Testimony of Paul Almeida
Department for Professional Employees
American Fede ration of Labor and Congress of Industrial Organizations
Before the U.S. House of Representatives Committee on Small Business
On the Globalization of White Collar Jobs
June 18, 2003
Mr. Chairman, Congresswoman Velasquez, Members of the Committee, thank you for
the opportunity to testify today on behalf of the Department for Professional Employees
of the AFL-CIO on this extremely important and urgent topic.
We are very alarmed at the recent trend of outsourcing of white collar and information
technology jobs. This trend, which is clearly accelerating, is affecting workers all over
the country, at every income and education level. Technology companies are laying off
American workers from high-paying desirable jobs while they add thousands of jobs
overseas. Corporations are shifting jobs in call centers, accounting, engineering,
computer, and financial services offshore, among others. Some local and state
governments have even begun to outsource administrative jobs, which is an outrageous
misuse of taxpayers’ dollars.
Based on a survey of the world’s 100 largest financial services firms, Deloitte Research
found that these companies expect to shift $356 billion worth of operations and about two
million jobs to low-wage countries over the next five years. Forrester Research Inc.
predicts that American employers will move about 3.3 million white-collar service jobs
and $136 billion in wages overseas in the next 15 years, up from $4 billion in 2000.
The use of cheaper foreign labor has already had a negative impact on U.S. wages in
certain sectors. According to Sharon Marsh Roberts, chair of the government relations
committee of the Independent Computer Consultants Associatio n, outsourcing has forced
down hourly rates by 10 percent to 40 percent for many U.S. computer consultants 1 .
Outsourcing may also have a disproportionate impact on African Americans, who are
already under-represented in high-tech fields, according to the Coalition for Fair
Employment in Silicon Valley. From 1998 to 1999, black engineering employment in the
Pacific states dropped 20%, according to the Bureau of Labor Statistics. And African-
American-owned technology firms will lose opportunities to compete for government
contracts if more of them go overseas.
If these trends continue to accelerate, we will see even more dramatic job loss and wage
erosion affecting workers throughout the income scale. This will severely impact the
“Displaced U.S. Employees Frustrated, Angry At Information Technology
Industry,” Hartford Courant, January 6, 2003.
wages and job security of the American middle class, in addition to depriving state, local,
and federal governments of tax revenues. Policymakers must recognize and acknowledge
the severity of the problem and act quickly to stem the job loss.
Short-sighted corporate policy focused on saving a few bucks in the short run will have
an enormous deleterious impact on the entire U.S. economy if not checked soon. A recent
Powerpoint presentation by a Microsoft senior vice-president urged managers to “pick
something to move offshore today” as part of a “short-term project list.” The “long-term
project list” included evaluating “the cost advantage of adding offshore talent.”
When manufacturing jobs started moving offshore, we were told not to worry, that the
U.S. comparative advantage was in services and high technology. We were assured that
the new global division of labor was both natural and benign: we would keep the high-
paying, high-skilled jobs, while the developing countries would do the actual work of
making things. For decades, American workers were told to simply acquire more skills
and education in order to succeed in the U.S. job market.
Now engineers with Ph.D.s and recent college graduates alike are hearing that they are
too expensive, that their job can be done more cheaply abroad. Meanwhile, the U.S. trade
picture is also shifting in ominous ways.
The merchandise trade deficit hit almost half a trillion dollars last year ($485 billion), an
all-time record. While the goods trade deficit has been growing steadily since the early
1990s, our trade surplus in services has traditionally offset some of that growth. The U.S.
trade surplus in services grew from $46 billion in 1991 to a peak of over $80 billion in
1999. The services surplus fell somewhat in 2000 and in 2001. However, in 2002, the
services surplus plunged by almost $20 billion, to only $49 billion. This enormous single-
year decline is largely due to growth in imports of private services, which almost
certainly reflects the outsourcing that has already been taking place. In 2002, the U.S.
surplus in advanced technology products also plummeted, shifting from a surplus of $4
billion to a deficit of $17 billion.
These negative shifts have contributed to a record high current account deficit, the
broadest measure of international activity, which includes trade in goods and services as
well as investment income flows. Federal Reserve Chairman Alan Greenspan has warned
that at almost 5% of GDP, the current account deficit is dangerously high and
The outsourcing is not spurred by a lack of skills or education here in the United States.
In June 2003, an estimated 1,286,000 Bachelor's degrees were conferred, along with
436,000 Master's, 80,400 First Professional, and 46,700 Doctoral degrees. In addition,
633,000 Associates degrees were projected. Degrees in all these categories are up
substantially since the mid-1980s, as young people have heeded the advice given them to
acquire more education.
All these factors taken together should be setting off alarm bells for Congress and other
policymakers. If an advanced degree, years of experience, and excellent work habits are
not enough to land a job, and the U.S. comparative advantage in services and high tech
has seriously eroded, what does the future of work look like for the United States? If
these cost-saving job shifts are taken to their logical extreme, even American
corporations should be wondering where their future consumers will be located, and how
they will buy the goods and services that are offered.
Just as the labor movement has fought hard for trade and tax policies that will help the
U.S. manufacturing sector thrive and survive, we also need to take a close look at the
policies that impact service-sector and information technology jobs.
First, we should make sure that our tax policies are consistent and coherent – at the
national, state, and local levels. Many of the companies rushing to outsource jobs have
received and continue to receive tax breaks negotiated on the assumption that they would
support local job creation. We need to target tax relief to companies that support their
own communities with decent jobs.
Second, we can and should ensure that government tax dollars are spent to support strong
communities and jobs domestically. State legislatures in Connecticut, New Jersey,
Maryland, Washington, and Missouri are all considering legislation that would ban the
outsourcing of government contracts to foreign countries. We support this legislation and
would recommend that Congress consider steps to strengthen the positive domestic
employment impact of federal procurement as well.
The New Jersey legislation was spurred by news reports that a company contracted by the
state of New Jersey to administer electronic benefits to welfare and food stamp recipients
had contracted the jobs fielding phone inquiries to Bombay, India. There, English-
speaking workers, some with fake “American” names answered service calls. Legislators
pointed out the irony of using taxpayer dollars to send entry- level service jobs overseas to
administer a program aimed at finding domestic entry-level service jobs for welfare
Third, we should support both more transparency and openness on the part of companies
that are outsourcing and more research to understand better the scope of the problem. We
have asked Congress to request a General Accounting Office (GAO) study into these
trends and their impact on U.S. jobs.
State legislators in New Jersey have recently introduced a bill (State Assembly Bill No.
3529) that would regulate certain call center communications. The bill would require
employees of inbound call centers to identify their name, their employer, and their
location in phone calls or e- mail communications.
This seems like a pretty minimal requirement that ought not to be impossibly onerous.
However, some of the affected companies are opposing the bill and arguing that it would
violate U.S. obligations under the World Trade Organization (WTO). Companies ought
not to assume they can only do business if their customers are in the dark as to their
operations. Customers have a right to know who is answering their call and where that
person is located, just as they have a right to know the ingredients in a box of cereal.
Furthermore, this legislation is entirely in compliance with our WTO obligations in this
case. It treats foreign and domestic companies equally and simply requires truthful
disclosure on the part of companies providing services to the U.S. market.
Finally, we need to reexamine our trade policies to make sure they are reflecting the
concerns and interests of American workers, as well as U.S.-based corporations.
In conclusion, I’d like to thank the Committee for holding this hearing and for inviting
me here to testify today. I look forward to working with you to craft effective policy
responses to the very great challenges facing us in this area.