Offshoring State Jobs

Increasingly, state government contractors are “outsourcing” jobs to other countries where workers are paid less.

Forty-two states have sent child support, food stamp, TANF, or unemployment insurance administration jobs overseas.1 An audit revealed that 36 of 41 Washington state agencies contracted overseas—to India for English speakers and to Mexico for Spanish speakers.2 Alabama, Missouri and New Jersey contracted with eFunds Corp. when it shifted its help-center jobs from Green Bay, Wisconsin to Bombay, India.3

Unless checked, state offshoring will continue at the expense of American jobs.

It is expected that the value of offshored state and local government technology contracts will increase from $10 billion in 2003 to $23 billion in 2008.4 This is part of a national trend. Forrester Research predicts that at least 3.3 million white-collar jobs and $136 billion in wages will shift from the U.S. to low-wage countries by 2015.5

Offshoring state services decreases state revenue and increases costs.

While offshoring is justified by reduction in cost of state contracts, other costs to the state are ignored. When jobs are shipped overseas, states experience a loss in tax revenue and an increase in the need for the social services that accompany unemployment. Although these costs tend to be hidden, they are very real. The increase in expenditures on unemployment insurance, welfare payments, Medicaid, SCHIP, and housing assistance, along with a loss of tax revenue, make offshoring a short-sighted policy.

Offshoring state services encourages a low-road “race to the bottom.”

As corporations seek the cheapest labor and weakest workplace protections, more and more jobs will leave the states in a global race to the bottom. Even in India, jobs are moving from big cities to locations where wages are even lower—and in some cases companies are relocating jobs from India to China, where wages are among the lowest of industrialized nations. States cannot stop globalization, but that doesn’t mean states should help fuel the competition between their own citizens and low-paid—and sometimes exploited—foreign workers.

The public is very concerned about  offshoring.

Polls show that more than half of all voters worry “very often” about jobs moving overseas, while three-fourths of swing voters say the loss of high-tech and white-collar jobs is a serious problem.6

States are taking action to block the offshoring of state services.

Two states—Arizona and New Jersey—have prohibited offshoring in state contracts. Eight states (AZ, IL, MI, MN, MO, NJ, NC, TN) have relocated previously-offshored food stamp or TANF call centers to the United States. North Carolina converted its call center into a state-run operation. Five states (AK, CO, IL, MN, MO) require that state contractors disclose work performed offshore.

States can effectively block offshoring in spite of Agreements on Government Procurement.

Thirty-six governors signed World Trade Organization (WTO) Agreements on Government Procurement, which commit each state to give foreign companies equal consideration to U.S. companies in their procurement decisions. However, these agreements apply only to the other 23 signatories, most of which are industrialized European countries. The agreements do not apply to India, China or other countries where state services are most often offshored.

Endnotes

U.S. Government Accountability Office, “Offshoring in Six Human Services Programs,” March 2006.
Karl Schoenberger, “Secrecy the word on outsourcing,” Mercury News, February 16, 2004.
Michael Schroeder, “Unions and States Aspire to Block Job Outsourcing,” Wall Street Journal Online, March 25, 2004.
National Association of State Chief Information Officers, “Offshore Outsourcing: Contracting Out IT Services in a Global Marketplace,” February 2004.
Stacy A. Teicher, “White-collar jobs moving abroad,” Christian Science Monitor, July 29, 2003.
David Moberg, “Labor Organizes to Mobilize Ohio’s Swing Union Voters,” Business Journal Online, March 19, 2004.

Updates