OUTSOURCING TYPES, RELATIVE WAGES, AND THE DEMAND FOR SKILLED WORKERS: NEW EVIDENCE FROM U.S. MANUFACTURING

Existing studies on the impact of outsourcing on relative wages and the demand for skilled workers mainly focus on aggregate outsourcing, in which imported intermediate inputs are used as a proxy. We depart from the existing studies by focusing on various types of outsourcing based on the six-digit NAICS U.S. manufacturing data. We show that downstream materials and service outsourcing are skill biased, whereas upstream materials outsourcing is not. We also produce other supplementary results pertaining to the impact of technology, different capital inputs on relative wages, and the demand for skilled workers. ( JEL C33, F14, F15)     

SERVICES OUTSOURCING AND INNOVATION: AN EMPIRICAL INVESTIGATION

We provide a comprehensive empirical analysis of the links between international services outsourcing, domestic outsourcing, profits, and innovation using plant‐level data. We find a positive effect of international outsourcing of services on innovative activity at the plant level. Such a positive effect can also be observed for domestic outsourcing, but the magnitude is smaller. We also find that international services outsourcing has a positive effect on profitability, as predicted by theory, whereas this is not true for domestic sourcing. The results are robust to various specifications and an instrumental variables analysis. (JEL F19, O31)     

Outsourcing and the Contracting of Responsibility*

Outsourcing is becoming an increasingly prevalent phenomenon not only in business life, but also in the affairs of governments and in the lives of individuals and families. But what exactly is outsourcing and what are its consequences? I will argue that outsourcing offers entities a set of freedoms (i.e., possibilities of action and non‐action) that are not considered possible in this practice’s absence. However, many of these freedoms are precarious in that they involve a multitude of risks and dangers both for those outsourcing their affairs and for those who take them on. Although there are multiple freedoms of this sort, one is focused upon here; how outsourcing allows entities to contract, in the sense of limiting, their responsibilities. Three specific ways in which outsourcing allows entities to do this are detailed. Recognizing this precarious aspect of the freedoms associated with outsourcing is important because it highlights the social risks involved in this practice.     

Household Income,Women's Earnings,and Spending on Household Services, 1980–2010

The authors investigated changes in household outsourcing, the practice of spending on services that replace household labor, from 1980 to 2010. During this time, women's labor force participation, increased and economic, household bargaining, and time availability theories predict increased spending during this period. To test these predictions, the authors used data on spending on housekeeping, day care, babysitting and nannies, gardening and lawn services, eating out and pre‐prepared foods from the 1980–2010 Consumer Expenditure Surveys using 327,903 household‐quarters from the interview survey and 86,877 household‐weeks from the diary survey. The results indicate that changes in income predicted increases in housekeeping, child care, and gardening services. Changes in household characteristics predicted little change in food outsourcing, although food outsourcing did increase. Changes in women's earnings predicted little change in most outsourcing. The authors conclude the article with a discussion of the changing context for outsourcing.     

Outsourcing and union power

The outsourcing of union work and jobs either diffuses or diminishes union membership, depending on perspective and situation. The correlation of trends in union membership to trends in union power, while less than perfect, has until recently been relatively strong over the past sixteen years. The fact that as diverse a sample of unions as AFSCME, SEIU, and UAW have chosen to make outsourcing a prominent labor/public relations issue suggests that the correlation continues to be perceived by the union movement to be significant, notwithstanding the efforts of the “new” leadership of the AFL-CIO to break that link with respect to union political power by “taxing” member unions and their members to contribute both money and militancy to the 1996 election cycle. Although outsourcing may lead only to the diffusion of union membership either within or between unions, as opposed to the diminution of union membership, this fact has not received a great deal of attention. The net effect on total union membership of outsourcing from one union employer to another union employer is unclear, although the effect on the membership of the union at the outsourcing employer is not. The redistribution of membership within a union as a result of outsourcing is likely to have little immediate impact on union power. However, as even the best case scenario presented above suggests, it may have significant long-run deleterious effects on union bargaining power by taking labor out of a sheltered market and putting it into potentially competitive market. This is particularly likely to be the case when outsourcing (1) places the outsourced work into a different industry or wage contour and (2) creates the possibility of moving from sole-source to multiplesource supplier arrangements. The redistribution of membership between unions as a result of outsourcing is unlikely to have a major impact on union power broadly defined. It can have, however, serious deleterious effects in terms of the power of an individual union, as suggested in my “competitive case” scenario. The fact that one union’s losses due to outsourcing may be another union’s gain is of little consolation to the losing union. That act, in and of itself, may make the threat of outsourcing a potential union “Achilles heel” at the bargaining table by placing it into competition with some other, perhaps unknown, union as well as possibly nonunion competition. The most obvious threat to union power comes from outsourcing that diminishes union membership overall by transferring jobs from union to nonunion employers. The willingness and ability of employers to move work/jobs entirely out of the orbit of union control constitutes, in terms of power and particularly union bargaining power, a revisitation of the phenomenon of the “runaway shop.” It may also be viewed as a proactive form of hiring permanent replacements for (potentially) striking workers. The union options in dealing with such a challenge are to endeavor to preclude outsourcing through legislation or collective bargaining or to chase the work by organizing the unorganized, hopefully with the help of the unionized outsourcing employer. Neither option may be easy, but as the 1996 auto industry negotiations suggest, the former may be less difficult than the latter. The possibility that outsourcing from union to nonunion employer may provide unions with the power to organize from the top (outsourcer) down (outsourcee) cannot be entirely ignored as the issue of supplier “neutrality” reportedly was raised in the 1996 auto negotiations. The adverse effects of outsourcing on union political and financial power, by virtue of its impact on the level or distribution of union membership, can and may well be offset by an increase in union activism—as measured by dues levels, merger activity, organizing commitment, and political action. The adverse effects of outsourcing on union bargaining power are more problematical from the union standpoint. The effect of outsourcing, whatever its rationale or scenario, appears to be to put union labor back into competition. Thus, outsourcing constitutes yet another challenge to the labor movement in its ongoing and seemingly increasingly unsuccessful battle to take and keep U.S. union labor out of competition by proving itself able and willing to organize to the extent of the market and standardizing wages in that market.     

OUTSOURCING AND UNIONIZATION: A TALE OF MISALLOCATED (RESISTANCE) RESOURCES

While many believe the growth in outsourcing contributed to the decline in U.S. unionization up to the 1990s, this argument has never been investigated systematically. In this article, we analyze the effect of outsourcing on unionization between 1973 and 1993. Instrumental variables estimation shows outsourcing contributes to higher quasirents and industry productivity. We find the union wage premium increases with the extent of outsourcing—both for workers that are substitutable by outsourcing services and workers in jobs that are not substitutes of the tasks being outsourced. Finally, we find no support for the claim that outsourcing reduces unionization. (JEL J5, L2, L6)     

Outsourcing human resource management: A comparison of Russian and U.S. practices

Our objective is to determine the current state of outsourcing of HRM functions at companies operating in Russia, both Russian and Russian-based foreign com-panies, and compare and contrast the results with the findings of the Society for Human Research Management (SHRM) study of outsourcing practices at American companies in the United States. The comparison reveals the differences and similarities in terms of reasons for outsourcing as well as the obstacles and problems in implementing HRM outsourcing decisions to a foreign setting.     

Are nonprofit prisons an alternative? Some experiences in the Netherlands

Outsourcing of detention is complex due to quality risks from incomplete contracts, the public responsibility for sentencing and execution, and related social opinions. In the Netherlands, prison services are extensively outsourced—particularly for juvenile detention and internal forensic psychiatric care—to nonprofit organizations. In the Dutch experience, we have not found differences between public and nonprofit execution with respect to the type of contract, costs, performance indicators such as escapes and violence against personnel. The Dutch experience shows that outsourcing to nonprofit organizations can be an alternative to outsourcing to private entrepreneurs.     

INTERNATIONAL OUTSOURCING AND THE PRODUCTIVITY OF LOW-SKILLED LABOR IN THE EU

This article presents first insights into the role of international outsourcing on the productivity of low-skilled workers in EU manufacturing. Whereas in the short run international outsourcing exhibits a negative marginal effect on real value added per low-skilled worker, the long-run parameter estimates reveal a positive impact. This may be explained by imperfections in European labor and goods markets, which prohibit an immediate adjustment in the factor employment and the output structure. The change in the outsourcing intensity since 1993 alone acounts for a long-run increase of about 6.0% in the real value added per low-skilled worker. (JEL C33 , F14 , F15 )     

How human resource outsourcing affects organizational learning in the knowledge economy

Adaptability and knowledge management, key elements of organizational learn-ing, are critical to organizational success as a result of a fundamental shift towards a knowledge economy. HR outsourcing and the growth in contingent work can result in a significant loss in learning capital through a breakdown in the psychological contract. We explore how to preserve HR's strategic role in facilitating organizational learning in the new outsourcing and offshoring con-text. The problem is compounded if outsourcing is introduced for cost control rather than strategic refocusing reasons. We suggest that managers can posi-tively influence the relationship between outsourcing and organizational learn-ing through internal marketing tactics and enriched psychological contracts. A previous version of this paper was presented at the Administrative Sciences Association of Canada (ASAC) Annual Meeting, Toronto, Canada, June 2005.     

“营改增”政策试点的市场初步评估

会计市场咨询表明,＂营改增＂政策是一个相当积极的信号,对于上海行业细分和服务外包的发展、尤其是总部经济的发展有重大的推动作用。但从政策实施的实际效果看：首先受益的是制造业服务业分离企业,部分服务企业实际税负尚未降低;部分中资企业对于政策的了解较为局限,不懂得如何从＂营改增＂中获益;没有完整会计账册的小微企业无法享受增值税抵扣带来的税负减轻,反而由此在同业竞争中与大中企业相比丧失了部分议价竞争能力。针对上述问题,应采取相应的对策措施逐步加以解决。     

Outsourcing within the Nordic context: Care services for older people in Finland

The early 1990s economic setback brought significant reforms favoring the outsourcing of care in Finnish municipalities. Here, outsourcing refers to the practice of municipalities employing private organizations through different means (e.g., open tendering) to deliver public care services. In this context, this study examines the growth in the outsourcing of service housing and home-help services in 311 municipalities from 2001 to 2015 and investigates the municipal factors associated with outsourcing using four dimensions: care needs, population size, economic situation, and political ideology of the municipality. The findings reveal a steep increase in the outsourcing of home-help and service housing. Care needs of older people are the most influential factor for outsourcing, particularly for service housing. Overall, the findings show a growing trend in private care provision in Finnish municipalities.     

THE NATURE OF OUTSOURCING RELATIONSHIPS: EVIDENCE FROM OAP PRICES

This paper studies the extent and variation in production cost pass‐through for U.S. outsourcing imports. Data from 4,676 products imported through the U.S. overseas assembly program show that outsourcing imports were characterized by incomplete pass‐through of production and trade costs to import prices. Notably, pass‐through was higher for products assembled in high education countries while the response of outsourcing import prices to competing suppliers' prices was largest for products sold by firms in capital‐intense industries. The reasons for these cross‐country and cross‐industry differences, as they relate to theories of outsourcing and trade, are explored. (JEL F1, F2)     

Does International Outsourcing Really Lower Workers’ Income?

We analyze the impact of international outsourcing on income, if the domestic labor market is imperfect, i.e. there is a bilateral bargaining between a firm and a labor union. In our analysis we distinguish between the cases where the parties negotiate over the wage only and where they negotiate over both wage and profit sharing. We find in the first case that outsourcing has an ambiguous effect on the workers’ income, while it increases the workers’ income in the second case. For the optimal amount of international outsourcing, we find that, depending on the wage effect of outsourcing, in a pure wage bargaining system it can be higher or lower than the level where domestic and foreign marginal labor costs are the same. In contrast, in a wage and profit share bargaining system, the amount of outsourcing lies below this level.     

‘Now I See The Difference’ — The Use Of Visual News Of Difference In Clinical Practice

Differences between events, values, attitudes and relationships provide therapists with the most meaningful data in the search for a circular perspective. Systems change is believed to be dependent on the reception of relevant information by the system. Traditionally, information has been collected verbally and Tomm (1984) outlines a schema of the types of difference questions. However, clinical practice suggests that these questions are not suitable to all clients. Difference questions may be confusing and unproductive when working with young children whose language skills are not fully developed and auditory memory limited. Adults whose verbal skills are limited or whose primary mode for processing information is not auditory, also have difficulty. An alternative visual method for collecting news of difference is proposed, using Tomm's (1984) categories as a basis. Case examples are given of this technique, at the stage of data collection and as a way of marking and reinforcing change through the course of therapy.     

Understanding cultural singularities of ‘Indianness’ in an intercultural business setting

Analysing data from the Indian information technology (IT) industry, this paper advances an understanding of cultural singularities of ‘Indianness’. The research context of an intercultural meeting place of IT and business process outsourcing firms’ overseas subsidiaries, Belgium in this case, allows the authors to identify 10 cultural singularities that typify ‘Indianness’. This ethnographic, reflexive study is further validated by employing Ghoshal's ‘smell of the place’ metaphor through the authors collective experiences as consultants and researchers, and builds and extends upon the popular cultural dimension frameworks for understanding intercultural business and management. Existing cultural dimensions do not sufficiently describe the contemporary intercultural dynamics that typically take place in workplaces, especially so in offshore and outsourcing environments. A provisional set of parameters for understanding Indian culture, with its relevant impact on business life (customs and manners), business processes and business deliverables are proposed in this study.     

Union survival strategies for the twenty-first century

Clearly, the necessary changes in the law and culture will not come easily or quickly. But, transcending all forms of these labor market segments is a set of concerns that arguably should spur a search for common ground between labor and management. The proliferation of automated technologies, together with the continuing impact of foreign competition with cheap labor markets, has led some to predict that, over the next quarter century, we will witness the elimination of the blue-collar, mass assembly-line worker from the production process.¹⁴ Moreover, the theory that those losing jobs in the manufacturing sector will be generally absorbed into the service sector is losing currency as it is becoming clear that service jobs are, themselves, not invulnerable either to offshore outsourcing (e.g., telephone operators, data processors) or to automated technology (e.g., bank tellers, office secretaries). Nor is it realistic to expect the new “knowledge sector” to absorb more than a fraction of the unemployed and underemployed casualties of this transformation. As a result, the widening gap between the haves and have nots will only continue to grow. As the trend accelerates, certain possibilities for a labor-management accommodation emerge. For one thing, although corporations may be enjoying short-term gains from present wage stagnation, downsizing, outsourcing, and casting off of permanent employees, the longer term effects include a work force with considerably diminished consumer purchasing power. In some industries, corporations are already acknowledging the adverse effects of this trend. Furthermore, as employers are contributing into pension funds on behalf of fewer and fewer “employees,” the forced savings pool that has for many years constituted a primary financing source of capital investments in our economy, will gradually be depleted.¹⁵ At the same time as employers are coming face to face with the disadvantages of the union-free environment they have so long sought, employers are also rediscovering the contributions to productivity, quality, and efficiency that can be gained from a truly empowered work force with an independent voice in the workplace. All of this should lead an enlightened management to place less currency on resisting unionization and other legitimate forms of independent employee representation, and to join labor in advocating strong labor standards and effective labor law for all four of the labor market segments that exist today and will exist tomorrow. The authors wish to convey their deep appreciation for the invaluable contributions to this paper made by David Silberman of Bredhoff & Kaiser and Craig Becker, Associate General Counsel, Service Employees International Union. Another version of this paper was published in Labor Lawyer.     

Offshoring in the core: Russian software firms onshoring in the USA

Offshoring and outsourcing have become the buzzwords of the IT community and the popular media discourse about the current era of globalization in services. Acknowledging the geographic perspective expressed in these dominant terms, in this article I examine the processes and activities that are oriented in the opposite direction. Capturing this inversion, I develop the concept of ‘onshoring’ and use research material from fieldwork conducted with IT firms in St Petersburg, Russia and their affiliates, agents and clients in the USA to provide an empirical case study. Onshoring encompasses the corporeal, representational, material and legal practices of offshore firms developing a presence onshore, with Russia as offshore and the USA as onshore in this case. The lack of an established Russian professional diaspora in the USA created a context in which developing a recognizable onshore presence was necessary for firms based in Russia. By explicitly recognizing that the efforts, risk‐taking and experimental strategies of offshore firms to create connections, networks and contacts onshore in the USA are a constitutive part of offshore outsourcing, I document and examine the less acknowledged complex flows and practices of onshoring. I argue that although these actors and processes may seem marginal to the widely recognized narrative of offshore outsourcing, in fact, they are creative and strategic compensations that reveal how the globalization of services is enacted at the micro‐level.     

Becoming Unmanned

Abstract

Forty-nine nations currently have UAV (unmanned autonomous vehicle, or unmanned aerial vehicle) technology. Autonomous technology could potentially alter both the conduct of warfighting itself as well as our understanding of war as a gendered activity. Using drones or ‘robots’ could affect the activities of war through outsourcing killing to technology and removing the aggressors’ physical bodies from the battlefield. Drones could also affect the gendered construct of war as the traditional dyad of protector/protected is altered: a system in which men have traditionally protected women and children is replaced by a new system in which machines protect humans. Analysts like Haraway might interpret these developments as an important step towards posthumanity where man-machine as well as gender distinctions are overcome. However, traditional gendered concepts of warfare have a long history and it is not inevitable that new technologies will change gendered activities, relations and views of war. Instead, the discourse of new technologies as expressed by US military planners and technology developers currently reinforces rather than downplays gender distinctions. Robots themselves have been constructed as subordinate, as a new type of nature which is dominated or feminized, while ‘cyborg soldiers’ with technological implants are constructed as hypermasculine.     

MANAGING R&D IN VERTICAL RELATIONSHIPS

We study the optimal strategy for research and development (R&D) in a buyer‐supplier relationship. The buyer chooses whether to (1) insource a cost‐reducing R&D to its own research‐subunit or to (2) outsource it to its manufacturing supplier. The buyer cannot observe the R&D effort in either case, but can better observe the R&D result when the R&D is conducted internally. According to our analysis, the buyer prefers insourcing R&D to mitigate information asymmetry when the R&D cost is either small or large. When the R&D cost is intermediate, however, the buyer prefers outsourcing R&D, and can achieve the full information outcome (first‐best outcome) despite the information asymmetry associated with outsourcing R&D. Moreover, the buyer's preference for outsourcing high‐cost R&D increases when the R&D is more likely to succeed or to generate significant cost reductions, or the R&D result is more difficult to predict. Our analysis provides a theoretical explanation for the increasing trend of outsourcing innovation to manufacturing suppliers. (JEL D82, L22, L23)