Outsourcing, Occupationally Homogeneous Employers, and Growing Wage Inequality in the United States

This paper develops measures of the occupational homogeneity of employers as indicators of outsourcing. Findings are threefold. First, workers—particularly those in low-wage occupations who worked in smaller establishments—saw their employing establishments become more occupationally homogeneous during 2004-2019. Second, wages are strongly related to occupational homogeneity, particularly for workers in low-wage occupations. Third, changes in the occupational homogeneity of workplaces are an important contributor to growing wage inequality among workers over the first half of this period. The growing separation of workers in low-wage occupations into different employers from workers in high-wage occupations is an important part of wage inequality growth. I am grateful to seminar participants at the American Economic Association 2014 Annual Meetings, the University of Maryland, the Economic Policy Institute, the Federal Reserve Board of Governors, the Society of Labor Economists 2016 and 2017 Annual Meetings, the Center for Equitable Growth, the NBER 2018 Summer Institute, the BRIQ Institute, and the Bureau of Labor Statistics for comments, with special thanks to Matt Dey, Katharine Abraham, Andy Garin, David Autor, Erica Groshen, Sue Houseman, David Levine, Anne Polivka, Alex Bryson, David Piccone, David Weil, Nicole Fortin, Fernando Rios-Avila, and anonymous referees for particularly helpful comments and suggestions. This paper grew out of a project begun jointly with James Spletzer, and I thank him for his many contributions. Any opinions and conclusions herein are those of the author and do not necessarily reflect the views or policies of the U.S. Bureau of Labor Statistics. Research assistance from Lowell Mason and David Piccone is gratefully acknowledged.