To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now - The New York Times
But as more companies have outsourced more functions over more time, a strong body of evidence is emerging that it’s not just about efficiency. It seems to be a way for big companies to reduce compensation costs.
Sat Sep 30 13:04:54 2017 - permalink -
Firms in the United States are legally required to offer the same health insurance options and 401(k) match to all employees — meaning if those programs are made extra generous to attract top engineers, a company that doesn’t outsource will have to pay them for everyone.
More broadly, there are a whole set of social pressures and worries about morale that encourage companies to be more generous with pay and benefits for employees who are on the same payroll.
“There was an overriding concern about equity,” said Mr. Cobb, the Wharton professor. “Firms would try to set pay so that the gap between the security guard or administrative assistant and senior V.P. wasn’t as great as you might expect, essentially by paying lower- and middle-skill workers more than they were probably worth on the market.”