Memorandum: Data Needs for Research on Domestic Outsourcing in the United States

Available evidence points to substantial growth in U.S. firms’ outsourcing of various functions to domestic as well as foreign suppliers, a phenomenon sometimes called the vertical disintegration of the firm. Although receiving less attention than its offshore counterpart, domestic outsourcing is changing how work in the U.S. is organized across firms and industries. Good data allowing documentation of such supply networks is critical to the accuracy of many analyses, including employment impact analyses of a wide range of federal, state, and local economic policies; occupational workforce projections; and sector and industry productivity statistics. Moreover, although there are many reasons why firms outsource tasks, domestic outsourcing may be an important mechanism by which some firms cut labor costs including compensation, thereby contributing to the growth in earnings inequality. Yet, large data gaps limit the ability to conduct research on how outsourcing is changing the organization of work and affecting workers’ earnings and other aspects of job quality. In this memo, we offer strategies to improve the data to document and analyze the prevalence of domestic outsourcing in the U.S. and its effects on wages and other measures of job quality. The memo builds on a white paper we recently released with our co-authors Rose Batt and Eileen Appelbaum, Domestic Outsourcing in the U.S.: A Research Agenda to Assess Trends and Effects on Job Quality