Feds could force states to bring back offshore jobs
By Sean Hao
Advertiser Staff Writer
Hawai'i is one of 40 states that sends government-financed social-service jobs overseas where labor is cheaper.
Controversy surrounding the practice known as offshoring has resulted in six states deciding to end the practice, and a bill in Congress could force remaining states, including Hawai'i, to bring those jobs back or lose federal money.
Hawai'i pays $1.95 million annually to JP Morgan Chase to administer an electronic system that delivers and tracks social benefits such as food stamps and financial assistance. Since 2001 a customer call center financed under that contract has operated from India, according to state officials. It serves about 40,000 Hawai'i households that receive food stamps and financial assistance.
At issue is whether the savings creating by moving that service overseas outweigh concerns that the government is indirectly sending jobs overseas. That's particularly disconcerting when jobs sent offshore could be filled by those on public assistance, said Philip Mattera, research director for Washington, D.C.-based research group Corporate Research Project of Good Jobs First.
"This is something unseemly in that a program designed to help low-income people is creating jobs in another country," Mattera said.
According to a study by Good Jobs First, New Jersey, North Carolina, Arizona, Kansas, Oregon and Wisconsin have taken steps to bring such jobs back to the United States despite facing higher costs.
Under the Welfare Reform Act of 1996, states were forced to adopt so-called electronic benefit transfer programs, which replace traditional paper food stamps with something akin to a credit card. Program enrollment is still done locally, but Hawai'i outsourced most of the management of that program, including a call center, about eight years ago.
No local jobs were lost when the call center was outsourced to India because the state did not have a call center when it operated paper-based benefit delivery system, said Lillian Koller, director for the state Department of Human Services.
"Those jobs never existed in Hawai'i — ever," Koller said.
The call center was first set up on the Mainland and later moved to India.
The outsourcing of the call center during the 1990s came at a time when the state was in the midst of a big push to attract call centers to Hawai'i. Call centers were seen as a growth industry because Hawai'i's location allowed callers to communicate with the East Coast and the Far East during the same business day.
The state was motivated by the cost savings. It proved more efficient to join a consortium of Western states that pay JP Morgan to manage parts of the electronic benefit transfer programs. Since outsourcing the program, the system has worked without complaint, DHS said.
Just how much of the nearly $2 million the state pays JP Morgan per year was spent on call-center services in India was unknown to state officials, Koller said. Officials for New York-based JP Morgan Chase & Co. were unavailable for comment yesterday.
A state contract with JP Morgan was signed last summer and expires in 2010. Hawai'i and the federal government split the cost of administering the food stamp program.
Bringing those jobs back to the United States "is something worth looking at, and Congress is looking at it," Koller said. However bringing the call center back to the United States will undoubtedly cost more, Koller added.
Also having such international relationships works in favor of U.S. interests by spreading democracy through economic opportunity, she said.
"There are a lot of benefits to operating on an international stage for this country," Koller said.
Overall, states spend more than $75 million annually outsourcing electronic benefit systems, Mattera said. The amount of that money spent on offshore call centers is unknown but is believed to be relatively small, he said. Part of the problem in identifying the impact of offshoring is many states aren't aware that companies they contract with send jobs overseas, he said.
"It's not as if the states decided to take the jobs offshore, but some states, once they learned about this, they've taken steps to bring those jobs back," Mattera said.
Under a bill passed by the U.S. House of Representatives this month, states would no longer be able to rely on federal money to pay administrative costs for the food stamp program if the money goes to jobs in foreign countries.
Hawai'i Reps. Ed Case and Neil Abercrombie voted in favor of the bill, which now is in the Senate. The measure, which is an amendment to a bill providing money for agriculture, bans federal money for offshore jobs and was proposed by Rep. Marcy Kaptur, D-Ohio, and passed without opposition, Case said.
"That's a pretty straight-forward signal by the U.S. House that we don't like the offshoring of those jobs and we're not going to pay for it," he said. "We've got plenty of other ways to promote democracy.
"What makes this situation even more egregious in my mind is the whole purpose of this program as with all social service programs is to create opportunities for people who are in need or are under-employed."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
