Why Outsourcing Is Grabbing a Larger Share of the Workforce

As corporate cost cutting becomes endemic, the search for global advantage means the biggest company and largest employer are no longer synonymous. JL

Lauren Weber reports in the Wall Street Journal:

Of the top 20 global employers in 2017, five are outsourcing and “workforce solutions” companies. In 2000, only one employer in the top 20—IBM, which offers outsourced IT services among its many businesses—fell into that bucket.Outsourcing companies are vacuuming up the world’s workers as traditional employers are handing over more of their tasks to nonemployees, a shift that has transformed the way corporations do business and had profound effects on workers’ prospects and pay.
The list of the world’s largest employers was once dominated by household names like Ford Motor Co., J.C. Penney Co., and General Electric Co., companies that made and sold things.
A new analysis conducted for The Wall Street Journal shows those names are nowhere to be found on that list today. In their place are large outsourcing companies like Compass Group PLC, Accenture PLC and other businesses that essentially lease workers to clients.
Of the top 20 global employers in 2017, five are outsourcing and “workforce solutions” companies, according to an analysis by S&P Global Market Intelligence. In 2000, only one employer in the top 20—International Business Machines Corp., which offers outsourced IT services among its many businesses—fell into that bucket.

Outsourcing companies are vacuuming up the world’s workers as traditional employers are handing over more of their tasks to nonemployees, a shift that has transformed the way corporations do business and had profound effects on workers’ prospects and pay.
The past two decades have been boom times for the outsourcing sector, with the annual value of contracts growing to $37 billion in 2016 from $12.5 billion in 2000, according to research and advisory firm Information Services Group Inc. III -0.24% The market is expected to rise again in 2017 and 2018, thanks partly to double-digit growth in big technology projects as more companies transfer massive volumes of data to the cloud.
For employers, dispatching work to outside companies saves money and lets them access skills they need without adding to their headcount. Workers in jobs that have gone to outsourcers, though, can feel moved around like chess pieces, either displaced entirely or re-badged as employees of a service provider, sometimes with fewer benefits and lower pay. A growing body of economic research suggests that outsourcing is a significant factor fueling the rise of income inequality in the past decade.
“If all the engineers are in one firm and the cleaners are in another, you get less diversity within firms and more inequality across firms,” says Nicholas Bloom, an economist at Stanford University.