Hiring limits of non-U.S. workers have limited impact

By Kate Evans-Correia, Search400.com Senior News Editor 04 Dec 2003 | Search400.com

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Legislation that seeks to limit the number of non-U.S. workers hired for state jobs in Indiana is likely to pass, but it's not likely to have too much of an impact on some of the country's largest outsourcers, such as IBM and Electronic Data Systems Corp. And it certainly isn't likely to help IT workers who've already been displaced by the furious growth of offshore outsourcing, analysts say.

New laws might, however, create an influx of IT workers to lower-paying state jobs.

The most recent attempt to nix the use of foreign workers is a bill introduced by Indiana state Sen. Jeff Drozda, who proposes to limit the amount of state work handled by non-U.S. citizens. According to a Reuters report, Drozda, a Republican, filed the bill after his state awarded a $15.2 million contract to an Indian company to upgrade computers that process unemployment claims. Drozda contends that, because it pays low wages, the Indian company was able to underbid competitor Accenture Ltd. The contract was nullified after Democratic Gov. Joe Kernan learned that, of the roughly 80 employees the company would bring on, only 18 would be current state employees.

The Indiana controversy is only the latest involving states and offshore companies. New Jersey has a similar bill pending and, according to one employment expert, other states will follow suit. Other legislation seeks to put controls on H-1B and L-1 visas, which allow foreign workers in the U.S. on a temporary basis.

"I think [the passage of the Indiana legislation] is a done deal," said Rick Nashleanas, principal and founder of the IT headhunter firm Monarch Technology Management LLC, in Colorado Springs, Colo. "I think it's a done deal in each state [where there's legislation], and there's not a chance of stopping it."

Nashleanas said that legislators are under increasing pressure to respond to criticism that U.S. companies, such as IBM, are shipping white-collar jobs overseas, and that offshore competitors are bringing in poorly paid nationals to handle U.S. contracts. The challenge is to protect U.S. workers while avoiding alienating foreign markets.

"They can't go ahead and not vote for this," he said.

But new laws won't come easily, and they won't cure any of the country's ills that are related to outsourcing practices, Nashleanas said. They will, however, encourage IT workers to seek out state jobs because they'll perceive those jobs as more stable.

"The money is less, but their jobs won't get shipped overseas," he said. "It's not a guarantee, but they have a better chance of keeping their jobs."

According to analyst Jeff Kaplan of ThinkStrategies, in Wellesley, Mass., initiatives to limit the use of non-U.S. workers are getting more common, but none of these proposals will stop the inevitable: Companies like IBM will continue to look overseas.

But regulations might lessen the blow, he said.

Kaplan said these laws will slow down the growth of offshore outsourcing, but all this legal wrangling isn't likely to hurt outsourcing giants such as IBM, EDS and Oracle Corp. Still, the laws could force them to act more responsibly.

"I think it would be a mistake to try to prevent [outsourcing] all together," he said, "and these bills recognize that, but at least they try to put some sort of cap on the process."

Kaplan said that it is possible for legislators to make sure that, if companies are going to go offshore anyway, that they do so in a more thoughtful fashion and compassionate way. He said that means taking full responsibility -- such as putting training programs in place for U.S. workers.

Ironically, technology consultant Accenture, which lost the Indiana state bid, announced Wednesday that it plans to more than double its staff in India next year to 10,000 people and take advantage of relatively low wages paid to software engineers in that country.

According to reports, Accenture has about 4,300 employees in India and has nearly tripled its work force there during the past two years. Oracle plans to double its work force in India as well, to an estimated 6,000 by the end of next year. IBM is estimated to have more than 5,000 workers in India and is also expanding its Indian presence.

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Let us know what you think about the story; e-mail Kate Evans-Correia, Senior News Editor.

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