Institute for Research on Labor and Employment

This paper examines drivers of domestic outsourcing through a case study of food services. It demonstrates that outsourcing is not necessarily motivated by clients’ desire to reduce costs or improve efficiency, and suggests that in some cases outsourcing may cost more than inhouse production. Instead, this study points to other kinds of financial incentives to outsource food services. For tech companies, an important incentive is to limit employee headcount in order to improve productivity metrics and thereby increase a company’s appeal to financial stakeholders. For universities, an important incentive is to obtain financing for facilities improvements from contractor companies.