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Lawmakers in eight states work to limit outsourcing

Lawmakers in California and seven other states are mulling legislation to ban American companies that ship technology jobs to countries like India.

india Updated: Jan 13, 2004 14:25 IST

Lawmakers in California and seven other states are mulling legislation to ban American companies that ship technology jobs to countries like India and use government contracts to employ cheaper labour overseas.

The legislation seeks to limit these American firms to use their contract to employ only American citizens within the US in a bid to counter outsourcing.

This comes amid a broader debate about corporate America's controversial cost-cutting practice of hiring cheaper foreign labour, especially in India.

"This is all about starting the discussion around whether we should use tax dollars to create jobs someplace else," said Washington state representative Zach Hudgins, who plans to introduce a bill this week.

California state Senator Joseph Dunn, Democrat from Garden Grove, is also weighing the issue. "I don't buy the argument that (overseas outsourcing) saves taxpayers money," he said, according to a report in the Contra Costa Times, published from San Francisco, California.

A recent University of California Berkeley (UCB) study reported as many as 14 million US service jobs were at risk of being sent overseas.

Under pressure to cut costs, American companies accelerated their use of foreign workers for more skilled positions, particularly in the high-tech sector. That trend is picking up steam in the public sector.

A recent study by INPUT Research, a market research firm in Reston, Virginia, projects that outsourcing of state and local government technology contracts will grow from $10 billion last year to $23 billion in 2008.

California, for instance, shells out tens of millions of dollars to technology companies that send some work overseas. It is difficult to estimate how many government jobs end up in other countries, according to UCB researcher Cynthia Kroll.

Concern over the controversial cost-cutting practice has escalated as California Governor Arnold Schwarzenegger, wrestling with a massive budget deficit, pushes a plan to save money by funnelling even more state work to the private sector.

But there is something particularly ironic about having low-wage workers in Bangalore and Pune answer Californians' questions about their food-stamp benefits, critics say.

In 1996 the federal government mandated that all states switch from paper food-stamps coupons to electronic benefits cards similar to ATM cards.

A division of financial giant J.P. Morgan Chase & Co. has the nine-year, $451 million contract with California to run the electronic benefits programme, from providing the cards to crediting the accounts each month.

J.P. Morgan uses an Indian company, MsourcE, to operate three overseas customer service centres that field 35,000 calls a month from the 382,000 Californians currently using the cards. Two of the call centres are in India, where staffers earn $2 to $4 an hour. The third, for Spanish-speaking callers, is in Mexico.

The federal government, which picks up all but $109 million of the $451 million tab for the programme, has no rules excluding companies that ship jobs overseas from landing the contract. Neither does California.

Critics say exporting California jobs overseas takes an even greater toll on the state's economy and it is a misuse of taxpayer funds that good jobs are sent overseas to save a few bucks. However, business leaders say blocking the flow of public jobs overseas would do more harm than good in California and across the US.

California has huge financial problems, says Harris Miller, president of the Information Technology Association of America, an Arlington, Virginia, trade group. "If you can get the same level of service, the same level of security, the same level of reliability and quality and it costs less to have a call centre outside the US, then there is more money left over for other needs."

Blanket bans on the use of overseas labour could have a chilling effect as American companies attempt to sell their own products and services to foreign governments, Miller said.

Such bans may even violate World Trade Organisation regulations or face legal challenges. Instead of enacting laws prohibiting the use of overseas labour in government contracts, Miller advocates that states give extra points to businesses that keep jobs in the United States, making it a key factor to consider when choosing a contractor.

First Published: Jan 13, 2004 14:25 IST