IDEAS home Printed from https://ideas.repec.org/p/cdl/indrel/qt6s89498v.html
   My bibliography  Save this paper

Does Outsourcing Reduce Wages in the Low Wage Service Occupations? Evidence from Janitors and Guards

Author

Listed:
  • Dube, Arindrajit
  • Kaplan, Ethan

Abstract

Outsourcing of labor services grew substantially during the eighties and nineties, and was associated with lower wages, less benefits, and lower rates of unionization. We focus on two occupations for which we can identify outsourcing using industry and occupation codes: janitors and guards. Across a wide array of specifications, we find that the outsourcing wage penalty ranges between 4% and 7% for janitors and between 8% and 24% for guards. Our findings on health benefits mirror those on wages. We provide evidence that the outsourcing penalty is not due to compensating differentials for higher benefits or lower hours, skill differences, or the type of industries which outsource. Overall, the evidence suggests that outsourcing has 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 over this period.

Suggested Citation

  • Dube, Arindrajit & Kaplan, Ethan, 2008. "Does Outsourcing Reduce Wages in the Low Wage Service Occupations? Evidence from Janitors and Guards," Institute for Research on Labor and Employment, Working Paper Series qt6s89498v, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt6s89498v
    as

    Download full text from publisher

    File URL: http://www.escholarship.org/uc/item/6s89498v.pdf;origin=repeccitec
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    2. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
    3. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
    4. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    6. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
    7. Lewis M. Segal & Daniel G. Sullivan, 1998. "Wage differentials for temporary services work: evidence from administrative data," Working Paper Series WP-98-23, Federal Reserve Bank of Chicago.
    8. George J. Borjas & Valerie A. Ramey, 2000. "Market Responses to Interindustry Wage Differentials," NBER Working Papers 7799, National Bureau of Economic Research, Inc.
    9. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    10. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    11. Samuel Berlinski, 2008. "Wages and Contracting Out: Does the Law of One Price Hold?," British Journal of Industrial Relations, London School of Economics, vol. 46(1), pages 59-75, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deborah Goldschmidt & Johannes F. Schmieder, 2017. "The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), pages 1165-1217.
    2. Autor, David & Dorn, David & Katz, Lawrence F. & Patterson, Christina & Van Reenen, John, 2017. "The fall of the Labor share and the rise of superstar firms," LSE Research Online Documents on Economics 83616, London School of Economics and Political Science, LSE Library.
    3. Lawrence F. Katz & Alan B. Krueger, 2016. "The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015," NBER Working Papers 22667, National Bureau of Economic Research, Inc.
    4. Umkehrer, Matthias, 2015. "The impact of changing youth employment patterns on future wages," IAB Discussion Paper 201531, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    6. Elizabeth Weber Handwerker & James R. Spletzer, 2015. "The Role of Establishments and the Concentration of Occupations in Wage Inequality," Working Papers 15-26, Center for Economic Studies, U.S. Census Bureau.
    7. Annette Bernhardt & Rosemary L. Batt & Susan Houseman & Eileen Appelbaum, 2016. "Domestic Outsourcing in the United States: A Research Agenda to Assess Trends and Effects on Job Quality," Upjohn Working Papers and Journal Articles 16-253, W.E. Upjohn Institute for Employment Research.
    8. Pedro S. Martins, 2016. "The third worker: Assessing the trade-off between employees and contractors," Working Papers 75, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    9. Guido Matias Cortes & Andrea Salvatori, 2016. "Delving into the Demand Side: Changes in Workplace Specialization and Job Polarization," Working Paper series 16-21, Rimini Centre for Economic Analysis.
    10. Sasan Bakhtiari, 2011. "Efficiency and Outsourcing: Evidence from Australian Manufacturing," Discussion Papers 2012-07, School of Economics, The University of New South Wales.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:indrel:qt6s89498v. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff). General contact details of provider: http://edirc.repec.org/data/irucbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.