OFFSHORING & OUTSOURCING

BACKGROUND -- Historically, manufacturing jobs have been the backbone of our state's economy and helped create and sustain our middle class. In the late 1980s and most of the 1990s, our state economy began to diversify. We became leaders in information technology, research and development, and high-tech jobs. With this boom in high-skilled high-wage white- collar jobs, we saw a shift in our dependence on manufacturing for our state’s economic vitality.

But these industries and many more such as timber, metal trades, agriculture, pulp and paper and food processing—all of which are important to our state’s economy -- are being lost to offshoring and outsourcing.

It is important to distinguish between outsourcing (typically used to describe the contracting-out of government work) and offshoring (companies sending work outside the country).

The phenomena of outsourcing or offshoring is not new. Since the 1980s manufacturers have moved complete production facilities overseas in search of the lowest wage. Leading companies such as Microsoft and Boeing are exporting our white collar high-tech jobs overseas to slash labor costs. In agriculture, whole operations from growing to packing are closing up shop to reopen in Third World nations, where there is an endless supply of workers willing to work for the lowest wages. This trend will have a significant impact on Washington’s economic future because our economy depends heavily on these industries and the jobs they create.

We also know that state agencies supported by our tax dollars are offshoring work in search of the lowest bidder. A 2004 Governor’s Office report disclosed that dozens of state agencies have outsourced work and sent millions in state revenue overseas.

The offshoring of service sector jobs has been greatly facilitated by the absence of any regulations regarding basic privacy protections, professional qualifications and security safeguards.

LABOR'S POSITION -- The Washington State Labor Council, its affiliates and allies have called on policymakers to look at the issue of outsourcing and offshoring and its impact on our trade-dependant state. In recent years there has been constructive study and debate, but no policy enacted.

In 2005, a number of bills set out to prohibit or restrict offshoring, especially by state agencies that enter into contracts sending work overseas. In the end, a task force was created to study the issue.

The time for study is now over. There is no question about the problem and no question that Washington's taxpayers would prefer their money spent to create jobs here in Washington rather than in other countries.

The WSLC will continue to support legislation to prohibit the offshoring of state contracts, and to demand accountability from offshoring companies that get state tax breaks. Washington taxpayers should not subsidize companies that export jobs. All tax breaks should have strong provisions for public disclosure and clawbacks if the company accepts subsidies, but exports jobs overseas or does not create the intended number of jobs (also see Tax Policy, Subsidies and Economic Development).

Our state must also look at the privacy issues surrounding the personal information beyond name address and phone number. Social Security numbers, medical and financial information, dates of birth, names of relatives and other information is being compiled by overseas contractors outside the jurisdiction of federal or state consumer privacy laws. These security matters have been left solely to the discretion of the private-sector businesses sending the work offshore.

2004 -- A proviso in the House version of the supplemental operating budget would have required a report of state contracts performed at locations outside the U.S. The proviso was not included in the final version of the budget. 
-- SHB 3187 would have prohibited work under certain state contracts from being performed at locations outside the U.S. It died in the House 
-- SHB 3186 would have required call-center employees to identify their employer’s identity and location. It died in the House. 
-- SHB 2352 would have required certain employers to give affected employees 10 days' advance notice of a layoff for workers required to train their replacements. It died in the House.

2005 -- ESCR 8407 created a joint task force to study the extent to which state contractors offshore work and the impact on our economy. Passed with bipartisan support, and was signed into law.

2006 -- HB 3160 would have required that certain state contracts disclose the nature and percentage of work offshored. It advanced from committee, but died without a House vote.

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