Most State Governments Shipping Jobs Overseas
More than 40 state governments have contracted with companies in India and other low-wage countries to help administer new food-stamp and other taxpayer-funded programs, according to a study released Wednesday by a technology workers union.
The practice by state agencies of sending work overseas has proliferated despite efforts in many legislatures to impose restrictions on doing so, the study said, and foreign firms are becoming more aggressive in their efforts to win government contracts.
“Taxpayers clearly aren’t informed,” said Marcus Courtney, president of the Washington Alliance of Technology Workers, or WashTech, in Seattle. “Citizens don’t necessarily know that their tax dollars are being spent overseas. This is being done quietly and secretly. Oftentimes, the state governments don’t even know that this is going on.”
In California, at least 11 companies specializing in “offshore” contracting are on the list of state government vendors, according to research commissioned by WashTech, an affiliate of the Communications Workers of America.
One Indian firm, R Systems Inc., has done more than $3 million in computer programming for state agencies, the study said. In addition, California is one of 42 states using overseas call centers to dispense information about a new debit card program that has replaced food stamps throughout the country.
The report’s authors acknowledged that they were able to document only a portion of state government work performed overseas, and could not provide a reliable estimate of the total dollar volume of such contracting. Some states refused to disclose contact data, some lacked centralized vendor information, and some were not certain whether work was being done in the U.S. or overseas.
Nevertheless, they said the study represents one of the first efforts to quantify a practice that may have contributed to the loss of U.S. jobs, and it could increase pressure on politicians to impose restrictions. Legislation has been introduced in 36 states, including California, to limit the transfer of jobs overseas, show preference to domestic firms or increase disclosure of foreign contracting.
“A lot of people feel there is something wrong about using taxpayer dollars to create jobs offshore when there are people in this country that are without jobs,” said Philip Mattera, the report’s principal author. “That’s a policy issue.”
Advocates of this practice said state government contracting accounts for only a sliver of the total market for overseas contracting. Even so, they said efforts to restrict states from contracting with companies that send jobs abroad would saddle the taxpayers with higher costs and alienate key U.S. trading partners.
“This is a big issue,” said University of Maryland trade economist Peter Morici. “It’s really one of the frontiers of trade policy right now. It’s one of the key ways that unions are trying to maintain their lock on a marketplace when that lock is being eroded by technology.”
Cliff Justice, who is a specialist in overseas outsourcing at EquaTerra, a Houston-based advisory firm, said legislation under consideration in California and other states would invite retaliation by India and other countries that were providing services to the United States.
“This is a global economy,” Justice said. “We are a large consumer, but we also sell a lot into these countries. When we start putting up barriers to imports, then they start putting up barriers to our exports. It causes job loss ultimately.”
The California contracts cited in the WashTech study included a recent $175,000 project by R Systems to develop a Web-based intranet for local law enforcement agencies seeking information on released sex offenders.
The Indian company had previously done about $500,000 in programming work involving sex-offender data for the state Department of Justice, it said, as well as $2.5 million in other contracting with the Integrated Waste Management Board and the departments of Corrections, Mental Health, Aging and Child Support Services.
California, like many other states, was unable to provide a comprehensive list of contracts involving work performed overseas, the study authors said. A spokesman for the Department of General Services in Sacramento, which handles state procurement, confirmed that no such list was available.
The WashTech study identified $75 million in offshore contracts throughout the country by matching names from a list of 18 foreign firms with contract information provided by cooperating state governments. But it said its list was far from complete because it did not include U.S.-based contractors that did some of their work abroad.
WashTech said states needed to do a better job of compiling information on overseas contracting so elected officials could make informed decisions about the need for potential restrictions. “We did our best to estimate how much of this is going on,” said Mattera. “Ultimately, we found that it is really unknowable.”
Atul Vashistha, founder of neoIT, a San Ramon, Calif., consulting firm that helps U.S. companies send work abroad, said that state contracting probably represented no more than $100 million or so of a total IT market exceeding $15 billion a year to send jobs abroad. But he added that state governments, like private companies, had an obligation to consider the social costs along with the cost savings.
“It’s the responsibility of the corporation or the state government, whoever’s doing the outsourcing, to look at how the people that are being displaced are handled,” Vashistha said.
The WashTech study said some foreign companies were moving aggressively to capture a bigger share of the state government market by getting on states’ “qualified” or “approved” vendor lists, hiring former government officials to represent them and making contributions to state politicians.
“The time for reform is now, before this trend spins out of control,” Courtney said.
