Stop Government Support for Offshoring Our Jobs
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No taxation without representation! — 1776
Our taxes should benefit us! — 2004
It's a simple proposition: the taxes we pay should be used to benefit us as U.S citizens, not multi-national corporations who pay little or no taxes at all.
Federal, state, and municipal governments are increasingly outsourcing work to low-wage workers in foreign countries. Touted as a way to save money for government operations, and make best use of tax dollars, offshoring of government work actually undermines local employment, the local tax base, and our communities.
The Offshoring of Government work:
- Exacerbates unemployment and workforce dislocation and deprives tax-payers of job opportunities, including industries and jobs the government has expended tax resources to attract.
- Erodes federal, state, and local revenues by drawing jobs and income away from the United States. Workers in foreign lands do not pay taxes here, nor do they contribute to the Social Security fund. And the offshoring corporations use international taxdodges (no hyphen) to avoid paying their fair share of U.S. taxes.
- Provides less privacy protections for Americans whose personal information may be transmitted to locations outside the United States.
- Circumvents professional licensing requirements.
- For states and localities, there is little actual tax savings derived from offshoring government work. Much of the "savings" go to increased corporate profits and bloated CEO salaries rather than reductions in what the state actually pays. Moreover, government is forced to fight expensive anti-offshoring lawsuits by citizens and government employees outraged at this misuse of tax funds.
According to State Senator Shirley Turner [D], New Jersey: "If people don't work, they don't pay taxes, and if people don't pay taxes we can't provide the services that we're responsible for providing. Companies with multi-million dollar state contracts shouldn't be allowed to take the money and then go hire cheap labor in foreign countries to increase their profits from our New Jersey taxpayers. I hope we can bring the jobs home because -- if they can train the people of Bombay, they can train people right here in America..."
The Road From Privatization to Offshoring
It used to be that government work paid for by our taxes was done by government employees with decent wages and benefits, or by companies under government contract who paid their workers at "prevailing" unionlevels (no hyphen). Those employed by our taxes used to be able to buy homes and put their kids through college, they had medical coverage, could take vacations, and had something to retire on after a lifetime of labor. In their turn, they paid taxes that helped support our schools, hospitals, libraries, roads and bridges, fire and police, parks, the arts, and so on.
Then came "privatization," the transfer of government work to corporations who paid minimumwage (no hyphen) and no benefits at all to those who did the work. Privatization advocates claimed that through privatization government work could be done at lower cost, and that these lower costs would result in lower taxes. But in truth, most of the "savings" from paying minimum-wage to those who do the work go into the pockets of the business owners, corporate CEOs, and the stockholders of the companies who get the government contracts.
Now the private companies who perform government services and provide goods under contract are "offshoring" the work to low-wage countries that have no unions, no worker or environment protection laws, no privacy controls, and no data security.
Once again outsourcing advocates claim that this will result in lower costs and lower taxes. And once again we see little actual savings: taxes don't go down, and most of the contract dollars are simply transferred from government employees to CEO and stockholder pockets. For more information on offshoring in general, who benefits, and who loses, see High-Tech Offshoring.
These offshoring schemes often use multiple layers of contractor and sub-contractor firms, each one taking its profit and lavishly paying its CEO. For example, in the now infamous case of the medical transcriber who was not paid and threatened to sell patient data, the San Francisco Chronicle reported:
"...[U.C. Medical Center] contracted with a company in Sausalito, which sent the work out to 15 subcontractors, one of whom was in Florida. The Florida transcriptionist was apparently too busy, so she hired a Texas company to do the work for her, and that company outsourced the job to [a woman] in Pakistan. When you consider that every one of these individuals or companies was taking a cut of the action, you may begin to suspect someone, somewhere, might be paying too much if a medical procedure costs enough to provide five different levels of profit. But that's a different issue."
Government Offshoring on the Rise
A recent study by INPUT Research projects that outsourcing of state and local government technology contracts will more than double from $10 billion last year to $23 billion in the next few years.
A recent study by the Corporate Research Project concluded:
- Offshoring is going on to some degree in just about every state government.
- Offshoring firms are gaining increased access to "qualified-contractor lists," hiring former government officials from the "revolving door," and making state electoral campaign contributions to both parties.
- The total amount or value of state contract offshoring cannot be estimated, because most state governments do not know where their contracted-out service work is performed. And subcontracting is so common that states are often unaware of the exact identity and location of the company that is ultimately performing the work.
- States award contracts to U.S. firms and assume the work will be done domestically, but then the company subcontracts to an offshore firm without the state's knowledge. Companies that appear to be domestic sometimes are not. States may think they are dealing with a U.S. firm because it has a domestic mailing address, but sometimes that address is just a marketing office for a company that is based offshore; other firms are technically headquartered in the U.S. but do all or most of their work in offshore facilities.
Government Offshoring is Bad Public Policy
Government spending is meant to support and develop our communities, our states, and our country.
Tax money that is invested in domestic job creation provides employment for those who might otherwise be collecting unemployment benefits and ultimately public assistance to secure housing, food, and health care for their families. Instead of being tax-payers, those who would have filled the jobs locally become tax-consumers, which increases taxes rather than lowering them.
Local jobs mean more money in circulation, more money being contributed to the state and local tax base, and more spending dollars being reinvested in the local economy. That increases total tax revenue and lowers the tax share that individuals have to pay.
Offshoring government work to foreign countries has just the opposite effect. It takes money out of circulation, decreases the state and local tax base, and makes no investment in the development of our local communities.
In fact, offshoring of government work undercuts the very purposes that Government programs are meant to achieve. Last year, for example, a nationally-mandated program to benefit welfare recipients was offshored by many states, creating an even higher demand for welfare assistance.
In the case of New Jersey, after winning a seven-year, $326,000-a-month contract from the state to provide electronic benefits cards to welfare recipients, the contracting company moved its call center from Green Bay, Wisconsin, where it paid workers $12/hour, to Bombay, India, where it pays workers $3/hour.
Said New Jersey's Human Services Commissioner, Gwendolyn L. Harris:
"[I am] deeply troubled by the symbolism of a state contractor moving a call center for welfare and food stamp recipients to India."
Though profitable for the offshoring corporations, in some cases offshoring government work may actually cost more than keeping the jobs here. For example, Georgia is spending about $32 million dollars on a contract for a Food Stamp Call Center that is offshore. They could have saved $12 million dollars using a local company out of Columbus, that would have produced jobs in Georgia, but the bid process favored multinational companies over local ones.
Said Rep. Curt Thompson [D], Georgia:
"With $12 million dollars you could buy over 200 state patrol cars to make our expressways safer. With $12 million dollars you could have bought about 90 fire trucks to assist in fighting fires in communities like ours that don't have an adequate number of fire stations. With $12 million dollars you could hire over 160 teachers including all of their pension and other benefits to help keep our class sizes down. Instead we sent $12 million dollars overseas."
Says State Representative Zack Hudgins [D], Washington:
"We are tasked in state government with spending tax dollars efficiently, but we also need to spend them wisely and sometimes a short-term savings doesn't help you in the long run. If we are sending these jobs someplace else then we are undermining our communities and our tax base and our jobs."
Indirect Government Support for Offshoring
In addition to contracting out government work to firms that take that work offshore, the federal, state, and municipal agencies support offshoring in a number of indirect ways:
- Governments routinely award subsidies and grants for economic development, research, tax abatement, and other forms of public support to corporations that ship jobs overseas.
- The U.S. government provides tax breaks and incentives for corporations to set up operations abroad.
- The U.S. government allows the H1B and L1 visa programs to be used to
subsidize and facilitate the offshoring of jobs. The L1 visa program,
for example, was set up to allow international companies to temporarily
transfer executive employees into the US while continuing to pay their
wages, benefits, and taxes in their home countries. Offshore software
vendors consistently send developers to the US on the L1 visa to be the
onshore coordinators for work done overseas. This violates the spirit
and often the letter of the law.
Take the case of Automatic Data Processing Inc., which develops software and manages securities data for Wall Street financial firms. The company set up a wholly owned subsidiary named ADP Wilco in India, used H1B and L1 visas to bring over technical professionals and managers for training, and then offshored the entire operation to Hyderabad.
Offshoring Undermines Public Health and Safety
Offshoring of work done by licensed professionals undermines public safety. To protect the public, doctors, engineers, accountants, and other professionals must hold valid state-certified licenses before they can practice in the U.S. Now government agencies are starting to send offshore work that could only be done by a licensed professional if performed here. And they are not requiring that those doing the work overseas hold state licenses, or meet equivalent standards. Do you want your X-Ray or MRI report interpreted by who-knows-who in whatever country by someone who is not held to the same requirements as your doctor here? How would you feel driving your children over a new bridge designed by cut-rate "engineers" who have not had to pass the same tests as engineers here?
National Writers Union Position
Given the negative impact government offshoring has on our members and our communities, the National Writers Union supports and advocates the following positions:
- Government should not use our tax dollars to move jobs to other countries. Government contractors should be prohibited from shipping jobs overseas.
- Government subsidies and grants for economic development and research, tax abatement, and other forms of public support for corporations should be conditional on local job creation. No tax-paid-for subsidies to businesses that ship jobs overseas.
- Government should extend professional licensing requirements to offshored work. If a job requires a professional license when done here, anyone doing it overseas should have the same or equivalent license.
- Government should not manipulate the visa system to facilitate moving jobs to other countries by bringing in foreign nationals on temporary visas for the clear purpose of preparing them to handle work that will then be offshored.
Where proposed legislation conforms to these positions, the National Writers Union will support it. Where legislation falls short, the union will lobby to strengthen the legislation, or propose new legislation as needed.
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>> government support of offshoring flyer
Related Documents:
Read an overview of high-tech and professional offshoring.
Check out frequently stated misconceptions and myths about offshoring.
Read about the threat to personal security posed by offshoring.
