Consider the outsource

Critics fear Nevada is exporting public and private jobs overseas

By Larry Wills

Those sucking sounds you hear are jobs being siphoned off to overseas markets, even state government jobs.

And that's raised an alarm among union officials trying to fathom the scope of the problem. "In Nevada, I noticed it about a year ago," says Scott MacKenzie, executive director of the State of Nevada Employees Association. He worries that privatization contracts may be concealing the loss of jobs in the state. "We started hearing about these contracts. It's not like they're outsourcing whole departments. They're picking some positions. It's hard to put my finger on how extensive it is."

Greg Bortolin, spokesman for Gov. Kenny Guinn, denies any intentional effort to outsource state jobs. "We are not aware of it. That's a concern of the governor and not something we would do. It's not worth somebody losing his job."

But state officials may not know what their contractors are up to, especially if subcontracting is involved. "I don't think anybody knows," says Dennis Houlihan, labor economist for the American Federal, State, County and Municipal Employees Association. "A few governors have made inquiries to their state agencies."

NBC News reported that a J.P. Morgan study showed Nevada was among 40 states that were outsourcing public positions. Phone inquiries about food stamps in New Jersey and Georgia were routed to operators in India. Other reports list New York City traffic violations going to Ghana and other paperwork was winging its way to Barbados.

Naomi Walker, state issue researcher at the AFL-CIO headquarters, calls the problem epidemic, probably involving more than 40 states. "This is huge. About every state will have legislation on this issue. Governors are issuing executive orders to disclose which agencies are outsourcing."

Nevada has contracted services in several areas. Medicaid had been contracted to Blue Cross until last year, but officials did not return phone calls. And some prison functions have been handled by private companies. Bortolin sees no foreign ties to those firms.

Mike Willden, director of the state Department of Human Resources, says every effort is made to ensure services are provided by Nevadans, but some national firms are contracted through state consortiums. He says he's not aware of any outsourcing in his department. "I am not an advocate of outsourcing," he says.

But MacKenzie worries that some state positions may be in jeopardy. "There are contractors coming in from all over. Health care finance and policy used to be state employees." He sees some of the work moving to other places in the country, while other jobs may be going much farther away.

"The whole India thing has come into the public eye in the past month or so," MacKenzie says. "Instead of Americans paying taxes, it's all over in India."

Houlihan calls the food stamp program particularly susceptible to export. "There was a push by the federal [government] to go to the cards," he says of the electronic devices that replaced the paper stamps. "Now they are handled by call centers."

And he worries that the trend may expand as governments seek ways to hold down taxes. "It clearly has that potential. Now with telecommunication improvements, the work can go anywhere."

In Nevada, services such as workers' compensation, claims processing, unemployment insurance and child support collections all would be ripe for overseas contracts. "Any caps on hiring probably means it's being outsourced," Houlihan says. "The question is, how much of it is going on now?" The economist believes there are long-term implications for outsourcing public employment, especially as a large number of state workers near retirement age. "A lot of expertise will be lost and there is the financial strain" of retraining, he says.

MacKenize says that's already happening in some parts of state government, where workers are let go and then hired on contracts at a greater cost to the state.

Houlihan believes states should improve their outsourcing safeguards. "Some of it you do legislatively only after the damage is done, or you can try to be proactive."

Walker sees state legislators responding. Not only are laws banning outsourcing of jobs being considered, but so are consumer safeguards, allowing the public to demand calls be rerouted back to the United States. State Sen. Dina Titus, D-Las Vegas, plans to introduce legislation next year prohibiting outsourcing of all state work. The Legislative Counsel Bureau is currently looking into the extent of the problem in Nevada, she says.

In the private sector, Nevada's experience with outsourcing is at best a mixed bag. Last year, more than 1,000 jobs were lost after three Nevada firms closed or cut back their call center operations. Those jobs reportedly did not go overseas but to other locations in the United States--still little consolation to the unemployed. American Airlines laid off 350 workers, Merck Medco scrapped 650 positions at a pharmacy call center and Sprint furloughed 78 jobs.

CNN is maintaining a growing list of national firms that are outsourcing operations overseas. The list includes Sprint, Bank One and CitiGroup, the parent organization of Citibank. Officials there deny any job exporting affects Nevada.

"As far as CitiBank Nevada, we haven't done anything like that," says Barbara Mulholland, a company spokeswoman. "We're in a hiring mode." The company has nearly 2,000 employees who handle customer calls on their credit cards and process financial information.

Calmetta Coleman says the same is true of her company that employs about 100 people. "There are no Bank One positions in Nevada that are affected at all."

Detra Page echoes the same story for Sprint's 1,700 workers. "We have not been impacted at all," she says. "We have a Hispanic center as well as an English call center and also have a 401 directory assistance center here."

Just what outsourcing will mean to the Nevada marketplace remains a matter of opinion. Tim Rubalb, a researcher at the Nevada Economic Development Commission, sees any job losses offset by growth in the rest of the economy. "We're the only state of 50 that grew its manufacturing sector in the last two years," he notes. And the proximity to the Golden State is luring businesses tired of the taxes and regulation to Nevada, a kind of outsourcing in reverse. "Our location next to California is an asset with its 55 million population marketplace."

"I don't see a dramatic situation," he says of outsourcing.

Somer Hollingsworth, executive director the Nevada Development Authority, says the rush to outsource may cool in the future. "In some cases outsourcing isn't working," he says. "They were reading scripts and there wasn't a human relationship."

MacKenzie hopes so. But he remains worried about the loss of jobs in Nevada and a declining tax base. "We're shooting ourselves in the head," he says.