It promises lower costs and increased efficiency. Regulation and Restructuring Firms resort to external contracting as a means of cutting labor costs. But there is more to the story. Although corporate restructuring is largely driven by normal competitive pressures, it may also be abetted by other factors. Not the least of these may be policymakers and plaintiffs piling on laws and lawsuits of dubious merit.
Globalization opens new opportunities to downsize and then externalize functions.
Increasingly, firms that want to lower their taxes, limit their liabilities, or lighten their regulatory overload are prepared to seize those opportunities. When they do, the real compensation of American workers may suffer. Even a company's threat to exit can be enough to restrain wages. Outsourcing recently became the principal thorn in contract negotiations at companies like Ford, Chrysler, and Lockheed Martin. At Boeing Company and General Motors, the practice recently provoked full-scale walkouts.