Congress looks for ways to slow offshore hiring

WASHINGTON – The U.S. government should stop buying foreign products and the U.S. Congress should enact other policies encouraging U.S. IT and other companies to stop sending jobs offshore, the chairman of the House Small Business Committee said Monday.

Congress should pass a corporate tax reduction to keep manufacturing jobs in the U.S., and the Bush Administration should encourage countries like China and Japan to stop manipulating their currencies to keep them low against the U.S. dollar, committee chairman Don Manzullo, an Illinois Republican said during a hearing on the “offshoring” of high-skill jobs Monday.

Manzullo criticized U.S. Department of Defense purchases of foreign-made clothing and weapons systems, rather than technology. But if the U.S. government cannot buy American, U.S. companies won’t see much incentive to be loyal to U.S. workers, he said. “If the American people see how the U.S. government is using their taxpayers’ dollars to destroy jobs here at home, what type of example does that set?” Manzullo asked.

Manzullo called on Congress to strengthen “Buy American” laws, requiring the Defense Department and other agencies to buy U.S. products.

Manzullo produced a report which he said showed more than 60,000 U.S. jobs lost through “offshoring” in the last month, including thousands of jobs moved by Intel, Oracle, Electronic Data Systems, Sprint and Microsoft.

“Thousands and thousands and thousands of white-collar jobs are going overseas, chasing the cheap dollar in India, China, Malaysia and the Philippines,” Manzullo said. “That’s the reason for this hearing, because of the incontrovertible evidence that the United States is on the verge of adopting the economies of Third World nations.”

While part of the hearing focused on manufacturing and U.S. government procurement, much of the debate centered on moving IT jobs offshore. Harris Miller, president of the Information Technology Association of America, said even in the most dire predictions of jobs lost through “offshoring,” only about 500,000 U.S. IT jobs would move offshore by 2015, representing about 5 percent of the U.S. IT workforce. The issue of offshoring IT jobs has been over-hyped in the media and Congress, Miller said.

The U.S. needs to worry about competition from IT sectors in India and other countries, Miller added, but he expects IT spending in the U.S. to increase in 2003 after two years of decline. If the U.S. adopts trade policies that discourage companies from hiring IT workers in other countries, those countries may decide to stop buying U.S. IT products, Miller said. The U.S. IT industry enjoys a $7.9 billion trade surplus with other nations, but that could change if Congress tries to restrict offshore hiring and outsourcing, he said, and some large U.S. IT vendors receive more than 40 percent of their profits from overseas sales.

Any trend toward offshoring touches many other topics, including trade policy and tax law, Miller said. He called on Congress to conduct a “thoughtful examination” of the issue before passing “knee-jerk” legislation.

“The U.S. IT industry finds itself in the difficult position of trying to respond to pricing pressure from abroad while trying to maintain its domestic talent pool,” Miller said. “We cannot legislate or regulate ourselves out of this perplexing situation. I don’t want to diminish the angst felt by IT workers who have lost their jobs or are in fear of losing their jobs … but I also believe we cannot overreact to what, up until now, has been a short-term situation.”

Responding to criticisms from some committee members that U.S. companies were simply trying to pay less than $2 an hour to IT workers overseas, Miller said the issue is more complicated than that. “If the only issue were dollars per hour that people were paid, the whole industry would’ve disappeared already,” Miller said.

Others, including a quality assurance (QA) engineer laid off by Palm in August, disagreed with Miller’s argument that cheaper labor wasn’t the only cause of U.S. companies moving IT jobs offshore. Natasha Humphries, who worked at Palm for more than three years, testified that she was laid off in August after training workers in India how to do QA work. Those workers made $5 per hour or less, compared to U.S. workers who made $30 an hour or more, she said.

The reason for the layoffs in Palm’s U.S. QA staff was “pretty much the bottom line,” Humphries said. As Palm began hiring offshore workers, Humphries met with her supervisors several times to ask them how she could improve her skills to keep her job, but she was discouraged from learning new programming or scripting languages, she said.

Palm did not immediately respond to Humphries’ testimony.

“Offshoring has created a devastating economic climate, not just among Silicon Valley technical workers, but through the United States,” said Humphries, now a member of TechsUnite.org, an alliance of technology workers. “Offshoring will prolong the economic recovery period as the number of U.S. jobs quickly diminish over time.”

The number of unemployed electrical engineers in the U.S. stands at an historic high, added Ronil Hira, chairman of the R&D Policy Committee for the Institute of Electrical and Electronics Engineers — United States of America (IEEE-USA). During a U.S. recession in the late ’80s, unemployment for electrical engineers hovered around 2 percent, he said, but today, unemployment stands at 6.7 percent for electrical engineers and 6.9 percent for computer hardware engineers.

Many of those unemployed are engineers with years of experience, he said. Hira called on companies planning to move jobs offshore to give adequate notice to employees and the government, so that both have time to respond.

“Right now (employees) are being blindsided,” Hira said. “We need a national strategy for dealing with this phenomenon.”

Representative Nydia Velázquez, a New York Democrat, called on Congress to adopt new tax laws encouraging U.S. companies to keep their jobs at home and to rethink its free trade agreements. The U.S. IT sector could see the same declines as the U.S. manufacturing industry if Congress does not act to protect it from foreign competition, Velázquez said.

Miller said the IT industry and its workers have not recognized the competition from foreign IT workers as much as they should have. “I think we’ve been relatively naive as a country for a long time in the IT space, believing that somehow because we were so smart and so talented that countries like Ireland and Israel and South Africa and Argentina … couldn’t be smart too,” he said. “It turns out they can be smart — they can produce very capable IT workers. We’ve been relatively naive the same way that the Detroit automobile industry was naive in the ’60s.”