Change some of these loopholes and the outsourcing overhead becomes far more significant. Though employing large numbers of part time workers works better at scale so the practice has some advantages.
There is a tremendous exposure to legal risk both for the contracting company and the company that hires the contracting company if they employ workers who do not have the right to work in the US. Having worked with IBM's legal department I'm pretty sure they run audits on any company they employ to insure they comply will all laws (they are really fussy about that stuff). In the New York Times article the Apple contract janitors weren't illegals either just under paid.
Now the 'gig' economy? Sure. People who hire day laborers from the parking lot of the home improvement store? No question. But running a contracting business? I've not seen anything that backs up that assertion, and certainly nothing that is 'significant.'
In practice that's very rarely an issue. One recent case had Target using a cleaning service that way paying illegal immigrants below minimum wage. The government did not care and the only impact was being forced to pay actual wages. And remember that's the worst case, which means sticking with minimum wage is safe.
Now, IBM/Apple/whatever may take steps to avoid illegal immigrants. But, the market clearing price does not have a simple illegal vs. non separation for jobs. So, companies bidding on work are faced with some hard choices.
PS: Now, if you can find examples of penalties for the big company side of things outside of the most blatant violations I would be curious.
That's why you layer it so the people taking the risk are little more than hourly employees themselves.
Big corp hire cleaning corp to clean. Cleaning corp hires local cleaner to clean. Local cleaner hires legal worker with plenty of contacts who aren't legal, gives them the cash to get the job done with what ever 'contractors' they want. While local cleaner could technically be found guilty, they'll always through the local legal employee under the bus and rarely ever get prosecuted. At worst they'll be shut down and then they'll just open up under another name. Cleaning corp is effectively immune and can always find a new local cleaner if the previous one is shut down. Big corp might not ever know what is going on, they are just paying someone who handles things for cheaper than directly employing the cleaners (at least cheaper on certain budget reports that they needed to make look better).
In California at least the SEIU union is all over employers and both well funded and well motivated to root out such abuses of the system. That they don't find them and there aren't big stories about companies they are taking to court, suggests to me that in all their looking they have yet to find this situation to actually exist.
I'm not saying they don't exist, I'm saying that I haven't seen any evidence that this is happening.
https://www.texastribune.org/2016/12/19/big-name-businesses-... Target is a ~45 billion dollar company.
It's all tiny local cleaning companies. So, sure it's not corporate policy to do X or Y nationally. But, they are not going to object to saving some money.
The issue instead was that their employer, Jim’s Maintenance, was failing to fulfill its obligations to keep proper records, including records of I-9 compliance. This failure to fulfill its contractual obligations ultimately contributed to Target’s decision to terminate its contract with Jim’s Maintenance.
So company offers services to Target, uses workers that are undocumented. Target severs the relationship as soon as they "know"[1] that the company is a bad actor which puts this company out of business.
This is how it is supposed to work, which is that people do things that are bad, they get discovered and they end up losing more than they gained from their bad behavior.
But to my original point, Target understood the legal risk of hiring a firm that hired people who were not authorized to work in the US, and once they were made aware of it they stopped. In California this is something the SEIU does, if they suspect a company is using illegal workers they will go tell people who employ them that what they are doing in a paper trail sort of way (registered mail etc). That forces the company to break that relationship. As a result, it is quite difficult to run this sort of thing and harder to make any money at it. All this has the appropriate chilling effect.
[1] I realize that clearly someone inside the Target stores knew this was going on, but in this case it is once the corporate entity knew. I'm curious if the store manager was fired or not.
So, sure when a huge lawsuit shows up Target is going to fire that company. But, notice the issue was not the workers bing undocumented it’s them making below minimum wage and then suing Target.
There are definitely industries in which hiring (suspected, but very likely) illegal immigrants is standard practice.
If you fail to do that, you violate the Immigration Reform and Control Act (IRCA) which was passed in 1986 and subjects the business to fines, penalties, potentially the loss of business licenses and prosecution under the RICO act.
Is it? A friend of mine works in documents at an old-school whiteshoe law firm and they converted all of their administrative staff to a 3rd party a couple years ago. He didn't get fired or laid off, he just works for the other company now.