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Stagnant wages, growing inequality, and the deterioration of job quality are among the most important challenges facing the U.S. economy today. Although domestic outsourcing – firms’ use of contractors, franchises, and independent contractors – is a potentially important mechanism through which companies reduce compensation and shift economic risk to workers, surprisingly little is known about the extent of this practice and its implications for wages and working conditions. The review of the available research suggests that domestic outsourcing takes place on a much larger scale and affects many more workers than has been recognized – ranging from low-wage service workers such as janitors, security guards, warehouse workers, and hotel housekeepers to professional and technical workers such as programmers, health care technicians, and accountants.

These trends are part of a structural change in the organization of production and work across firms that the researchers suspect is profoundly affecting the quality of jobs and the nature of the employment contract for a significant portion of the American workforce (Weil 2014). The goal of this paper is to develop a comprehensive research agenda to analyze trends in domestic outsourcing in the U.S. and its effects on the quality of jobs – including wages, benefits, employee skills and discretion at work, training and mobility opportunities, and job security – as well as inequality across jobs. In the process, researchers review definitions of outsourcing, the available scant empirical research, and limitations of existing data sources.

Researchers also summarize theories that attempt to explain why firms contract out for certain functions and assess their predictions about likely impacts on job quality. They then lay out in detail a major research initiative on domestic outsourcing, discussing the questions it should answer and providing a menu of research methodologies and potential data sources. In their view, such a research investment will be a critical resource for policymakers and other stakeholders as they seek solutions to problems arising from the changing nature of work. Domestic outsourcing has potentially important implications for the adequacy of existing employment and labor laws; the provision of health, pension, and other workplace benefits; and workplace enforcement strategies – all topics of current debates that could be informed by better data and research.

Research Gaps

• How common is domestic outsourcing, has it grown over time, and how many workers are affected? What are the drivers of domestic outsourcing in particular industries or production networks, and what are the different forms it takes? What is the effect of domestic outsourcing on job quality and the employment relationship? (pages 30-31)

Citation

Bernhardt, A., Batt, R., Houseman, S., Appelbaum, E. (2016). Domestic Outsourcing in the U.S.: A Research Agenda to Assess Trends and Effects on Job Quality. Prepared for the Future of Work Symposium, Washington DC. Chief Evaluation Office, U.S. Department of Labor.

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The Department of Labor’s (DOL) Chief Evaluation Office (CEO) sponsors independent evaluations and research, primarily conducted by external, third-party contractors in accordance with the Department of Labor Evaluation Policy and CEO’s research development process.