Economic theory does not give information about the quantitative domestic employment effect of Foreign Direct Investment (FDI) within a certain country or region. In order to get empirical results about domestic employment effects various methodological approaches are discussed in this paper. Based on the databank INDAT and information of more than 5000 West German manufacturing firms we found out that the FDI protected domestic employment significantly between 1986 and 1996. The reason is that MNEs layed off less employees than uninational firms (mainly in the auto industry and the electronic industry), but this positive effect dropped in recent years. This positive domestic employment effect amounts to some 20000 jobs per year between 1986 and 1996 that would have been lost without FDI. A positive domestic employment effect is also seen for MNEs that held shares pf production plans abroad. Obviously global production networks of German MNEs have been set up especially since 1980s and were used more intensively for production abroad in the 1990s (mainly in the steel industry). This swing in the domestic employment effects indicates a problem of the German labour market if German policy will continue to oppose structural reforms as the process of globalisation will continue. Indirect employment effects almost double the quantities mentioned above. The analysis of the industrial data bank INDAT is responsible for a significant part of unemployment in Germany and for changing qualification of domestic workers so far.