“Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards”
Abstract
Outsourcing of labor services grew substantially during the 1980s and 1990s and was associated with lower wages, fewer benefits, and lower rates of unionization. The authors focus on two occupations for which they can identify outsourcing in those two decades using industry and occupation codes: janitors and guards. Across a wide array of specifications, they find that the outsourcing wage penalty ranged from 4% to 7% for janitors and from 8% to 24% for guards. Their findings on health benefits mirror those on wages. Evidence suggests that the outsourcing penalty was not due to compensating differentials for higher benefits or lower hours, skill differences, or the types of industries that outsourced. Rather, outsourcing seems to have reduced labor market rents for workers, especially for those in the upper half of the occupational wage distribution. Industries with higher historical wage premia were more likely to outsource service work.
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Fissuring may also reduce the bargaining power of both in-house and outsourced workers in occupations subject to outsourcing threats and increased labor market competition.
“It may also reduce the bargaining power of both in-house and outsourced workers in occupations subject to outsourcing threats and increased labor market competition (Dube and Kaplan, 2010; Goldschmidt and Schmieder, 2017).”
From The Fall of the Labor Share and the Rise of Superstar Firms* (2020) · cites this paper as Dube and Kaplan, 2010
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Holmes, T. J., & Snider, J. T. (2011) · American Economic Journal Microeconomics · doi:10.1257/mic.3.2.38 · Cited by 11 · see citing works
The high costs of outsourcing: Vendor errors, customer mistreatment, and well‐being in call centers
O’Brady, S., Doellgast, V., & Blatter, D. (2023) · Industrial Relations A Journal of Economy and Society · doi:10.1111/irel.12338 · Cited by 9 · see citing works
Outsourcing and Innovation: An Empirical Exploration of the Dynamic Relationship
Breunig, R. V., & Bakhtiari, S. (2013) · The B E Journal of Economic Analysis & Policy · doi:10.1515/bejeap-2012-0016 · Cited by 9 · see citing works
The Changing Quality of Nonstandard Work Arrangements: Does Skill Matter?
Liu, C. Y., & Nazareno, L. D. A. (2019) · RSF The Russell Sage Foundation Journal of the Social Sciences · doi:10.7758/rsf.2019.5.4.04 · Cited by 9 · see citing works
Hansen, G. E., Bel, G., & Petersen, O. H. (2022) · Journal of Public Administration Research and Theory · doi:10.1093/jopart/muac041 · Cited by 8 · see citing works
Reconsidering Occupational Internal Labor Markets: Incidence and Consequences
Osterman, P. (2024) · Industrial and Labor Relations Review · doi:10.1177/00197939241242089 · Cited by 8 · see citing works
“First, firms increasingly utilize contractors when they seek to remove some jobs from the ILM and, by putting the work out for bid, push down wages and other forms of compensation for the tasks that are contracted out (Dube and Kaplan 2010; Howell and Kalleberg 2019).”
BackgroundTechnological Change and Domestic Outsourcing
Bergeaud, A., Malgouyres, C., Mazet-Sonilhac, C., & Signorelli, S. (2024) · Journal of Labor Economics · doi:10.1086/730166 · Cited by 8 · see citing works
Diferencial de salários da mão de obra terceirizada no Brasil
Stein, G., Zylberstajn, E., & Zylberstajn, H. (2017) · Estudos Econômicos (São Paulo) · doi:10.1590/0101-41614736heg · Cited by 8 · see citing works
Growing Apart: The Changing Firm-Size Wage Effect and Its Inequality ConsequencesPreprint
Cobb, J. A., Lin, K.-H., & Gabriel, P. (2016) · SSRN Electronic Journal · doi:10.2139/ssrn.2785868 · Cited by 8 · see citing works
“Supporting this view, Dube and Kaplan (2010) found that outsourced janitors and security guards routinely earned less than their in-house counterparts, primarily because firms replaced relatively middleto high-paying jobs with lower-paying jobs.”
Course Correction Reversing Wage Erosion to Restore Good Jobs at American Airports
Dietz, M., & Jacobs, K. (2013) · eScholarship (California Digital Library) · Cited by 6 · see citing works
Intellectual Monopoly and Income Inequality in the United States, 1948–2021: A Long-Run Analysis
Rotta, T. N. (2024) · Review of Radical Political Economics · doi:10.1177/04866134241279944 · Cited by 7 · see citing works
“…duration (Shaikh 2016; Meloni and Stirati 2020), workplace fissuring through subcontracting, franchising, and the gig economy (Weil 2014; Dube and Kaplan 2010), household debt (Gouzoulis 2020; Karwowski, Shabani, and Stockhammer 2019; Dunhaupt 2017), greater participation of women in…”
Effects of the award of public service contracts on the performance and payroll of winning firms
Ravenda, D., Valencia-Silva, M. M., Argilés-Bosch, J. M., & García-Blandón, J. (2021) · Industrial and Corporate Change · doi:10.1093/icc/dtab067 · Cited by 7 · see citing works
Contract Employment: Measurement and Implications for Employer–Employee Relationships
Osterman, P. (2022) · Industrial and Labor Relations Review · doi:10.1177/00197939221132530 · Cited by 7 · see citing works
“Dube and Kaplan (2010) reported that in the year 2000, 20% of building cleaners and 50% of security guards were contract company employees.”
Technological change and domestic outsourcing
Bergeaud, A., Malgouyres, C., Mazet-Sonilhac, C., & Signorelli, S. (2021) · OECD social employment and migration working papers · doi:10.1787/e3b226da-en · Cited by 7 · see citing works
The impact of declining youth employment stability on future wages
Umkehrer, M. (2018) · Empirical Economics · doi:10.1007/s00181-018-1444-5 · Cited by 6 · see citing works
Battaglio, P., French, P. E., & Goodman, D. (2017) · Public Administration Quarterly · doi:10.1177/073491491704100206 · Cited by 6 · see citing works
Employment and Wages in the Places Left Behind
Partridge, M. D., Pérez-Silva, R., & Wertz, S. S. (2020) · National symposium on family issues · doi:10.1007/978-3-030-37689-5_3 · Cited by 6 · see citing works
Delving into the Demand Side: Changes in Workplace Specialization and Job PolarizationPreprint
Cortés, G. M., & Salvatori, A. (2016) · SSRN Electronic Journal · doi:10.2139/ssrn.2822659 · Cited by 6 · see citing works
- Authors
- Dube, A., & Kaplan, E.
- Affiliations
- Stockholm University (SE)
- Venue
- ILR Review
- Publisher
- SAGE Publications
- Published
- 2010-01
- Volume
- 63
- Issue
- 2
- Pages
- 287-306
- ISSN
- 0019-7939 (ISSN-L)
- 2162-271X
- OpenAlex
- W1479909922
- Cited by
- 203
- References
- 17
- Citations by year
- 2026: 11 · 2025: 11 · 2024: 17 · 2023: 23 · 2022: 10 · 2021: 21 · 2020: 23 · 2019: 13 · 2018: 15 · 2017: 10 · 2016: 13 · 2015: 9 · 2014: 6 · 2013: 8 · 2012: 4
- FWCI
- 13.60
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Industrial and Labor Relations Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Safety Research › Employment, Labor, and Gender Studies
- Keywords
- labor outsourcing, wage penalty, cleaning workers, guards, health benefits, unionization, compensating differentials, service sector employment
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