Lawmakers Want To Bar Overseas Outsourcing

From the June 2003 issue of Optimize magazine

In the halls of government, overseas outsourcing is under attack. Last year, Shirley Turner, a Democratic state senator from Mercer County, N.J., proposed the first bill that would, if passed into law, require all state contracts to be performed by either U.S. citizens or foreign citizens who work legally in the United States. Her bill, No. 1349, was unanimously approved in a vote by the New Jersey Senate in December 2002. In the months since, the bill has attracted both criticism and praise. The praise has come from unions, other workers' groups, and other states; Connecticut, Maryland, Missouri, and Wisconsin all have similar bills under consideration. The criticism has come from Indian trade groups and, domestically, the Information Technology Association of America (ITAA).

While Turner's bill doesn't specifically address IT outsourcing, it has important implications for any outsourcing vendor that includes U.S. state agencies among its clients and farms work out to lower-cost workers outside the United States. Turner proposed the bill after discovering that the call center for Families First, a New Jersey program to provide welfare recipients with debit cards for grocery shopping, had been outsourced to Mumbai, India. In response to the bill, the company that originally won the New Jersey contract, eFunds Corp. in Scottsdale, Ariz., has moved the call center to a facility in Camden, N.J. To learn more about the bill and its implications for business-technology executives, contributing editor Peter Krass spoke recently with Turner.

Q: Sen. Turner, give us an update on your bill.

A: It's in the State Assembly Committee. It's being bogged down, and it's not moving, although the chairman has indicated his willingness to hear the bill. But it has not been scheduled for a date yet.

Q: Any indication from N.J. Gov. McGreevey on whether he's inclined to sign your bill into law, should it emerge from the committee?

A: No, I haven't any idea what his position would be on that bill. However, we did receive a victory of sorts: EFunds, the company that won the state contract and outsourced the call center to Mumbai, India, just opened a call center in Camden, N.J. So they did bring those jobs back. That's a direct result of the bill and the pressure I've been putting on the company. They're concerned because their contract is up for renewal next year. My bill would not have anything to do with an existing contract, but a renewal would be affected by it.

Q: What was your original goal in sponsoring S.1349?

A: To stem the flow of taxpayers' dollars, public money, being exported offshore. We are in a recession. Our economy is sagging, and here in the state of New Jersey we have a $5 billion deficit and around a 6% unemployment rate. In many of our cities and rural areas, that unemployment number is much higher; it's double-digits, and I see these jobs as being ideal for people who are unemployed, on welfare, or underemployed. These are jobs that were paying $10 to $12 an hour before they moved offshore. I see it as a way to reduce our unemployment numbers and to stimulate our sagging economy. When we send taxpayers' dollars overseas, we get nothing back in return. The people who perform those contracts do not pay any taxes or spend money in our country or state to stimulate the economy. And for the people who are unemployed here in this country, we have to provide government services at a time when we can't afford to do it because all governments in this country are now running deficits. That's because people are not working, not making the salary they were, and therefore don't pay taxes. If we don't pay taxes, then we don't have a government.

Q: But doesn't doing the work in New Jersey also increase the cost to taxpayers? For example, it's been reported that eFunds, by moving the Families First cost center from India to Camden, will also increase its charges to the state by 20%.

A: That was a short-term gain if you just look at the immediate effect. But if you look at it on the long-term basis, we were losing a lot more in the way of money, because we have to pay unemployment insurance to people without jobs, and we also pay for services they need, such as welfare and health care. We as a government have to concern ourselves with the anti-social behavior that occurs many times because people lose their jobs, and their families become dysfunctional; there is a higher percentage of spousal, child, and substance abuse. It's the government that must provide those services when those conditions exist. Whereas with a corporation, they can just lay people off and not worry about them. As an elected official and a representative of government, we have a higher calling. We have to be concerned about the whole person and their families. We have to be there as a safety net, but that costs money. Corporations just have to look at their bottom line and how much they can save by outsourcing. We in government can't afford to outsource when the people we represent are the ones who are going to suffer as a result of it.

Q: Looking ahead, has there been any thought given to how New Jersey would enforce the law, if it passes?

A: No, we haven't looked at enforcement at this juncture. We just want the subcontractors to know when they sign with the state of New Jersey, they are bound by that agreement-that the people they are hiring will be citizens or legal aliens.

Q: Four other states are considering or introducing similar legislation. Have you been in touch with them at all?

A: No, I haven't spoken directly with any of those representatives who are considering or have introduced similar legislation, though I have gotten phone calls from the offices of legislatures in different states and also from the National Conference of State Legislatures.LINK: www.nscl.org

Q: ITAA and other trade groups are unhappy about the bill. Have they been in touch?

A: Yes, they've been in touch through their lobbyists.

Q: What's their major objection?

A: They've said it's anti-trade and, of course, I don't agree with that. I believe in trade, but fair trade. I don't believe we can have a level playing field when it comes to the salaries. The countries that are getting these contracts don't enjoy the standard of living that we enjoy in this country. So if you base it upon salaries alone, we'll lose every time. I wouldn't want to see us compete in that arena, because nobody can compete with $1 to $2 an hour and exist in this country. I have no control over corporations, because I am not involved in the federal area, where they would have to be accountable. But for taxpayers' dollars here in the state of New Jersey, I do have some authorization as to how those dollars should be used and how we can get those dollars recycled so it benefits us here in New Jersey and the U.S.A.

Q: Your bill was originally instigated by a contract for the New Jersey Family First Program, but to your knowledge, are there any New Jersey programs being outsourced overseas?

A: Not that I'm aware of. But I don't want this to become a trend. I don't believe taxpayer or government dollars should contribute to exporting jobs when we need them here at home. Job creation begins at home. We can spread our jobs abroad once our people are gainfully employed. We can't help anybody else in this world if we don't first help ourselves. We'll become a second-rate economic power if we continue in this direction. We lost all of the manufacturing jobs already-I can't find anything anymore that's manufactured in this country; it's all being made somewhere else. And now if we allow this to continue unabated, services and technology will be in a similar situation.

If we continue to encourage our young people to become computer-literate and major in computer technology, what happens when they learn that they can't find a job? They'll have to leave the country to go to work for one of these corporations? We're going to continue to have a shortage in that field.

Q: Have any New Jersey companies responded directly, either against or in support of your bill?

A: No, they have not. What I've found is that a lot of companies are cowardly. They don't want it to be known that they're outsourcing jobs. They're not proud of it, and I don't know how they could be at a time when we're supposed to be so patriotic. You can't be patriotic when our country is in an economic recession and people are unemployed here at home, and we are talking about terrorism, recovering from 9/11, and we just finished a war. It seems everybody would be patriotic and start working to bring this country back to where it was prior to the recession and 9/11.

There's also the issue of security. Many people are concerned that their vital information, including financial information, is being sent out of this country without their consent. I've received E-mails since this bill was introduced from people who are concerned. They don't want that information in the hands of foreigners; they worry about what foreigners are going to do with it. There is so much now in the way of identity fraud taking place. So we also need to look at the security and privacy issues.

This interview originally appeared in Optimize magazine, June 2003. Optimize provides 70,000 Business Technology Executives with business thought leadership and practical knowledge to bridge the gap between business strategy and execution.