Working Papers

The 2010 National Organizations Survey

Examining the Relationships Between Job Quality and the Domestic and International Sourcing


This paper presents the results from the 2010 National Organizations Survey (NOS). The survey is representative of U.S. full-time jobs. It collects data on the international and domestic sourcing practices of United States organizations, including non-profit and public organizations as well as for-profit firms, and on the characteristics of domestic jobs. Using an approach similar to what is being used in Europe and Canada, the survey collects data on domestic and international sourcing according to eight standardized business functions intended to be mutually exclusive and cover all activities of the organization. The business function list includes: 1) the primary business function (typically associated with main product or service produced), 2) research and development (R&D), 3) sales and marketing, 4) transportation, logistics, and distribution, 5) customer and after-sales service, 6) management, administration, and back office functions, 7) informational technology (IT) systems, and 8) facilities maintenance. For organizations engaged in international sourcing, the distribution of sourcing costs are collected across three types of countries (1) “developing” with much lower costs, 2) “emerging” with moderately lower costs, and 3) “industrialized” with costs similar to or higher than to the United States). The survey collects data on the earnings distribution of domestic employment by business function. The ability to quantify the importance of international sourcing practices by business function allows the relationships between international sourcing and employment and wages to be examined.

The survey finds about 2/3rds of employment in the primary business function, that almost one-half (48%) of full-time employees work at organizations that have some domestic outsourcing, and almost one-quarter (23%) work at organizations that source internationally. International sourcing is concentrated in organizations in the goods producing and trade industry groupings. It is spread across all functions, including R&D, and is mainly carried out by large firms through foreign affiliates. Most international sourcing is to high cost locations, and secondarily to very low cost locations. Non-goods-producing organizations are more likely to source from low cost locations. Domestic outsourcing is concentrated in transport, IT services, and facilities maintenance business functions, and no consistent relationships between domestic outsourcing and employment or wages were evident in the data. In general, international sourcing is related to above-average high-wage domestic employment and below-average low-wage domestic employment. For the primary business function, the share of domestic employment decreases as international sourcing increases; the distribution of earnings, i.e., shares of low-wage or high-wage employment in the primary business function, is not significantly related to the international sourcing of this function. This pattern is consistent with at least two outcomes: international sourcing of the primary business function substitutes for domestic jobs in the primary business function; or the international activity expands markets and thus requires an expansion of domestic employment in support functions more than in the primary business function. In either case, domestic high-wage and low-wage jobs in the primary business function appear to expand or contract at similar rates. The relationships between an organization’s domestic employment (and job quality) and international sourcing costs vary by support function. For example, as international sourcing increases, the share of domestic employment increases in customer service, IT, and sales and marketing. As international sourcing increases, the share of high-wage jobs in customer service, facilities maintenance, management and administration, and transportation also increase. R&D was the only business function where the share of low-wage jobs increased with higher international sourcing costs.