There is something happening in the workplace today; what started in large global corporations has spread throughout the employment ecosystem.
There is a vast outsourcing of tasks that companies see as ‘non critical’.
Instead of handling these tasks in-house, companies will send them to outsourcers, facility management firms, and other subcontractors.
Some have argued, rightly so in many cases, that this is keeping a lid on wages, which can contribute to income inequality; while I would argue that while this is occasionally true, this movement has also led to wage normalization.
In a free market economy, if one firm can provide a service for less than another can provide it themselves, said outside firm should be the beneficiary. This is no different than other industries providing services to companies that are best outsourced; from utilities providing power, light, water and more, to sanitation services, to real estate management services.
Since the invention of the corporation, systems have evolved to drive efficiencies.
This is a form of business evolution. Corporate Darwinism.
This trend shows no signs of abating, as companies continue to realize the value of shedding non-core assets and capabilities to partner with best of breed providers, like TxMQ, to offer services ranging from general staff augmentation to specialized tasks like application development, systems administration, and database management.
Surely some employers took to outsourcing to avoid entanglements with unions, and workplace regulations, while others did so as a ‘balance sheet’ management maneuver, to shift costs from head count, to recurring operational expenses via staff augmentation, or project based services.
In its simplest form, specialized firms and contract shops have found a way to create a profit center, out of what historically were cost centers for large companies.
Does this trend actually lead to a reduction in average wage?
In our experience, it has not. More often, in fact, employees of firms like TxMQ are paid better than they would be as internal staff at global corporations.
While the overall trend of wage growth or contraction is hard to measure, since subcontracting can take many forms, we know this is a huge segment of the employment market.
In a study by Lawrence F. Katz of Harvard and Alan B. Krueger of Princeton, a former chief economic adviser to President Obama, they concluded that independent contractors, on-call workers and workers provided by contracting companies or temp agencies accounted altogether for 94 percent of employment growth over the last 10 years.
By most measures, contract or consulting work accounts for almost one in six jobs today. That is 24 million jobs, nine million more than 10 years ago.
In addition, as the global economies continue to show healthy signs of healing and even growth, it becomes more challenging for companies to compete for talent. Specialized firms focused on recruiting as a core competency, have a dramatic advantage over many companies, no matter how large those companies are.
From flexible work arrangements, generous bonuses, and liberal holiday policies, it can be hard for the global 2000 to compete.
There will always be a need for internal Human Resources departments.
Internal HR departments are and should be a core competency for any company with any staff. As to whether we should burden them with recruitment, or simply have them focus on retention, and corporate culture and compliance…that is for the employer to decide.