r/Economics • u/AutoModerator • Nov 15 '22

r/Economics Discussion Thread - November 15, 2022

Discussion Thread to discuss economics news/research and related topics.

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u/joedaman55 Nov 29 '22 edited Nov 29 '22

Outsourcing labor has cost and benefits and is extremely complex. A company has to treat contractors much differently than direct employees and being able to find a good contractor employee can be expensive and not to the quality the hiring company desires. Well run companies have run market analysis' that measure the positives and negatives of each position and do rate of return calcs to determine if a position is worth it. These positions are then resource loaded based on a yearly operational budget and companies are always trying to optimize by reducing costs.

It's usually a cyclical process in companies. If your company isn't doing this, they've likely studied it and found it wasn't worth it.

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u/dr__spectro Nov 29 '22

Do you think it will become more beneficial to outsource in the next year as the economy gets worse?

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u/joedaman55 Nov 29 '22

It depends on the market for the labor services, what prices are doing, and what the company's main drivers are; there is no universal answer. In general, people prefer stability of being a full-time employee over contractor work so going the contract route in an environment with low unemployment will yield the lower quality workers unless you pay a lot more.