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Outsourcing Jobs Is Changing What It Means to Be An Employee

November 12th, 2018

What will the future workforce look like?

That's a question economists, labor analysts and human resources professionals have been wrestling with for years. Outsourcing, automation, contracting, freelancing and contingent employment are all having an impact on what it means to have employees and to be one.

Now comes a Wall Street Journal article with the provocative title "The End of Employees" declaring, "Never before have American companies tried so hard to employ so few people."

The thesis suggests that a company's workforce of the future will be a mix of full-time workers, temps and independent contractors, with the latter two groups amounting to the largest share, if not nearly of the workforce. Already, "At large firms, 20% to 50% of the total workforce often is outsourced," says the article citing reports from staffing industry executives.

Outsourcing work is hardly a new trend. For decades now, companies have moved operations overseas to take advantage of lower wage rates and other savings. Initially, the overseas operations were staffed by employees of the parent company. Over time, employers hired out the work, a trend accelerated by the internet. However, because not all tasks can be outsourced overseas, employers turned to staffing agencies to take on jobs once handled by employees.

The Journal article cites several examples, including the outsourcing of warehouse work by WalMart, receptionists in the US offices of SAP and logistics management for jet engine maker Pratt & Whitney. "A similar shift is under way for higher-paying, white-collar jobs such as research scientist, recruiter, operations manager and loan underwriter, says the article. Alphabet, Google's parent company, employs some 70,000 contractors, vendors and temps to handle a broad range of work from testing its self-driving cars to reviewing legal documents and managing marketing and data projects.

How many people work in temporary, contracting and freelance jobs is, at best, an educated guess. The Bureau of Labor Statistics says just over 2% of the labor force is employed by staffing agencies, most as temporary workers. But that represents only a portion of the temporary workforce; a sizable number are hired directly as contractors or work for a contract firm, such as janitors working for a cleaning service.

"Rough estimates (of the total outsourced workforce) by economists range from 3% to 14% of the nation’s workforce, or as many as 20 million people," says the Journal. It's a trend that is predicted to continue.

"Moving noncore jobs out of a company allows it to devote more time and energy to the things it does best. When an outside firm is in charge of labor, it assumes the day-to-day grind of scheduling, hiring and firing. Workers are quickly replaced if needed, and the company worries only about the final product."

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