Outsourcing, Occupational Restructuring, and Employee Well-Being: Is There a Silver Lining?

Authors


  • The study was funded by the Finnish Work Environment Fund. The first author's work has, in part, been supported by the Academy of Finland (project no. 134057) and the second author's work by the Finnish Funding Agency for Technology and Innovation, TEKES (project no. 1795/31/2010). The data construction and decomposition computations were conducted at Statistics Finland following their terms and conditions of confidentiality. To obtain access to the data, please contact the Research Laboratory of the Business Structures Unit, Statistics Finland, FI-00022, Finland. We are grateful to Mika Haapanen and Antti Kauhanen for their comments. We are also grateful to three anonymous referees for valuable comments that have greatly improved the article. An earlier version was presented at the EALE conference in Bonn. Paul A. Dillingham has kindly checked the English language. The usual disclaimer applies.

Abstract

This study examines the relationship between outsourcing and various aspects of employee well-being by devoting special attention to the role of occupational restructuring as a conveying mechanism. Using linked employer–employee data, we find that offshoring involves job destruction, especially when the destination is a low-wage country. In such circumstances, staying employees’ job satisfaction is reduced. However, the relationship between outsourcing and employee well-being is not entirely negative. Our evidence also shows that offshoring to high-wage countries stimulates the vertical mobility of employees in affected firms in a manner that improves perceived well-being, particularly in terms of better prospects for promotion.

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