Outsourcing Helps States' Economies, Industry Claims

The growing zeal to keep U.S. jobs from going overseas including state jobs has the high-tech industry scrambling to defuse the anti-outsourcing sentiment surfacing in more than half the country's statehouses.

A March 30 report by an association of high-tech companies concedes that 104,000 computer programming and other high-tech jobs went overseas in 2003. But the Information Technology Association of America (ITAA) argues that outsourcing computer work through expanded global trade will create 317,000 new jobs of all sorts in the United States by 2008.

The report is meant to temper the political outcry over U.S. job losses, including a handful of high-profile incidents of state-funded jobs going to India. The embarrassment of state contracting jobs going overseas has prompted governors and state policymakers to take a closer look at their contracting policies.

Governors in Indiana, Massachusetts, Michigan and North Carolina have acted in recent months to keep state contract jobs from going abroad. Legislation is pending in 31 states that would curb outsourcing of state contracts to foreign firms, according to the National Conference of State Legislatures.

Over the next four years, outsourcing of software and computer work actually will result in an increase in jobs in the United States, with the greatest number of jobs 34,000 -- created in California, followed by Texas with 24,000, according to projections from ITAA, which lobbies on behalf of the high-tech industry. Florida and New York are expected to churn out nearly 40,000 new jobs combined; Wyoming and Vermont will generate fewer than 700 jobs each.

The ITAA report aims to put to rest the idea that outsourcing of computer services costs U.S. jobs by projecting instead the creation of 317,000 new jobs by 2008. That compares, however, with projections that nearly 1.4 million college students will graduate in 2008 and presumably will be looking for work.

ITAA President Harris Miller said at a news conference that global sourcing helps employers become more productive and competitive. The savings from sending jobs abroad results in lower inflation, higher productivity and lower interest rates, boosting business and consumer spending, he said.

Banning state contractors from taking high-tech work overseas may make good politics, but the move is bad economic policy, ITAA said. "This is political silly season," said Nariman Behravesh, chief economist of Global Insight, the Massachusetts-based company that conducted the ITAA report.

Even outside economists contend the state outsourcing debate is overrated. "The number of state jobs being outsourced out of the country is extremely small," said David Wyss of Standard & Poor's. "There's more smoke than fire here," said Wyss, who last week released a survey on behalf of the National Association of Business Economics that found the lack of jobs and the growing federal deficit ranked as the top problems facing the U.S. economy this year.

Still, the political fallout over state government jobs going oversees is fueling lobbying by anti-trade groups at both the state and federal level.

Public Citizen's Global Trade Watch, a group that advocates against free trade, recently kicked off a campaign to enlist the help of governors and state lawmakers to oppose a free trade pact with Central America that the Bush administration intends to send to Congress this year. Public Citizen says the Central American free trade agreement is "an attack on state purchasing policy" because it would tie the hands of governors who want to give preference in state contracts to local firms.

At least 23 states already have said they will comply with the Central American trade agreement. Public Citizen and other anti-trade groups are lobbying these states to walk away from the pact before Congress blesses it, according to Public Citizen's Sara Johnson, who is coordinating the campaign.

Policymakers in Colorado, Vermont and Washington are among states expressing concern about signing such trade pacts.