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Domestic Outsourcing and Worker Outcomes: Evidence from Staffing Firms

Author

Listed:
  • Goos, Maarten

    (Utrecht University)

  • Salomons, Anna

    (Tilburg University)

  • Scheer, Bas

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Van den Berge, Wiljan

    (Utrecht School of Economics)

Abstract

The rising incidence of alternative work arrangements, such as outsourcing, raises important questions about worker outcomes in such non-standard labor contracts. We study this question in the Netherlands, a country with a rapid rise in flexible labor contracts, using administrative employer-employee data from 2006--2019. To identify the causal impact of outsourcing, we take advantage of a legal arrangement called "payrolling", where workers hired by one firm are placed on a staffing firm's payroll while maintaining their job duties at the original firm. We find that outsourced workers experience worse labor market outcomes compared to a matched control group. These include persistently lower employment probability, lower hourly wage growth, a lower incidence of permanent contracts, and strikingly reduced pension contributions. This suggests that outsourcing erodes employment protection and job quality and leads to long-term scarring of labor market outcomes.

Suggested Citation

  • Goos, Maarten & Salomons, Anna & Scheer, Bas & Van den Berge, Wiljan, 2025. "Domestic Outsourcing and Worker Outcomes: Evidence from Staffing Firms," IZA Discussion Papers 18228, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp18228
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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