Must-Read: Arindrajit Dube and Ethan Kaplan: Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards

Arindrajit Dube and Ethan Kaplan (2010): Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards:

Outsourcing of labor services grew substantially during the 1980s and 1990s….

Two occupations… janitors and guards…. The outsourcing wage penalty ranged from 4% to 7% for janitors and from 8% to 24% for guards… 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.