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Does International Outsourcing Depress Union Wages?

  • Sebastian Braun
  • Juliane Scheffel

In this paper, we provide first empirical evidence on the effect of outsourcing on union wages using linked employer-employee data for Germany. We find that low skilled workers experience a decline in the union wage premium when working in industries with high outsourcing intensities. The finding applies to both firm- and sector-level agreements. Hence, outsourcing appears to deteriorate the bargaining position of unions. Outsourcing is not found to have a negative effect on the wages of low skilled employees not covered by collective bargaining agreements. While wages of medium skilled workers are largely unaffected by outsourcing, high skilled workers see their wages rise in industries with a high level of outsourcing. There is no interaction between coverage and outsourcing for these skill groups.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2007-033.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2007-033.

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Length: 26
Date of creation: May 2007
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2007-033
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  1. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  2. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
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