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Outsourcing, or a shift of activities performed within a company to its suppliers, has become widespread. This strategic choice has become increasingly available not only to large companies and multinationals but also to smaller ones. Production networks in many sectors have thus become increasingly fragmented. Outsourcing has also been pursued by public sector organizations. Cutting labour costs by lowering pay, in- creasing work intensity and/or shifting flexibility costs to workers are just some of the motivations for outsourcing. But it can also be used to circumvent employee representation and collective bargaining systems within companies, and labour market regulations in general. Though such intentions may not drive the bulk of outsourcing decisions, any change in company boundaries is likely to impact employment, working conditions and industrial relations in the value chain. This edited volume focuses on the dynamics of outsourcing in Europe from the perspective of employees. In particular, it considers one insufficiently studied as- pect: the impact of outsourcing on working conditions and employment relations in companies. The book also collects lessons learned from the efforts of employees and trade unions to shape outsourcing decisions, processes and their impact on employment and working conditions.
Popular attention has for the most part been devoted to offshoring processes as they involve a direct transfer of jobs abroad. The impact of offshoring, or offshore outsourcing, on employment, inequality and productivity has been studied extensively, with most studies showing an inequality-enhancing effect, consistent with the theoretical expectation that trade will increase the relative wages of high-skilled workers. There is also overwhelming evidence from the United States (US) and Western Europe of the negative impact of offshoring on low-skilled workers in
terms of pay and employment. Some recent papers also show a nega- tive impact on high-skilled workers, especially in services,1 while the evidence regarding the overall demand for labour remains inconclusive. The productivity effects of offshore outsourcing reveal no clear pattern, with somewhat greater positive effects in services (Olsen 2006).
Both outsourcing and offshoring impact the effectiveness of existing worker representation structures and collective bargaining institutions and hence the ability of workers to exert control over their working con- ditions. While outsourcing involves the transfer of activities and workers outside the scope of company-level employment relations institutions, offshoring may go one step further, involving a shift to a different regula- tory regime. Moreover, transnational employment relations institutions, such as European works councils (EWCs) and transnational company agreements where they exist, become relevant in the case of offshor- ing to foreign subsidiaries. At the same time, the effects of outsourcing and offshoring in terms of their implications for industrial relations and the applicability of labour market regulations become blurred when the former is used to import workers from abroad (see Chapters 3, 7, 9, and 10). As discussed in Chapters 7 and 10, subcontracting to transnation- al labour market intermediaries has been used to contest host country employment regulations and to arbitrage between different regulatory
environments (on social dumping, see also Bernaciak, 2015). The chal- lenges involved in integrating migrant workers into national industrial relations structures have impacted their relevance (see Chapters 3 and 9).
In this context, a distinction between outsourcing and the integration of work processes is useful (see Table 2). It is particularly relevant for understanding the outsourcing of such business services as IT or the creation of shared service centres (business process outsourcing).2 As shown in Chapter 4, profound transformation of the labour process is required to allow certain tasks to be separated from others in the send- ing location. However, in their aim to achieve economies of scale and/or specialization benefits, companies may decide to centralize some activi- ties without actually outsourcing them. This can have a similar transfor- mational impact on work processes and job quality as outsourcing itself, whereby activities remain in-house although possibly shifted to another location. At the same time, companies may outsource, and shift, activi- ties such as HR-related processes without necessarily integrating them. Such separation is also likely to affect labour processes and job quality, and may represent a first step in creating an (external) integrated ser- vices centre (cf. Gospel and Sako 2010). However, some tasks are likely to remain fragmented even after an integrated service centre has been created (see Chapter 4).
This volume starts by providing an overview of the extent and dynam- ics of outsourcing. The second part focuses on the impact of production network fragmentation on working conditions in a range of sectors char- acterized by a high prevalence of outsourcing. The third part consid- ers experience with worker organizing in these fragmented production networks. Finally, the volume includes comments on the outsourcing
Outlining the outsourcing landscape in Europe, Stefan Kirchner in Chap- ter 1 compares differences in the extent of outsourcing in EU Member States and between individual economic sectors. The analysis draws on the 2013 European Company Survey, a data set that allows a unique com- parison across all Member States. It shows that the extent of outsourcing is high in Nordic countries and the Baltic States and low in Central and Eastern Europe, whereby the latter seems to remain primarily a Euro- pean offshoring destination. The differences between countries remain even when controlled for company size, skill content and industry com- position. In fact, outsourcing levels across sectors in a given country are closely related. The manufacturing, ICT and construction sectors tend to outsource the most. The overall picture is thus of highly country-specific outcomes, apparently shaped by national institutions and regulations. These, for instance, structure incentives for companies in terms of access to alternative flexibility arrangements. The considerable differences in the extent of outsourcing between countries also provide opportunities for trade unions to learn from the experience of countries more exposed to the outsourcing challenge.
are particularly difficult to anticipate and are, in the short run, de facto hidden. The organizational and human resource risks involved in out- sourcing can be addressed through participating employees and their representatives in restructuring decisions. The authors conclude that effective employee involvement can create the conditions necessary for achieving satisfactory outsourcing outcomes in terms of enhancing com- pany competitiveness.
Opening the part on the impact of production network fragmentation on working conditions, Monique Ramioul and Geert Van Hootegem analyze the impact of relocation on labour processes and job quality in both sending and destination locations. Their sample presents a vari- ety of labour processes, ranging from highly-skilled knowledge work to semi-skilled administrative work. These were relocated and integrated to improve efficiency and productivity. The analyzed functions include order processing, customer service and IT. However, in none of the cases were entire functions relocated. Instead, workflows had to be redesigned to allow decoupling. Additional functions then had to be introduced to
deal with co-ordination problems. Few individuals in the sending loca- tion were unaffected. Relocations negatively impacted job quality and increased the risk of stress in both the sending and destination locations. The new labour processes entailed less satisfying job content with fewer opportunities for learning.
In the telecommunication sector, outsourcing followed the introduction of market competition and the privatization of the incumbent firms. In Chapter 5, Virginia Doellgast and Elisa Pannini analyse the impact of outsourcing call centres in major telecommunications firms in Denmark, Sweden and Germany. The outcome was declining pay and working con- ditions for lower-skilled workers and ones who were more easily out- sourceable. The chapter links the decline in job quality to two related trends: first, jobs were shifted to subcontractors with weaker collective bargaining institutions; second, benchmarking and concession bargain- ing exerted downward pressure on pay and working conditions in the incumbent firms.
Outsourcing has affected not only the private sector but also public ad- ministration. As Anna Mori argues in her study of outsourcing by local governments in Italy, the United Kingdom (UK) and Denmark, while decisions to outsource were driven by different factors, they shared the underlying rationale of trying to circumvent public sector collective agreements and job protections. As a consequence, those transferred experienced a deterioration of employment terms and conditions. En- compassing employment relations institutions (social dialogue and col- lective bargaining) and strong legislative protection for public employ- ment cushioned working conditions in Denmark and Italy, though did not prevent increased workload. The transposition of the EU Business Transfers Directive (Council Directive 2001/23/EC) was particularly im- portant in the UK where domestic institutions proved to be weak. The directive helped maintain working conditions during restructuring.
Hiring workers through subcontractors has become the way construc- tion, shipbuilding and the meat industry operate. These sectors are also characterized by a reliance on posted and migrant workers. Based on evidence from Germany, the Netherlands, Finland and the UK, Na- than Lillie and Ines Wagner argue in Chapter 7 that subcontracting to transnational service providers has been used to contest host country employment regulation and to arbitrage between regulatory environ- ments. Though the posting of workers is regulated by EU legislation
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