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http://www.washingtonpost.com/wp-dyn/articles/A64696-2004Jan30.html

Anxious About Outsourcing 
States Try to Stop U.S. Firms From Sending High-Tech Work Overseas 

By Greg Schneider
Washington Post Staff Writer
Saturday, January 31, 2004; Page E01 

State and federal lawmakers are finding little success in efforts to
stop technology companies from sending jobs overseas. But a paragraph
buried in the giant federal spending bill the president signed Jan. 23
could pave the way for state laws around the country aimed at
preventing the export of white-collar jobs to cheaper foreign markets.

The paragraph prohibits the federal government from awarding certain
contracts to companies that will perform the work overseas. The
measure expires at the end of September, and industry officials say
few contracts are likely to be affected.

But the provision sets a precedent that information technology
companies say could stoke a national backlash against them. Such
companies are at the forefront of a trend of moving service jobs
offshore -- jobs such as computer technical support and software
programming -- and giving them to English speakers in India, the
Philippines, Russia and other countries with lower wages for such
work.

Critics say the trend contributes to the U.S. economy's "jobless
recovery," along with the more extensive loss of manufacturing jobs
transplanted overseas. Last July, for instance, U.S. firms shipped as
many as 30,000 new service-sector jobs to India while eliminating some
226,000 in this country, according to a recent study by researchers at
the University of California, Berkeley.

Forrester Research has estimated that 3.3 million U.S. service-sector
jobs will flee to foreign countries over the next 15 years, along with
$136 billion in wages.

They'll be drawn by stark economics: Computer programming jobs that
pay $60,000 to $80,000 per year in the United States can go for as
little as $8,952 a year in China, $5,880 in India or $5,000 in the
Russian Federation, according to the UC-Berkeley study.

Harris Miller, president of the Information Technology Association of
America, said companies could suffer if they are unable to use cheaper
foreign workers to stay competitive.

The clause in the federal spending bill "sends a signal to the rest of
the world that it's okay to become protectionist," Miller said. "It
also gives a certain amount of aid and comfort to people at the state
level who are trying to promote similar legislation: 'The feds did it,
why can't we?' The total amount of dollars [involved] could be
substantial."

So far this year, eight states have taken up legislation aimed at
preventing public dollars from going to companies with workers
overseas, according to the National Conference of State Legislatures.
In Maryland, state Del. Pauline H. Menes (D) re-introduced such a bill
after having one die in committee last year.

Menes said she became concerned after learning last year that welfare
recipients in Maryland who call a help-line with questions about their
food stamps may be connected to a private contractor's call center in
India or Mexico.

"I think it's very inappropriate for a state to fulfill services by
out-of-country individuals when they have well-qualified people in
their own state . . . and they choose to allow companies to prey on
the low pay in foreign countries to get their work done," she said.

The same reasoning led the state of Indiana to cancel a $15 million
contract last fall with a company that would have administered
unemployment services from a call center in India. State Sen. Jeffrey
Drozda (R) then introduced a bill to prohibit offshore work in all
state contracting. The measure is up for a vote by the full Indiana
Senate on Monday.

"Pure and simple, this is a jobs bill," Drozda said. "I'm a
conservative Republican, but I have the support of many labor
organizations."

The AFL-CIO has mobilized support for such bills around the country,
urging not only outright bans on overseas contracting but also an end
to tax incentives that encourage overseas work and measures that force
contractors to disclose where their employees are located.

New Jersey state Sen. Shirley K. Turner (D) introduced the first
anti-offshore legislation nationwide in 2002, which passed that
state's Senate unanimously but failed to come up for a vote in the
Assembly. She has re-introduced it this year, and said the provision
in the federal spending bill should boost its prospects.

The federal measure is far more limited than the various state
proposals. It applies only to contracts that involve competition
between a federal agency and a private contractor, prohibiting the
winning contractor from performing the work outside the U.S, and it
expires at the end of fiscal 2004.

Stan Z. Soloway, president of the Professional Services Council, which
represents high-tech government contractors, said he knows of no such
competitions that have resulted in jobs going overseas. Security
restrictions often keep government contractors from using foreign
workers, he said.

Miller, of the ITAA, said the whole issue has been overblown. He
estimated that in the entire information technology industry -- both
commercial and government work -- less than 2 percent of some 10
million jobs are performed overseas.

The ITAA is monitoring the legislation in states around the country
and helping organize business leaders to lobby against it. Companies
need the flexibility to use cheaper, offshore workers to help them
hold down costs, Miller said. What's more, information technology is
one of the few business sectors where the United States runs a trade
surplus, exporting some $8 billion more in 2002 than the country
imported.

If the United States starts throwing up protectionist barriers, he
said, other countries might do the same, "and the big losers are U.S.
workers and U.S. industry."