During the 2008 Presidential campaign, the outsourcing
community, particularly those involved in offshore outsourcing,
were quite concerned with then-Senator Barrack Obama's comments
on the damage being done to American workers by offshore
outsourcing and his commitment to fight it.
However, since President Obama's election, the fate of offshore
outsourcing remains unclear. During a March 2009 Town Hall meeting,
President Obama admitted that not all jobs that had been outsourced
overseas would be coming back, on the theory that many of those
jobs were for low-wage, low-skill workers, and that bringing them
back would not help the economy since "there's no way that
people could be getting paid a living wage on some of these jobs
– at least in order to be competitive in an international
setting." Instead, President Obama put forth the notion that
the country has to create higher-skilled, higher-paying jobs that
can't be outsourced.
About a month later, as part of his tax reform plan, President
Obama announced a proposal to close certain tax loopholes which,
according to the President, currently make it possible to "pay
lower taxes if you create a job in Bangalore, India, than if you
create one in Buffalo, New York." While it remains to be seen
whether the closing of these loopholes would actually have any
impact on offshore outsourcing (it appears that any such closures
would affect only U.S. companies who operate offshore captives,
while U.S. companies who outsource work to offshore vendors would
see little to no impact), President Obama's plan appears to be
on hold while his administration tackles more critical domestic and
international issues.
This doesn't mean that the debate on this issue is over. In
fact, several bills were introduced at both the federal and state
levels over the last year that would impact offshore outsourcing.
Below is a brief summary of some of those key bills. Although none
of these bills have as of yet been enacted, they may give some
indication as to the direction we may be headed.
Current attempts to enact anti-offshore outsourcing legislation at
the federal level generally fall into one of three categories: (1)
requiring call centers to identify their location; (2) restricting
the transfer of personal information for processing outside the
U.S.; and (3) limiting government funds for entities that outsource
some of all of their services to foreign companies. In September
2009, a bill was introduced (H.R.3621) that would require employees
at a call center who either initiate or receive telephone calls to
disclose their physical location. In January 2009, a bill was
introduced (H.R. 427) that would prohibit a business from
transferring personally identifiable information of a U.S. citizen
to any affiliate or subcontractor in another country without
providing such citizen with notice of such transfer. Also in
January 2009, an amendment to one of the financial rescue bills
(H.R. 384) would have prohibited entities who received bailout
funds from outsourcing new customer service or call center jobs to
foreign companies.
At the state level, bills have been introduced to cut off state
perks, including financial assistance and tax incentives, for
companies that send work off-shore or out of state. For example, in
New York, the "State Financial Incentive Protection Act"
(A 4250) was introduced on February 2, 2009, and would prevent
financial incentives provided by the state from going to companies
that outsource jobs outside of the state. In this Act,
"financial incentives" was very broadly defined as
"any agreement or understanding between the State of New York
and a business entity...providing for awards, grants, loans, loan
grantees, tax benefits and other financial assistance to such
business entities." The New Jersey legislature introduced A
3516 on December 8, 2008, which has a similar intent as the New
York bill by prohibiting businesses that outsource jobs overseas
from receiving state contracts or grants as well as the investment
of state funds in such businesses. A Pennsylvania bill (HB 440)
takes a slightly different approach: the bill would require that
all government contracts for services include a provision that
requires all services performed under the contract, or performed
under any subcontract awarded under the contract, to be performed
at a physical location within the United States.
It should be noted that none of these bills actually prohibit
offshore outsourcing. Rather, they attempt to place stumbling
blocks in the way of U.S. companies that want to send work
offshore. Regardless of their impact, everyone involved in or
contemplating offshore outsourcing transactions should keep a
watchful eye on these legislative developments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.