"The rise of outsourcing and other nonstandard work arrangements has had a particularly deleterious effect on lower-and middle-wage employees. Outsourcing limits the amount of within-firm heterogeneity of abilities and rewards, allowing firms to disperse wages without triggering perceptions of inequity among high- and low-skilled workers.. Rather than administrative rules and procedures determining the pay, once outsourced, the external market for a job becomes a reference point through which wages are set," said the paper.