Assessment of the Impact of Foreign Direct Investment on Tanzanian Labor Market:ACase of Hotel Industry

Abstract

The main objective of the study was to assess the impact of FDI on Tanzanian labor market using a case of hotel industry. The specific objectives are to determine the trend in employment, assess the extent of salary discrimination between foreign and local employees and find out the labour market challenges in the sector. The study which was conducted in Dar es Salaam, was both longitudinal and cross sectional in nature. It involved both primary and secondary data. Secondary data were collected on trend in employment and salary discrepancy, while data on challenges in the sector were collected from focus group discussion targeting the hotel top executives. Data on employment trend and salary difference were analyzed using regression and Theil models
respectively. The findings show that for the entire period covered by FDI flow, employment has been rising. At the same time, salaries of foreign employees were higher than those of locally employed workers. In addition, the former are more educated, and have more skills than the latter. The challenges facing this sector include lack enough government support and constantly changing government regulations and tax systems. It is recommended that the hotel sector has to build capacity of local employees by in house and formal training in order to reduce salary inequality between foreign and local employees and also the government should support the sector in terms of transparent regulations and tax systems.