Leslie Haggin Geary


January 12, 2003

Offshoring backlash rising:

At both state and national levels, politicians are rushing to introduce anti-offshoring laws.

NEW YORK (CNN/Money) - In December, the State of Indiana cancelled a $15 million contract to upgrade its computer system. Why? Because workers from India would have been working on the government job.


The Hoosiers garnered national headlines. But Indiana isn't the only state that's backtracking from contracts that involve hiring foreign workers, a process called "off-shoring."


Politicians in at least eight states this year are slated to vote on bills that aim at banning foreign workers from public contracts. They include Connecticut, Florida, Indiana, Maryland, Michigan, New Jersey, North Carolina and Washington.


Meanwhile, there are eight bills pending in Congress that in some way restrict the use of foreign workers in the United States or limit non-citizens from participating in government contracts.


One of those bills is from presidential candidate John Kerry. The Democratic senator wants call center operators to identify themselves and their location.


The Kerry bill wouldn't ban offshoring, but it's nevertheless seen as part of the growing backlash -- and a sure sign that the issue will make its way into presidential debates, as well.


In fact, the use of foreign workers to perform government tasks "is causing both Democrats and Republicans to feel pressure from constituents," says Justin Marks, research analyst National Conference of State Legislatures. "I don't think it will go away any time soon."


The new political hot potato

The issue once garned scant notice. In Maryland, Democratic Assembly member Pauline Menes introduced a bill last year seeking to prohibit contractors or subcontractors from hiring overseas employees to perform work for the state. "It got no attention whatsoever," said Menes. "It was under the radar screen. No one seemed to know or care. I just assumed interested parties would come and speak. Well, they didn't."


But suddenly, Menes says, her phone is ringing off the hook.


"I have a folder of e-mails, letters and calls from newspeople all over the country," said Menes who will reintroduce her legislatoin in coming weeks. "The whole issue has just caught fire."


Despite hue and cry over the issue, off-shoring isn't a new phenomenon. Blue-collar workers have watched jobs move overseas for years, and many unions have opposed legislation, such as NAFTA, that they said threatened American jobs.


What's different now is that white-collar and service professionals - from IT workers to tax preparers, even radiologists - have joined the ranks. Forrester Research estimates that 3.3 million white-collar jobs, representing $136 billion in wages, will move offshore in the next 15 years.


Such predictions don't sit well when current job prospects are dim.


Michigan Rep. Steve Bieda, Democrat, who has introduced anti-offshoring legislation in his state and has launched an online anti-offshoring petition drive to support his bill.


Bieda learned offshoring was a potent issue when he was campaigning door-to-door last year. Unemployed constituents kept giving him the same story. "It was like a uniform answer: 'I worked for this company and my job was outsourced to foreign nationals," he said. "It was quite an eye-opening experience."


In Washington State, for example, Rep. Sandra Romero and Rep. Zack Hudgins, both Democrats, introduced a bill that would ban non-U.S. workers from state jobs. Romero said she decided to co-author the bill after she was contacted by state employees who live in her district.


"They're very concerned," she said. "How can state employees compete with 50-cent-an-hour employees in overseas, like India for example?"


But does banning off-shoring make sense?

The controversy puts states in an awkward position. Do they save taxpayer money or try to save constituents' jobs?


Consider the case of Indiana. The $15.2 million contract the state cancelled with Tata America International Corp. was $8.1 million cheaper than the next lowest bid. No Indiana-based firm even bid on the job.


Nevertheless, state lawmakers are poised to make sure similar deals aren't made in the future. Specifically, a proposed bill seeking to ban non-U.S. citizens from working on state jobs will be introduced to the Indiana Senate in January.


"It's a bipartisan issue," says Jeff Drozda, the Republican state senator who introduced the bill. "The bottom line is we're standing up for American workers or we're not."


Drozda argues that cost savings from cheaper contracts aren't necessarily what they seem.


"If we can't employ Hoosiers who are out of work, then they'll rely on the state for assistance," he says. "So while it may initially cost more to pay for a contract [employing U.S. workers], over the long term, it will have a positive benefit."


Others disagree.


"It doesn't make sense that taxpayers in Indiana, for example, should have to pay more for services so people in Florida or somewhere else can get more jobs," said Stuart Anderson, executive director at National Foundation for American Policy, a newly formed think tank devoted to trade and immigration issues.


"All you do is take more money out of taxpayers' hands that could be used for something more useful, like education or other purposes. These are political decisions that have no economic or fiscal basis."


One thing seems clear, says Marks from the National Conference of State Legislatures: "There will be more debate on this, that's for sure."

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