Behind Shrinking Middle-Class Jobs: A Surge in Outsourcing

[eridani]

http://readersupportednews.org/news-section2/318-66/37753-behind-shrinking-middle-class-jobs-a-surge-in-outsourcing

"If a firm wants to save labor costs, outsourcing is just a way of resetting wages and expectations," said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

Unlike the effect of offshoring, with its relocation of jobs and plants abroad, economists know relatively little about the extent and effects of decades of subcontracting production and services to third parties in the U.S. But what research has been done suggests the practice has played a significant role in the nation's troubling trends of stagnating wages and rising inequality.

Rosemary Batt and other researchers at Cornell University found that large employers at subcontracted call centers, for instance, paid their workers about 40% less than comparable workers employed in-house at large firms, not including the value of health and retirement benefits.

That disparity is partly because large companies are often sensitive to what is called “internal equity” or fairness in pay among co-workers at the same company. They have far less concern about paying outside employees lower salaries. Unionization also plays a role.

In a recent paper, Houseman, Batt and economist Eileen Appelbaum said that while the data are limited, there are indications that domestic outsourcing is much more prevalent than generally recognized and that the trend is "profoundly affecting the quality of jobs and the nature of the employment contract for a significant portion of the American workforce."