Cheap Labor at America's Expense; as U.S. Corporations Outsource Their Information-Technology Operations to the Lower-Wage Countries, American Workers Are Left on the outside Looking In

By O'Meara, Kelly Patricia | Insight on the News, May 27, 2003 | Go to article overview

Cheap Labor at America's Expense; as U.S. Corporations Outsource Their Information-Technology Operations to the Lower-Wage Countries, American Workers Are Left on the outside Looking In


O'Meara, Kelly Patricia, Insight on the News


Byline: Kelly Patricia O'Meara, INSIGHT

"Hey, it's good work if you can get it," says New Jersey state Sen. Shirley Turner about the outsourcing of the Garden State's welfare-processing contract. But neither New Jerseyans nor any other Americans are getting the work, so she has introduced legislation that she believes will keep those jobs at home.

Turner, a Democrat, filed her proposal after learning that the New Jersey Department of Human Services had contracted with an Arizona-based company to service paperwork for the state's welfare recipients at the "cost-saving" price of $326,000 a month. The Arizona company had established a call center in Green Bay, Wis., but once the New Jersey contract came through, the call center was relocated to Bombay, India.

"It seems like a race to the bottom," says Turner. "All these jobs are leaving the state and the country, and our unemployment rate continues to climb. We're in a recession and you have to wonder where it ends. The point of the contract was to save money assuming that these people overseas can do it cheaper and more efficiently. But this is a ruse because we're supposed to help provide jobs to these [unemployed] people here."

The irate Turner continues, "Neither the people in India who have the jobs, nor the people who are unemployed here in the U.S., are giving anything back in the way of taxes or buying and consuming U.S. goods and services, which is what stimulates our economy. By outsourcing these jobs to other countries we're helping the poor remain poor in this country. We have a $5 billion deficit in New Jersey and outsourcing these jobs to foreign countries only adds to the burden that the state must pick up when our citizens need [welfare] services. When people lose their jobs, and their unemployment benefits run out, the state must step in and take up the burden to provide the services. That's not cost savings and it really just snowballs when jobs are taken offshore."

Turner's bill has made it through the New Jersey Senate but has run into stiff opposition in the General Assembly from lobbies representing companies taking advantage of the cheap offshore labor. And no wonder: Outsourcing to countries that exploit cheap labor appears to be the corporate wave of the future. Kishore Mirchandani, president of Outsource Partners International, a U.S.-based company specializing in outsourcing finance and accounting services, tells Insight, "There are a lot of companies in India handling the accounting and finance of major corporations. General Electric, American Express and Citibank all do business in India."

Mirchandani's company, although U.S.-based, handles the tax-return preparation for the business clients of the accounting firm Ernst & Young at Outsource Partners' facilities in India. "We get business from CPA [certified public accountant] firms in the U.S.," explains Mirchandani, "who then contract with us to get the processing of returns in India. We have about 700 people working for us between India and the United States. A lot of people have raised concerns about the privacy of information, but we have taken steps to ensure that all information is secure."

According to Mirchandani, "the cost savings are tremendous." He says, "The cost to process these returns is anywhere between $100 to $200, whereas in the U.S. the processing would cost $400 to $600. If they outsource it to us the CPA firm saves $300. We hire accountants at about 25 percent of what it costs here in the U.S. A lot of major corporations have already done the outsourcing on their own and our company is an alternative to the companies who don't want to handle the outsourcing directly. General Electric has 12,000 people in its office in India to do its processing of financial information, and these are mostly Indians working there."

To get a better idea of just how many corporations are exporting jobs to take advantage of cheap labor overseas, this magazine followed up on those Mirchandani leads.

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