Outsourcing: mass layoffs and displaced workers' experiences

Purpose - Outsourcing of information technology jobs outside the USA has resulted in social costs in the form of mass layoffs and displaced workers. The purpose of this paper is to show the social cost of outsourcing from a transaction cost economics (TCE) perspective. Design/methodology/approach - The paper analyses the incidences of mass layoffs in sectors prone to outsourcing and its consequences on displaced workers. Mass Layoff Statistics (MLS) and the Displaced Workers Survey (DWS) data generated by the Bureau of Labor Statistics (BLS), USA, between 1996 and 2010, are examined for this purpose. Findings - Outsourcing as a reason for mass layoffs has continued to persist up until 2010. Displaced workers experienced earnings losses after job losses and reemployment. The more educated workers had higher post displacement reemployment rates, while older persons suffered the most earnings losses. Research limitations/implications - The data pertain to the period 1996 to 2010, including the “Dot Com Bubble Bust” and the “Great Recession.” Changes in data collection methods by BLS over this time period makes it difficult to compare some of the data. Practical implications - For policy makers, managers and workers, this study focuses attention on the outsourcing by information technology dependent sectors and the accompanying social costs in the form of displaced workers. Originality/value - Most papers focus on the efficiency gains of outsourcing but this paper focuses attention on the social cost of outsourcing, which is under‐researched and often overlooked.