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'Offshoring' Trend Casting a Wider Net

The outsourcing movement is defying conventional wisdom about what positions are immune from export

January 04, 2004|Marla Dickerson | Times Staff Writer

Recent economic data show the technology sector is perking up, with U.S. firms posting their first profits in years. Vicki Nelson wishes she could say the same of her finances.

The Sacramento-area software engineer has drained her daughter's college fund and sold off furniture to pay bills since she was sacked in 2001. Still unemployed, she doubts her fortunes will rebound along with those of high-tech companies, which through the years dumped tens of thousands of U.S. workers in favor of cheaper hands overseas.

"The jobs have gone to Bangalore," said Nelson, 46, speaking of the city in south India hailed as the new Silicon Valley. American companies "are selling us out to save a couple of bucks. I'm worried about the future of our economy."

As the U.S. struggles with the longest jobless recovery in recent memory, white-collar workers are facing a harsh reality. Just as highways paved the way for migration from America's cities, the information superhighway has given rise to a new set of economic road rules: If it can be digitized, it can be moved.

Retailers, banks, airlines, hotels and hospitals are sending work offshore, from back-office accounting to front-desk customer service. Ditto for government agencies. Today, a laid-off Californian with questions about food stamps can get answers from a telephone hot line staffed in part by workers in India. The state of California two years ago outsourced the delivery of some welfare benefits to Citicorp Electronic Financial Services Inc., which uses English-speaking workers in Bangalore and Pune to assist the down-and-out in Bakersfield and Pacoima.

Powered by high-speed global communications and educated foreign workers, the so-called offshoring trend is rapidly moving beyond call centers and data processing. And it's defying conventional wisdom about what jobs are immune from export.

Indian radiologists contracted by Massachusetts General Hospital in Boston are processing X-ray images of U.S. patients. Foreign legal eagles are writing patents for U.S. firms. Tax clients of Newport Beach-based SurePrep can thank Indian accountants for that fat refund from Uncle Sam. And far from Wall Street, equity analysts from developing nations are crunching numbers once reserved for six-figure American MBAs. Even foreign economists are willing to prognosticate on the cheap.

"There's a guy in India who has been contacting me" about a job, said Mark Zandi, chief economist at in West Chester, Pa. "My immediate reaction is that he couldn't possibly do it from there. But when you start to think about it, why not?" in October estimated that nearly 1 million U.S. jobs had been lost to offshoring since early 2001, with 1 in 6 of those in information technology, financial services or business and professional services -- the bedrock of the "new economy." Forrester Research Inc. projects that 3.3 million service and professional jobs will flee the country by 2015. Researchers at UC Berkeley figure that at least 14 million U.S. service jobs are vulnerable.

Despite all the angst about foreign defections, economists say the collapse in business spending is the principal culprit behind U.S. employment declines. And the focus has been on the manufacturing sector, which has shed nearly 2.7 million net jobs in the last three years. Still, analysts say offshoring has been a factor and will continue to be a drag on U.S. job creation and wages.

"There is no shortage of smart, qualified people overseas who are willing to do this work for a lot less," said Kim Berry, 45, a programmer who develops software for a small firm in Citrus Heights, Calif., and makes $42,000 a year. That's only about half what he made working for Hewlett-Packard Co. at the peak of the economic boom, but he figures he's lucky considering that so many of his former colleagues aren't working at all and foreign programmers are lined up just waiting for their chance.

Offshoring has touched a chord with middle-class Americans who thought workers in coveralls, not cubicles, were the ones at risk. Jobless white-collar workers have picketed outsourcing conferences and created websites, organized petition drives and sent e-mails to lawmakers. A Florida tech worker outraged at having to train his foreign replacement is running for Congress.

Indiana Gov. Joseph Kernan in November ordered a state agency to cancel a $15.2-million contract with an outsourcing firm after citizens went ballistic at the notion of workers in India upgrading their state's computers to, of all things, process unemployment claims of laid-off Hoosiers.

Bills introduced in Congress and at least four state legislatures would preserve U.S. service jobs by slapping restrictions on foreign call centers or giving Americans preference in government contracts. The issue could figure prominently in the 2004 presidential election if the nation's job engine continues to sputter.

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