International Outsourcing, Labor Unions, and Job Stability: Evidence from U.S. Manufacturing in the 1980s

After the results from Feenstra and Hanson (1999) and Diebold et al. (1997) are combined, three questions arise: Did international outsourcing lead to a deterioration in the job stability of workers in manufacturing industries in the 1980s? What was the impact on workers of different skill levels? Can labor unions moderate the impact of international outsourcing on workers? This study employs CPS data, the NBER Manufacturing Productivity Database (Bartelsman and Gray, 1996), and the outsourcing data in Feenstra and Hanson (1999) to analyze the impact of international outsourcing, labor unions, and the interaction between outsourcing and labor unions on workers' job retention rates. The results of this study show that international outsourcing decreases blue-collar but not white-collar workers' job retention rates. Unions, however, can mitigate the negative impact of international outsourcing on the loss of blue-collar workers' job stability. An increase in R&D expenditure enhances the job stability of white-collar workers.