Workers' Wages Sink as 'Domestic Outsourcing' Grows

by Martha C. White

Say "outsourcing" and Americans think of call centers in India or factories in China. But American workers increasingly are being forced to navigate a byzantine system of third-party contractors that leads to lower pay and fewer benefits.
Call it "domestic outsourcing."
A new report from the National Employment Law Project says that domestic outsourcing makes it harder for workers to organize and effectively lets companies pass the buck on taxes, benefits and worker safety.
"This business model of subcontracting has become increasingly ubiquitous," said Ruth Milkman, sociology professor at the City University of New York Graduate Center.
Debbie DeCrow knows this firsthand. After 18 years driving a school bus in the greater Memphis area, the 60-year-old and her fellow drivers recently were summoned into an auditorium with one week left in the school year. They were all fired and then invited to apply for jobs at the company that was taking over the district's transportation, Durham School Services.
Shelby County Schools defended the decision to outsource busing following its 2013 merger with Memphis City Schools. "The District saved approximately $1.9 million from its general fund by outsourcing all transportation services in 2014-15," spokesman Shawn Pachucki said via email. "We are told by Durham that the same base pay rate will be maintained for all District drivers that are hired," he said.
"We are still formulating the wage rates," Molly Hart, spokeswoman for National Express Corporation, parent company of Durham School Services, said via email.

'I knew all of their names'

DeCrow, who had been making more than $15 an hour as a school district employee, said Durham offered a pay rate of $10.25 an hour, with no sick days or paid vacation.

    "The job I do, I am worth more than $10 an hour."

"I knew all of their names, I kept up with their birthdays. I knew if there had been a death in the family," she said of the students she drove. "The job I do, I am worth more than $10 an hour."
This kind of scenario is common, NELP says. "Once outsourced, workers' wages suffer as compared to their non-contracted peers," NELP said. The drop can be steep, the group said: Janitors' wages fell by seven percent, port truck drivers' pay dropped by 30 percent and food service workers lost $6 an hour in wages.
As in the private sector, government contract workers earn less: In a 2009 report, the Economic Policy Institute found that more than twice the number of federal contract workers didn't make enough to lift a family of four above the poverty threshold when compared to workers employed directly by the government.
A study released Tuesday by advocacy group In The Public Interest says that contracting out jobs for corrections officers to trash collectors chips away at the economic stability that civil service jobs used to give families and communities. The group wants governments to examine the economic impact of outsourcing and mandate wage and benefit standards for contractors.
"Governments create and have the potential to create millions of low-wage jobs if they choose to contract with low-road contractors, thereby contributing to the disappearing middle class," the research warns. Taxpayers end up subsidizing these workers when they rely on food stamps, Medicaid and other forms of public assistance.
"Workers have less money to spend," said Daphne Greenwood, professor of economics at the University of Colorado, Colorado Springs.

Privatizing - "Domestic Outsourcing" - it's all the same. It's all designed to relegate middle class Americans to the lower class.