Companies are contracting out more jobs—that’s not great for workers

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Until the 1980s, big companies in America tended to take a paternalistic attitude toward their workforce. Many corporate CEOs took pride in taking care of everyone who worked at their corporate campuses. Business leaders loved to tell stories about someone working their way up from the mailroom to a C-suite office.

But this began to change in the 1980s. Wall Street investors demanded that companies focus more on maximizing returns for shareholders. An emerging corporate orthodoxy held that a company should focus on its "core competence"-the one or two functions that truly sets it apart from other companies-while contracting out other functions to third parties.

Often, companies found they could save money this way. Big companies often pay above the market rate for routine services like cleaning offices, answering phones, staffing a cafeteria, or working on an assembly line. Putting these services out for competitive bid helped the companies get these functions completed at rock-bottom rates, while avoiding the hassle of managing employees. It also saved them from having to pay the same generous benefits they offered to higher-skilled employees.

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