Companies are increasingly acquiring talent through outsourcing. In manufacturing, for example, the share of workers employed by outside agencies has risen from just 2% in the 1980s to more than one in 10. This trend toward using agencies has lowered costs, because the workers typically earn less—in one study, 29% lower for team assemblers. The change shows up in the wages of manufacturing jobs relative to all jobs for comparable education levels. In the 1980s, ­manufacturing jobs used to pay almost 15% more overall than comparable jobs in other industries; in the 2010s, that fell to a 10% ­premium. However, benefits packages for ­manufacturing have improved.

Similar patterns are affecting employers and workers in other industries. Many companies use service agencies to provide them with noncore workers such as security guards and call-center operators. Some use agencies for core work, too. Estimates of the share of outsourced workers have been in the range of 20 to 50% of a company's workforce. Alphabet, the parent of Google, has had more outsourced workers than full-time employees.

Recently, this trend has raised challenges particularly for outsourced work in other parts of the world. As the coronavirus pandemic spread, companies found that workers in India, the Philippines, and other locations had difficulty working remotely, because housing conditions, Internet services, and other infrastructure did not adequately support working from home.

 

1. Would you say that the trend toward outsourcing has been beneficial overall? Why or Why not?
2. What are some challenges that companies face when outsourcing? 

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