the disruption of livelihoods that often accompany them.[4]
<#m_-2611335496946523543__edn6> For example, the additional demand
generated by a mining project usually leads to local increases in informal
employment in food production and services. At the same time, mining
projects can severely affect informal sector livelihoods, including by
displacing artisanal mining jobs that are important for employment and are
generally not offset by increased employment in large-scale mining.
Similarly, when large-scale agricultural investments displace smallholder
agricultural production or other livelihood activities, the jobs generated
by the investments are not likely to fully offset the number of livelihoods
negatively affected, at least in the short-term. For some projects,
considering employment outcomes from a broader perspective that also
includes livelihood displacement may lead to drastically changed
assessments of the net employment impact from an investment.

Numbers alone never tell the entire employment story. For stakeholders
assuming that an investment will bring numerous local jobs, it is useful to
examine who benefits from the jobs generated. The economic and social
benefits that occur due to higher incomes may accrue to a small share of
the population. Negative consequences can also arise. For instance, local
unemployment may persist due to a mismatch between the skills required by
investors or sub-contractors and the skills possessed by the local
population. In-migration can boost the local economy, but can also result
in inflation and friction between locals and newcomers over jobs and
resources. Investments can also lead to localized structural changes in
labor participation for women, such as a change from work in subsistence
agriculture to services.

The key policy lesson is: governments hosting natural resource investments
should arm themselves with sound assessments of the potential employment
creation of such investments, considering not only the number of jobs
created but also their timing, quality and security, likely beneficiaries,
impact on livelihoods, and other socio-economic effects.

Policies grounded in such assessments should focus on the creation of
direct jobs (employment targets, investment attraction measures,
strengthened educational opportunities, including vocational training),
indirect jobs (local content requirements, supplier development programs,
“outgrower schemes” that incorporate smallholder farmers into business
arrangements as a form of local procurement), and induced jobs
(infrastructure improvements, capacity-building for local governments).
Employment policies should always be shaped by community consultations and
plan for employment impacts across the project life cycle, including
project closure or failure.

As employment impacts are context-specific, so are policy solutions.
Efforts to optimize employment generation from resource investments must be
tailored to the relevant context. A thorough understanding by governments
of the variables related to employment from natural resource investments
can help both in designing policies and evaluating potential investments.

* <#m_-2611335496946523543__ednref1> T*he Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
supporters.* *Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
** <#m_-2611335496946523543__ednref2> Perrine Toledano (
[log in to unmask]) is Head: Extractive Industries, Columbia Center on
Sustainable Investment (CCSI); Olle Östensson ([log in to unmask]) is
an independent consultant specializing in the relationship between
extractive industries, commodity trade and development; and Kaitlin Y.
Cordes ([log in to unmask]) is Head: Land and Agriculture,
CCSI. This *Perspective *is based on Kaitlin Y. Cordes, Olle Östensson and
Perrine Toledano, “Employment from mining and agricultural investments: how
much myth, how much reality?,” Columbia Center on Sustainable Investment,
Columbia University (2016). The authors are grateful to Lorenzo Cotula,
Matt Genasci and Tyler Gillard for their helpful peer reviews.
[1] <#m_-2611335496946523543__ednref3> CCSI, IISD and Engineers without
Borders, “Mining a mirage: reassessing the shared-value paradigm in light
of the technological advances in the mining sector” (2016),
CCSI-IISD-EWB-2016.pdf; *see also* Nahom Ghebrihiwet, “Mining automation:
threat or opportunity for FDI technology spillovers?”, *Columbia FDI
Perspectives*, No. 167, Feb. 15, 2016.
[2] <#m_-2611335496946523543__ednref4> CCSI, “Handbook on Measuring
Employment from Extractive Industry Investments,”
[3] <#m_-2611335496946523543__ednref5> One 2014 estimate, which looks
fairly accurate, placed direct employment globally from mining at 2.5
million. International Council on Metals and Mining, “The role of mining in
national economies,” (2014),
Estimating the employment creation from agricultural investment is too
fraught an exercise, given the opacity around such investments.
[4] <#m_-2611335496946523543__ednref6> A livelihood is a means of making a
living, and is thus broader than formal or informal employment. It may
include, for example, artisanal mining or smallholder farming.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Perrine Toledano, Olle Östensson and Kaitlin Y.
Cordes, ‘Parsing the myth and reality of employment creation through
resource investments,’ Columbia FDI Perspectives, No. 213, November 20,
2017. Reprinted with permission from the Columbia Center on Sustainable
Investment (** <>**).” A
copy should kindly be sent to the Columbia Center on Sustainable Investment
at **[log in to unmask]* <[log in to unmask]>*. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

   - No. 212, Stephen Kobrin, “The rise of nationalism, FDI and the
   multinational enterprise,” November 6, 2017.
   - No. 211, Mélida Hodgson, “NAFTA 2.0:  a way forward for the investment
   chapter,” October 23, 2017.
   - No. 210, Karl P. Sauvant, “The importance of negotiating good
   contracts,” October 9, 2017.

*All previous FDI Perspectives are available at
<>**. *

*Other relevant CCSI news and announcements*

   - CCSI is accepting applications for our three upcoming executive
   trainings: on Extractive Industries and Sustainable Development
   (June 4-15, 2018), Sustainable Investments in Agriculture
   (June 19-29, 2018), and Investment Treaties and Arbitration for
   Government Officials
   (July 30-August 9, 2018). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. *More information about each
   training, including brochures and applications, is available at the links
   - *On December 11*, Senator Sheldon Whitehouse of Rhode Island will
   share his eye-opening take on what corporate influence looks like today
   from the Senate floor, as he discusses his new book, *Captured: The
   Corporate Infiltration of American Democracy
   w*ith introduction by Professor Jeffrey Sachs. *Please see our website
   for more information.*
   - CCSI is announcing a *Call for Papers* for the edition of the *Yearbook
   on International Investment Law and Policy
   2017. Submissions will be accepted on a rolling basis until February 1,
   2018. *Please see details here

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2017 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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