Outsourcing leads to pay cuts

This is the conclusion of academic research published in the Cornell University’s Industrial & Labor Relations Review.

In the summary of the research it states:

Across a wide array of specifications, they find that the outsourcing wage penalty ranged from 4% to 7% for janitors and from 8% to 24% for guards. Their findings on health benefits mirror those on wages. Evidence suggests that the outsourcing penalty was not due to compensating differentials for higher benefits or lower hours, skill differences, or the types of industries that outsourced. Rather, outsourcing seems to have 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.

In plain English this means that the cuts in wages and benefits are not down to differences in skills, hours of the workers etc but that the out sourcing process itself has lead to the cuts i.e. in even plainer English, the workers get screwed over by the companies who take on the out sourced work.

So is the same happening in the UK? Well TUPE undoubtedly does protect workers – to an extent; certainly in a way that workers in the US are not protected and of course, for now, workers here don’t have to worry about paying for most health care but we think in the medium to long term real wages and benefits in what the research terms janitor and guard work have gone down and certainly is less than if the work had remained in house.

A simple proof of this; when cleaning was done in-house in the civil service the cleaners were part of the civil service pension scheme; it would be a shock to find any cleaner now working on the civil service estate having a pension. Out sourcing is bad for workers here and across the world.

To read the research please go here: http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1521&context=ilrreview

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