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  • Does Outsourcing Explain The Wage Gap

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    Peter Orszag
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    Increasing wage inequality in the U.S. is associated -- mainly, if not entirely -- with expanding wage gaps between companies rather than within them. But what's causing those gaps to expand? Are the high-paying companies doing something new and different, or are they simply outsourcing the jobs of low-wage workers?

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    Does Outsourcing Explain the Wage Gap

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    Increasing wage inequality in the U.S. is associated -- mainly, if not entirely -- with expanding wage gaps between companies rather than within them. But what's causing those gaps to expand? Are the high-paying companies doing something new and different, or are they simply outsourcing the jobs of low-wage workers?

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    © All Rights Reserved
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    11 views2 pages

    Does Outsourcing Explain The Wage Gap

    Uploaded by

    Peter Orszag
    Increasing wage inequality in the U.S. is associated -- mainly, if not entirely -- with expanding wage gaps between companies rather than within them. But what's causing those gaps to expand? Are the high-paying companies doing something new and different, or are they simply outsourcing the jobs of low-wage workers?

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    © All Rights Reserved
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    of 2

    6/10/2015

    Does Outsourcing Explain the Wage Gap? - Bloomberg View

    U .S .E C ON OMY

    DoesOutsourcingExplainthe
    WageGap?

    JUN5,20159:00AMEDT

    ByPeterR.Orszag

    aA

    IncreasingwageinequalityintheU.S.isassociatedmainly,ifnotentirelywithexpanding
    wagegapsbetweencompaniesratherthanwithinthem.Butwhat'scausingthosegapstoexpand?
    Arethehighpayingcompaniesdoingsomethingnewanddifferent,oraretheysimplyoutsourcing
    thejobsoflowwageworkers?
    Theoutsourcinghypothesiswouldsuggestthatthewideningwagegapisaredherring,because
    lowwageworkershavemerelybeenshuffledtoanothercompany.Indeed,newsreportswould
    suggestthatdomesticoutsourcingwhenacompanyhasoutsideworkersdocertainjobshas
    becomeadominantfeatureofoureconomy.
    Inhisbook"TheFissuredWorkplace,"DavidWeilofBostonUniversitysayscompanieshave
    outsourcedjanitorialwork,security,payrolladministrationandothertasksthatare"peripheralto
    theircorebusinessmodels,"andhepresentsevidenceofthephenomenonamongsuch
    occupations.Andyetwhenyoulookatanalysesthatattempttomeasuretheimpactofdomestic
    outsourcingontheeconomyasawhole,theresultsareunderwhelming.
    ResearchersattheBureauofEconomicAnalysis,forexample,foundthat,from1997to2006,
    domesticoutsourcingincreasedonlymodestly,to12percentoftheeconomyfrom10percent.To
    besure,theincreaseisgreaterwhenthecomparisonbeginsin1982backthen,theshareofgross
    domesticproductwasjust7percent.Still,the2006shareispresumablytoolow,andtheincrease
    overthepastthreedecadesnotlargeenough,toallowtheoutsourcingstorytobethesole
    explanationfortheriseinbetweenfirmwageinequality.
    http://www.bloombergview.com/articles/2015-06-05/does-outsourcing-account-for-the-u-s-s-wage-gap-

    1/2

    6/10/2015

    Does Outsourcing Explain the Wage Gap? - Bloomberg View

    Otherevidence,fromtheContingentWorkSupplementasurveythattheBureauofLabor
    Statisticsconductedfromthemid1990stothemid2000sindicatesthat,duringthattime,there
    wasnomajorincreaseintheshareofworkerswithoutanexplicitorimplicitcontractforlong
    termemployment.Thisdoesn'tcoverallpossibleformsofoutsourcing,however,andanother
    analysishasnotedthatthereisalackofcomprehensivedata.
    Thesevariousimperfectdatasourcesdon'tdisprovetheideathattherehasbeenabigincreasein
    domesticoutsourcing,buttheydon'tproveiteither.Theevidencealsosuggeststhatthere'sbeenan
    increaseintheshareofcompaniesearningveryhighreturnsoncapital,anditwouldn'tbe
    surprisingifthesereturnspartiallyspilledoverintowages.Thatwouldbeadramaticallydifferent
    storysuggestingthatwageinequalitymightbelinkedmoretodifferencesincompany
    performancethanwaspreviouslyimagined.
    Theonlythingthat'sclearatthispointisthatwehaveworktodotofigureoutwhat'swideningthe
    wagegap.
    Tocontacttheauthoronthisstory:
    PeterOrszagatporszag3@bloomberg.net
    Tocontacttheeditoronthisstory:
    MaryDuenwaldatmduenwald@bloomberg.net

    http://www.bloombergview.com/articles/2015-06-05/does-outsourcing-account-for-the-u-s-s-wage-gap-

    2/2

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