Association for Public Policy Analysis & Management

Since the early 1970s, government outsourcing has been gradually but extensively used as the alternative improving efficiency and performance in delivering public service. Under the reinventing government movement in the U.S., in particular, the proponents of market-oriented reforms insist that government outsourcing will deliver positive outcomes in numerous organizational contexts. That is, government outsourcing not only delivers its promises on better economic performance, but also contributes to employee work attitudes. The literature evaluating government outsourcing outcomes has predominantly focused on the former question of the economic outcomes of outsourcing, but we have a little understanding on the latter one of how government outsourcing affects employees in their work attitudes.

This research explores potential consequences of government outsourcing in employee work attitudes. More specifically, this research brings together disparate literature on organizational slack, public service motivation (PSM), and psychological contract theory to propose theoretical foundations in understanding why and how government outsourcing may affect employee work attitudes in public sector organizations. Both scholars and practitioners alike hold the traditional belief that government outsourcing may be detrimental on employee work attitudes, but we take a more comprehensive approach considering both positive and negative theoretical perspectives in evaluating outsourcing outcomes.

This research empirically examines how employee work attitudes—job satisfaction and commitment—change over time in the federal agencies while looking for the impacts of government outsourcing. We also investigate whether government outsourcing has different impacts on managers and employees. A difference-in-difference-in-difference model is used in examining the impacts of outsourcing a debt collection program to private agencies in the Internal Revenue Service (IRS) in 2017. According to the law enacted in 2016, the IRS has outsourced its debt collection program for outstanding inactive tax receivables to four private collection agencies. Federal Employee Viewpoint Surveys covering a 6-year period between 2013 and 2018 are analyzed. The results indicate that government outsourcing does lower job satisfaction of both managers and employees. With an emphasis on the perspective of public managers and employees, this research advances a more comprehensive understanding of government outsourcing outcomes.