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 onTanzanian labor market using a case of hotel industry. The specificobjectives are to determine the trend in employment, assess the extentof salary discrimination between foreign and local employees and findout the labour market challenges in the sector. The study which wasconducted in Dar es Salaam, was both longitudinal and cross sectionalin nature. It involved both primary and secondary data. Secondarydata were collected on trend in employment and salary discrepancy,while data on challenges in the sector were collected from focus groupdiscussion targeting the hotel top executives. Data on employment trendand salary difference were analyzed using regression and Theil modelsrespectively. The findings show that for the entire period covered byFDI flow, employment has been rising. At the same time, salaries offoreign employees were higher than those of locally employed workers.In addition, the former are more educated, and have more skills thanthe latter. The challenges facing this sector include lack enoughgovernment support and constantly changing government regulationsand tax systems. It is recommended that the hotel sector has to buildcapacity of local employees by in house and formal training in orderto reduce salary inequality between foreign and local employees andalso the government should support the sector in terms of transparentregulations and tax systems.