Why Senator Schumer’s proposed call center tax is detrimental and unproductive for the US economy

It can't be... surely not... is that... is that... a proactive bill that encourages businesses to invest in the US?

When is comes to “bringing US jobs back onshore”, we repeatedly seem to get all sorts of legislation that, quite simply, is focused on restricting our busineses’ competitiveness, when we should be looking at helping them invest in new talent and entrepreneurship, rather than penalizing them for trying to be competitive in today’s global environment. (Read our excellent discussion from last year:  Who’s looking out for the US business these days?)

Senator Charles Schumer’s proposed new legislation, if passed, would tax U.S. companies that transfer domestic calls (at $.0.25 per call) to foreign call centers and require consumers be informed when their call is transferred outside the U.S.  I assume by now most of you know the details of this, so let’s consider what good this does US businesses and the US economy:

1) The cost differential is not enough to warrant routing call center work back onshore.   If the offshore call center is charging $18.00 per hour for each agent, who takes, on average, 20 calls per hour, this only knocks their costs up to $23.00 per agent/hour.  A US domestic call center would likely charge clients $30 per agent/hour (or higher), so the cost differential still doesn’t warrant pulling the work back.  Conversely, offshore providers are more nimble with price flexibility and can easily squeeze rates down if this became an issue.  Benefit to US businesses: none, simply higher taxes.  Benefit to US economy:  additional tax income, but less competitive businesses.

2) There are an estimated 31 million business in the US, according to the latest government stats… er… that’s quite a lot of administration needed?  Even the smallest of firms often use offshore call center support.  The administrative organization needed to manage and audit this number of businesses to ensure compliance would be massive.  You are talking multiple millions of dollars in investment that would likely struggle to be offset by the resulting tax returns.  Benefit to US economy:  none, simply government money wasted on bureaucracy. 

3) Customers will be informed where their call is being taken, which will create negative overtones for businesses.  This is probably the only ”effective” component of this legislation, solely based on the fact it will educate the US masses that offshore workers are more competitive that they are, and run most of the call center work these days.    However, what good will this do beyond stir up anti-offshoring attitudes?  Yes, it may encourage a small proportion of businesses to move their work to US call centers, but if all calls are revealing the location, it will simply become an expected procedure and quickly lose its impact (such as the adverse side-effects warnings after pharmaceutical products commercials).  Benefit to US economy:  none, simply the creation of negative overtones towards companies offshoring. 

4) US call centers are very good and becoming increasingly competitive.  The Recession has only helped US call centers, with a lot more work being moved to centers in locations such as North Dakota, Michigan and Nebraska.  Why not use some of this cash to give the US call centers tax-breaks to be more price-competitive, than penalize the offshore centers?  Heaven forbid, why not support new center development in US locations?  Benefit to US cell centers:  a little more clout and a little more price competitiveness, but likely to be minimal overall.

5) Large enterprises may simply route calls to their offshore captives.  Most mid-to-large US enterprises can simply shift call center work back inhouse and run from their own offshore/nearshore locations.   Benefit to US economy:  none.

6) This legislation also raises the potential of retaliation from other countries, under the recent Uruguay Round of WTO Agreements.  Taxing international calls and not taxing domestic calls is a form of discrimination against foreign call center service providers that violates the basic principle of “national treatment”, with the exception of specific situations, such as national security, the environment, local labor, police, etc. Benefit to US economy:  zero, and potentially negative.

All-in-all this legislation is reactive, not proactiveThe old days of outsourcing backlashes are well and truly over.  It’s clear that the way forward is to make the US an attractive location for call center, and other commonly outsourced work-types.  Furthermore, it’s clear that the US needs to be an attractive environment where where firms simply want to function, where they can receive government benefits to help then get established, and to hire US-based personnel. 

Other economies all aggressively support businesses to invest in their own locations (just go through the countries - they all do it, and some very effectively).  This legislation does very little to help US call center jobs and will likely cost the tax payer more in implementing the plan than it can ever accrue from the tax.  Government leaders need to be smarter about “protecting jobs”, which means actually helping to create work onshore, as opposed to scaremongering / taxing enterprises into forced activities that do not enhance their competitiveness.  For example, the proposed “Entrepreneur’s Visa” is a fine idea – it is encouraging top entrepreneurial talent to set up shop in the US and employ US talent, and they will receive  a Green Card.  We need to see more schemes that drive the global entrepreneurial agenda for the US economy, not hold it back.

 

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44 Comments

  1. Manohar Shintre
    Posted June 4, 2010 at 6:37 pm | Permalink

    Protectionist policies almost always help a fraction of constituents at the cost of the rest of the nation (there are exceptions – but they are few and far between). In this case, this will help domestic call centers who are competitive at $0.25/call above the offshore rates. This tax will simply be transferred to the consumers through higher product/service prices.

    In order to maintain a higher standard of living, we need to develop products and services that command premium – i.e. be innovative. Coddling commodity products and services will be disastrous to economic growth.

  2. Adam Poumie
    Posted June 4, 2010 at 6:56 pm | Permalink

    Phil,

    This is reactive action from US government and only create added cost to business and consumers. You make the point that it will likely cost more to implement than they will ever get back in taxation revenue too. I agree – politicians need to think about ways to be ahead of the curve with developing growth, not try to prevent it with punitive measures such as this,

    Adam

  3. Posted June 4, 2010 at 8:50 pm | Permalink

    Other related concerns;

    - how will the tax be used to benefit business or consumers? will it in essence be squandered on yet another government misplace program?

    - chances are the cost will be passed along to the consumers either in the form of higher costs or reduction in support?

    sounds to me that government is using outsourcing as the posterchild for the economic problems (rather than acknowledging the real reason).

    these misguided past governmental practices continue to erode the US and it’s ability to sustain it’s present status. sad day indeed if it comes to reality.

  4. Posted June 5, 2010 at 3:41 am | Permalink

    The point about the WTO is very pertinent, Phil. Once leading economies, such as the US, start taxing established services, such as call center, it’s only going to have a domino-effect with other countries reacting with similar taxes to US exports.

    I do hope they scrap this plan,

    Amanda

  5. Posted June 5, 2010 at 6:16 am | Permalink

    Phil,

    This proposal sums up the reactionary, negative attitude some politicians have towards outsourcing. Rather than finding the cause into why companies outsource to offshore firms in the first place, they try and penalize those who have done so, which is the majority of them today. This type of legislation will never solve the problem, only provide additional difficulties for US firms to operate competitively in the global markets. As you correctly point out, there is very little upside to US firms, or the US economy at large,

    Dan

  6. Bob McDonald
    Posted June 5, 2010 at 5:07 pm | Permalink

    Phil,

    You can’t blame Schumer for trying, but you have to question the logic behind this proposal. It’s driven more by a vendetta against firms using offshore, than a cohesive strategy to create more US jobs in the call center business.

    Bob

  7. Posted June 6, 2010 at 2:35 am | Permalink

    Hi all,

    I understand that offshore outsourcing providers are worried about these protectionistic measures. Fact is however that the golden years for the developed world are gone.
    States are having towerhigh debts. They will need twenty years to cleanup their financials.
    At the same time it becomes increasingly difficult for westerners with a modest salary to survive or build up a life which approaches the perceived average standard of living.

    It is predictable that in the next ten years developed countries will:
    - take measures to bring back jobs to their own countries, unless the reasons for offshore outsourcing are not ony costbased. This is absolutely needed to keep the social security systems alive.
    - increasingly organise their labourmarket in such a way that the number of jobs for non-educated labourers will increase, through decreasing the cost to the company of such workers.

    The situation in the developing countries was, in my opinion and I’m expressing myself cautiously here, such that often the outsourcing business was only based on this cost-difference and certainly NOT on quality and speed of the offered services.
    As an offshore service provider it was easy to do business till 2009. From the above article I can read: 18$ an hour, while the labourcost was only around 3$. Some people did really become rich in the last 15 years offering such services. No way there was attention for productivity, quality, efficiency. Neither was their attention for the wellfare of the workers. It was considered easy money because … it WAS easy money.

    In the developed countries however, companies had to spend 30$ salary, while they could invoice 40$ at maximum for the few jobs still kept locally.

    To all the offshore ‘businessmen’ complaining about such a small start of the fair equalisation of competitiveness: I hope you will be able to compete on the basis of quality, speed and efficiency. But I guess that it will be mainly the simple workers in the offshore locations having to pay for this evolution. That was also always the case in the past.

    One thing: I’m living in India with my wife and run a business there. So I’m not against offshore outsourcing as such. Only … I’ve seen too many things happening which didn’t make sense at all. Not for the ‘developed’ world, and also not for the ‘developing’ world.

    Greetz,

    Tony

  8. Posted June 6, 2010 at 2:39 am | Permalink

    The thing I always remind my American colleagues (I’m a Brit who loves America), is that everyone wants to do business with America and work with Americans. For those of us who love your country, your culture and your way of doing things in business this type of officialdom is just so NOT American. Like Britain, America has to accept that it has to change its perception of globalisation and embrace it. Ask not what the world is doing to your country but what you can do for the world (to coin a phrase of one of your great Presidents).

  9. Posted June 6, 2010 at 2:12 pm | Permalink

    I’m all in favor of Senator Schumer’s proposed Call Center tax – as it’s a step in the direction of leveling the playing field between off-shore Business Process Outsourcers (BPOs) and the North American Call Center Industry.

    There is an important difference between “Fair Trade” and “Free Trade” – and how it impacts on us in the North American Call Center Industry.

    Globalization and Free Trade are here to stay – along with the potential to outsource Call Center functions to offshore, low-labor cost locations such as India, the Philippines Eastern Europe, Africa, China, etc.

    But as currently practiced, “Free Trade” means that off-shore Business Process Outsourcers (BPOs) pay substantially less in taxes to compete and do business in the U.S. and Canada than North American companies do. It also means that all too often BPOs are free to ignore the most basic aspects of US & Canadian Labor Law – for example – India’s labor standards are low or non-existent.

    Call Center Agents in many off-shore locations are typically employed in 21st Century ‘Cyber Sweatshops’. They work graveyard shifts – under high pressure – in work environments where liberal attitudes to sex and club drugs are encouraged and thriving. In India, “Blacklist” data bases – containing the details of all those employed in the Indian Call Center industry have been set up – so that “negative insider elements” can be detected by employers at the recruitment stage. Workers in their hundreds are fired without so much as one cent in severance pay. I think it’s well past time to bring the principles of “Fair Trade” into any discussion about the North American Contact Center Industry and off-shore BPOs.

    The principles of “Fair Trade” have been around for a long time, and are primarily based on ideas of human rights and economic justice. “Fair Trade” is about improving the social and ethical well-being of people in both developing and developed nations. It is about the Pursuit of Happiness rather than just the pursuit of wealth. And the Pursuit of Happiness has always been about improving social relationships among people – and about moral and righteous living – not just the pursuit of material well-being.

    In North America, the creator of so much of our strength, freedom, and leadership has been – and continues to be – the North American worker. Through generations of political debate, elections, strikes, lockouts and other conflicts, the vital force of labor has added materially to the highest standard of living and the greatest production the world has ever known. The North American fight for Labor Standards has brought us closer to the realization of our traditional ideals of economic and political democracy.

    Globalization & Free Trade – without considering “Fair Trade” – has resulted in tens of thousands of North American Call Center jobs being moved abroad – and hundreds of Call Centers closed. North American workers and the communities where they live have been left to their own devices. We see the results daily in the squeezing of the Middle Class, the rising Trade Deficits, and a bleaker economic outlook for our children.

    The majority of North American Consumers speak with their wallets in support of “Fair Trade” – just ask Starbucks. And equally – we’ve seen how North American Consumers punish companies exposed for exploiting labor in the developing world – just remember Kathie Lee Gifford’s clothing line, or the Gap, Inc., and the “Sweatshop Uproars” they had to weather.

    The North American Call Center Industry will become ever more entwined with those of other nations. The issue is how this will be done – to what degree – and in whose best interests.

  10. Ratul Sengupta
    Posted June 7, 2010 at 4:45 am | Permalink

    Phil,
    Has any analysis ever been done on ancillary benefits to the US economy from offshoring? All the contact centers setup offshore use equipment from companies such as Avaya or Nortel or Cisco (granted one of these is Canadian, but you get the point) plus telecom services from AT&T, Verizon, Sprint etc plus the impact on industries such as travel and hospitality through executive travel from outsourcing buyers and sellers. It might not be equal in $ terms, but it seems to me that if offshored contact centers are eliminated, there will be an impact on skilled workers requirement reducing while (relatively) unskilled workers requirement will increase.

  11. Posted June 7, 2010 at 5:12 am | Permalink

    Ratul,

    You raise an interesting point: the whole global sourcing industry relies heavily on networking capability, and the claims of “250,000 call center jobs lost” over recent years will be offset by a large number of jobs created over the years – though not in the same numbers.

    However, this industry provides a lot more than simply “cheaper bodies”; the ability to establish 24×7 customer service underpinned by the requisite enabling technology has many benefiits beyond creating more hi-tech jobs – think about the added sales to businesses, the ability to increase their call center throughput and have real-time data to make quick business decisions. Moreover, just because 250,000 offshore jobs may have been “created” to cater for US businesses, doesn’t mean that 250,000 US positions have been eliminated. Many firms increased their customer support because they could afford do so with the lower-cost services, often retaining their onshore servives for high-tough support requirements. In effect, many businesses have been able to enhance their sales and customer service capabilities because of the affordability of leveraging offshore support.

    It’s a very complex scenario to quantify, but the benefits offshore services have brought US business have certainly helped them be more competitive and have created more intelligence for their executives and round-the-clock support for their customers.

    Incentivize to buy American as opposed to penalize for buying non-American is they key here,

    PF

  12. Robert Melzer
    Posted June 7, 2010 at 8:18 am | Permalink

    I think the goal of a tax like that would be to cut down on the number of calls, and thus would be adverse to the economy,

    Robert Melzer

  13. Jim Bogart
    Posted June 7, 2010 at 9:11 am | Permalink

    Phil,

    I doubt if 25 cents a call will alter outsourcing behavior; it is another Tax and Spend idea from Washington,

    Jim

  14. Posted June 7, 2010 at 10:01 am | Permalink

    Easy Politics – if Senator Charles Schumer is for it – I am against it.

    Bob Moore

  15. Marc Kauffmann
    Posted June 7, 2010 at 11:02 am | Permalink

    I agree with Bob…It doesn’t promote American competitiveness and innovation

  16. Greg Rust
    Posted June 7, 2010 at 3:03 pm | Permalink

    It’s easy to see the political motivation for this, but ultimately could lead to higher costs for consumers in addition to the incremental costs of the Financial and credit card reforms. It feels like another cycle of this issue. Let’s hope the support wanes as it has in the past and it has in the manufacturing industry.

    We should be focused on continuing to invest in education and training so we can continue to innovate and allow the lower skilled work to be done where it can help create a market for those innovative products,

    Greg Rust

  17. Posted June 8, 2010 at 5:05 am | Permalink

    It’s great politics, but these types of protectionist taxes often backfire.

    For a complete response to Schumer’s legislation, please check out:

    http://blog.neocontext.com/?page_id=2 entitled “Reaction to Senator Schumer’s tax on calls routed to Offshore Call Centers”

    Jim

  18. Posted June 8, 2010 at 5:50 am | Permalink

    Phil,

    As with every other tax, it simply gets passed on to the consumer in the price of the service call, or if offered as “free”, it will be bundled in the price of the product being supported.

    This is just the government raising prices on American consumers again.

    Andy Avery

  19. Brian Tumpowsky
    Posted June 8, 2010 at 8:59 am | Permalink

    Does anyone realize that creating middle classes in under-developed countries actually builds a new supply of people to buy U.S. goods?

  20. Dean Ekman
    Posted June 8, 2010 at 9:33 am | Permalink

    And what, pray tell, are the good Senator’s plans for these taxes?

    I wish he would stay out of business and concentrate on what he does best: looking for a camera and microphone so he can offer an interview.

  21. Dave Mason
    Posted June 8, 2010 at 10:06 am | Permalink

    Phil,

    I would be curious to know where Chuck came up with the $.25 per call. If this is the calculated amount that companies save by outsourcing their call centers, then the bill may have the impact he states he wants (bring jobs back onshore). But with Chuck, I would guess the amount is less than the cost and his hope is companies will pay the tax and continue the current practice thereby increasing government revenues.

    Telling the customer he is being transferred may not be a bad idea as then the market can react to the practice by refusing to do business with that firm.

    Either way, our cost will go up,

    Dave Mason

  22. Ryan Edwards
    Posted June 8, 2010 at 10:21 am | Permalink

    Phil:

    I think it’s absolutely ridiculous. These jobs are going overseas because the US labor pool is not very competitive for these types of positions.

    That begs the question….how badly do we want these jobs? Are we willing to improve our skills to the point that we’re actually worth our asking wages? Or are we willing to accept wages that would be competitive in this world market?

    Or do we really even want these jobs at all?

    Ryan Edwards

  23. Posted June 8, 2010 at 11:53 am | Permalink

    When Gordon Bethune was turning around Continental, he said, “You can make a 99 cent pizza, but who wants to eat it?”

    I’m not sure the tax is the big thing–But Schumer knows perception is reality. The real problem is how many companies brands are being eroded every day by poor quality offshore call centers. When your call center is your brand’s touchpoint to the customer, it has to be a good experience. Unfortunately, English comprehension and therefore, customer service seems to have worsened as call centers have spread to more locations. As the economy continues to languish, the natural reaction of consumers is to take it out on the company’s brand.

    We are actually building onshore capabilities at a cost very comparable to offshoring. We believe we can save our clients money and reputation:

    http://www.clearviewfocus.com/feeds/item/america-first/77

    Hilary Palmer

  24. Posted June 8, 2010 at 12:37 pm | Permalink

    This post has captured some great insight into what I strongly believe is a no-win approach for tapping the strength of the US based outsourcing industry. America’s onshore service providers can succeed and prosper without Senator Schumer’s proposed tax legislation and regulations targeted to offshore firms. As noted in this post, many of the best-in-class call centers are located in low cost, high productivity centers in more rural sections of the US. There is no doubt that the US based worker can effectively compete for business and deliver service excellence. Moreover, I see a recent significant shift in the broader, IT Services market as well.

    There is a growing interest among CIOs and business leaders for a new type of outsourcing partner who can tap the strengths of the technology savvy American workforce based in locations where the work ethic and culture foster service excellence in a cost effective manner.
    To meet with this new demand I formed Advantage Outsourcing with Marc Sumner, and based it in Wichita. Being in the heart of the mid-western community, where we believe a handshake still means something, was paramount to our company’s vision. It is our goal to gain community support and create jobs in our market with a highly specialized network of business technology professionals who share our passion for client service, saving our client’s time, money and effort.

    While Senator Schumer may think he is trying to help the American workforce be competitive, I think he underestimates the talent, technology and work ethic that makes the US onshore solution the one to beat.

    Skip Womack

  25. Herb Briggs
    Posted June 8, 2010 at 1:50 pm | Permalink

    It’s just politics. He wants the union bosses to think he’s doing something that will cripple offshoring and outsourcing. They’re getting impatient.

    Herb

  26. Daniel Bloom
    Posted June 8, 2010 at 6:57 pm | Permalink

    Phil,

    I believe that the intent behind the Schumer bill is a good one. There have been numerous studies that have showed in the long run it costs a corporation more to send the business overseas due to the inability of the workforce to adequately solve the problems, AT&T and RadioShack have in recent months brought their call centers back to the US to save money. Maybe if they were confronted with the fees they would bring the jobs home again.

    I am aware of a number of corporations that moved positions over to India or China strictly based on the wages being paid, not the lack of professionals here in the US.

    Daniel Bloom

  27. Colin Taylor
    Posted June 9, 2010 at 12:02 pm | Permalink

    Phil,

    I find it interesting. The Department of Labor has already confirmed that The US is the recipient of thousands of higher paying jobs, (many thousands more than have been offshored in call centers) that have been outsourced from some of the very same countries the Schumer bill targets.

    Colin

  28. Posted June 9, 2010 at 9:49 pm | Permalink

    Another example of reactionary politics. As was mentioned by many here and in other discussions, the real opportunity lies in the investment that allows industry to become innovative to fuel future growth. It’s tougher to get the masses to focus on the future when they face tough economic times today. Politics all too often brings us back 2 steps for every 1 step forward….

    Besides – it’s an election year.

    Sanket Purani

  29. Yaseen Khan
    Posted June 13, 2010 at 9:38 am | Permalink

    This is counterproductive, unless the quality of calls goes up sunstantially and also reduces the volume of calls.

    Remember, no one can stop globalization .

  30. Adrian Matadeen
    Posted June 13, 2010 at 10:47 am | Permalink

    Senator Schumer ought to get very familiar with the writings of Ann Rand, Prof. Say and Adam Smith, prior to this policy proposal. Jobs are directly proportional to productivity.

    Adrian Matadeen

  31. Steve Taylor
    Posted June 13, 2010 at 11:04 am | Permalink

    Phil,

    The federal government needs to quit interfering with private business. The economy is in the shape it’s in now because of political meddling. Let private business do what it’s always done, make money by adapting to current needs. The feds need to step away from the plate! They had their at bat and they struck out!

    Steve Taylor

  32. Subhas C Biswas
    Posted June 13, 2010 at 12:06 pm | Permalink

    It may so happen that the after paying the tax and informing people on outsourcing, the business shall benefit economically and still prefer to outsource to countries where the salary component works to their advantage. However, with a tax load, the local companies will lose certain price advantages.

    Many organization shall restrict their customer call services to the hours suitable for their employees – where 24×7 is the norm, the services will become expensive.

    Customers may prefer outsourcing if they expect service at all hours, especially during weekends and holidays.

    Immigrants will land at areas where demand for specific skills exceeds local supply. People need to consider the effects of both, outsourcing and immigrant on their economy,

    Subhas Biswas

  33. Randy Overmyer
    Posted June 13, 2010 at 1:58 pm | Permalink

    Phil,

    Money is a work storage mechanism. You perform work for someone, the work you perform is stored in your pay, you exchange your pay for someone else’s work. The value of the dollar is how much work (labor) is stored in it.

    The smaller the area of the work exchange, the more likely the amount of work stored in your currency match your base standard of living (with any premiums for skill). As an example if we take a service that is confined to a small area (you can’t outsource plumbing), you find that service rates follow the regional cost of living.

    Since it cost more to live in the NE US than in the SE, raw labor rates will be higher in the NE than the SE. This is why labor intensive industries moved south as shipping methods (and freeways) improved. As it became cost effective to widen the labor pool, the value of labor in money fell.

    As technology allows more professions to be further away (the highest paid jobs are becoming the easiest to move), the value of professional labor in the dollar falls. This effect is fairly easily seen; as the US has outsourced higher level work, the current generation of Americans will become the first to have a lower standard of living than their parents.

    As you move the pay to different regions, you move the consumer. Consumption follows payroll dollars over time. Part of the American middle class has been transferred to India and China, places American industry can’t follow. How does that benefit the American economy?

    In this particular case: the claim that this impacts how well a company can compete is kind of silly. If everyone (foreign and domestic) is following the same rule (same imposed cost structure), then the playing field is level.

    Randy Overmyer

  34. Posted June 13, 2010 at 7:22 pm | Permalink

    Phil as soon as this news broke i flushed it to our global network and most of the responses were in utter disbelief. This was due in large part to the fact that center are a service and not a precipitating reason beyond the economic collapse that we are facing.

    My question is this… where are this knuckleheads coming up with these crazy ideas? Are they talking to anyone either in sector, outside or the consumers? Have they done any fact based studies to support these proposals or are they expecting to flush it out in debate that they hope will fuel popularity re-elections. My gosh I would think if they opened their eyes for just one nano they would see the state were are in and start attacking the problems and not what might give them some points for re-election!

  35. Posted June 15, 2010 at 9:06 pm | Permalink

    This proposed tax rides on the same proposal Obama had in 2008…Buffalo not Bangalore. The problem is that Buffalo does not have the same skills and talents as Bangalore.

    Schumer seems to be unaware that India is performing much, much more than call centre support. Is he…

    going to tax GE on the innovation that India has created for them?
    going to tax AT&T for buying part of Reliance Industries?
    and the list goes on…..

    The irony is that I think this “tax” would hurt smaller businesses–the last people that need to be hit in our current economic malaise — more than large ones since it would be highly controversial to flag a call through a large enterprise company’s office in India. I don’t see how that would work??

  36. Wallace Jackson
    Posted June 16, 2010 at 11:18 am | Permalink

    Politics will define the winding path and people will optimize their travels along it…

  37. Greg Poulos
    Posted June 16, 2010 at 11:26 am | Permalink

    Phil,

    My issue is with the whole process of offshoring.
    There is no level playing field when comparing offshore and here in the States.

    I don’t care to hash out the right or wrong of government imposing requirements on business. Many here have already made up their minds.

    The reasons it is cheaper to send jobs overseas, is that there are more government regulations: working conditions, safety guidelines, social security, medicare, insurance requirements, minimum wages etc. All together, it costs more to employ someone here than over seas.

    Now, who here wants to go back to a day when insurance was not part of compensation? Or worker safety? or 14 to 18 hours a day required? Or how about leaving high school and working at 14?

    Not everything that has happened in the labour field has been bad.

    US business is focused on short term and not long term. At some point, when the majority of jobs are offshore, and no one is employed, how will anyone be able to afford anything?

    And please, don’t talk about making the workforce smarter. We already are more educated and experienced than anywhere else on the planet. Take a look at New England. More university grads than anywhere on the planet. More Hospitals, Healtcare Industry, Biotech and info tech companies per sq. mile… and yet: high unemployment. Because it is cheaper to employ those who will work for less, no matter the total experience and education than it is to pay the prevailing wage,

    Greg Poulos

  38. Paul Jones
    Posted June 16, 2010 at 6:16 pm | Permalink

    Phil,

    This is proof that either Schumer’s out of touch, Washington is – or BOTH. Very concerning when this is the best legislation they can currently come up with,

    Paul

  39. Kevin Konczal
    Posted June 16, 2010 at 7:17 pm | Permalink

    Phil: Most corporations main objective is to make a profit and provide a good return to its investors. If there is an economic value to a company to off shore any of its work, they will do that. But for the government to step in and alter the free market system with a punishment tax is wrong. So, this is how they plan on paying for health care?

    Kevin Konczal

  40. Michael Gardner
    Posted June 16, 2010 at 11:29 pm | Permalink

    It is another platform to take more money out of the hands of the people and put it into the hands of government.

    Michael Gardner

  41. Marc Estrella
    Posted June 17, 2010 at 6:27 am | Permalink

    Hi Phil,

    I did enjoy the article and your points.

    I think that Sen Schumer decided to attempt to score political points with the political equivalent of low hanging fruit. Foreign call centers are easy targets because Americans don’t like having their calls routed to someone who, “doesn’t speak proper English,” or talks with, “an accent,” that they cannot understand (whatever these terms mean.) There are many (and not just in organized labor) who probably are cheering the man for, “doing something,” about exporting jobs to people who speak in an, “unintelligible,” manner.

    Besides, he probably thinks it is easier to get a quick hit with something that has the potential of being popular than actually doing the work to get the nation out of an economic ditch and on the road to full employment and the prosperity that comes with it,

    Marc Estrella

  42. Posted June 29, 2010 at 10:20 pm | Permalink

    Phil,

    I don’t want to beat a dead horse, but I notice that no one has yet responded to the flawed argument that Schumer’s proposed call center tax supports Fair Trade (in David Filwood’s comment).

    Fundamentally, a U.S. tax on calls directed to India will work against the Fair Trade movement’s purpose, which is to support market access and fair prices for small producers in developing economies. (See http://transfairusa.org/content/about/overview.php or http://www.fairtrade.net/what_is_fairtrade.html.) Schumer’s tax would likely reduce market access and payments to small businesses in India, while increasing payments to the U.S. government – hardly a small producer in a developing economy.

    Fair Trade organizations in developed economies typically guarantee a price to their suppliers based on what is needed to ensure a decent standard of living for their workers (rather than the lowest available current market price), and provide technical and economic support, such as business planning and access to loans. The Fair Trade response to David’s concerns about poor conditions and low pay in the services business in India should be to support for the creation of call centers in India (and other developing economies) that are governed by the same principles applied to Fair Trade farmers and goods producers. The U.S. side of a Fair Trade supporting business would focus on marketing services to American businesses who believe their customers will value their certification of Fair Trade practices sufficiently to pay a small premium. For a great example of an organization innovating in this area, look to Samasource (www.samasource.org), which pays individuals and small worker co-ops for service work in some of the world’s poorest areas, including refugee camps.

    David is correct that Fair Trade principles include a commitment to ensuring fair labor practices from suppliers, and further, to requiring suppliers to run their businesses democratically and responsibly, for the good of all in their community, including the environment. However, Schumer’s tax will not have any impact on Indian labor laws or practices. Indeed, by impeding trade and probably taking away American business, the tax will likely reduce the ability of the US to influence labor practices. Schumer’s tax will work against the ability of employees to improve their own working situations as employment and business grows in India. Witness the steady increase in salaries in IT/ITES businesses as the number of jobs began to outpace the availability of skilled employees. The reality is that this industry has enabled many Indian families to move up from poverty and buy homes and cars for the first time ever. I don’t mean to suggest that today’s India-based call centers are adhering to Fair Trade principles, but it is a gross misrepresentation to claim Fair Trade in support of trade restrictions and taxes on business in emerging economies.

    Cindy Carpenter

  43. Kenc911
    Posted July 19, 2010 at 1:28 pm | Permalink

    unfortunately .25 is not enough, to stop it. Should be 25% of the monthly bill received by the foreign company. This would help pay Americas tax base. The last thing American buisness needs is more write offs. They are making records profits on the hard backs of America’s still employed. They have used descrimatory practices against the American people and have gotten away with it. It is time to take the hard line, They make it or go out of buisness. Lets not bow to the wall street methods which is the republican concept of making the rich richer and you poorer.

  44. TJ
    Posted March 14, 2011 at 8:53 pm | Permalink

    There is an element that the writer glossed over. Actually, a couple.

    There is an immediate emotional response customers have, whether warranted or not, when hearing a voice that is ‘similar’ to their own.

    The reality is that a call center representative in India may called himself “Steve” but that person, through no fault of his, does not have the nuance of conversation and cultural understanding that is sometimes necessary when dealing with customer support issues. It’s not xenophobia…it’s fact.

    And what happens because of language and cultural familiarity is that less time is taken on calls with positive results being stronger. The company therefore is seeing a higher success rate and better customer satisfaction and retention. That’s money.

    This administration has implemented dozens of tax benefits to small businesses and should absolutely implement taxes for those who offshore work that could be done here…especially when the cost is commiserate.

    I don’t like the idea of corporations benefiting through incentives only to be better positioned to move jobs out of the country. Seems like a double-dip to me.

    And as a consumer, I don’t fault Steve from India or Mary from the Philippines for wanting to earn a living. But until we start to take care of our ‘own,’ there won’t be anyone left to give money to American businesses for their services. A little one hand washing the other is a concept that needs to be encouraged.

6 Trackbacks

  1. [...] for so many of the comments, calls and emails we received after our recent post discussing “Why Senator Schumer’s proposed call center tax is detrimental and unproductive for the US e….  The majority of the viewpoints convey concern and confusion regarding the  implications of [...]

  2. [...] Fersht’s blog Horses for Sources published a piece about Senator Schumer’s proposed tax on calls transferred to foreign call centers several weeks ago that has received spirited comments for and against the proposed [...]

  3. [...] http://www.horsesforsources.com The Editors moderate this CRE blog and the Corporate Real Estate LinkedIn Group. CREeditors [...]

  4. By Why Chuck needs to get the chop on August 17, 2010 at 11:01 am

    [...] Charles E. Schumer, not content with ludicrous attempts to tax the US consumer for taking an offshore call, has continued his personal tirade against the use of offshore [...]

  5. [...] against that job growth, and see it as taking jobs away from Americans.  (See, for example, the recent debate on Shumer’s proposed offshore call center tax at Horses for Sources, and my response about Fair Trade in services outsourcing here.)  This is [...]

  6. [...] the legislation and state that a $0.25 cent tax is not enough to bring jobs back to the US. The article made the following [...]

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