The Outsourcing Bugaboo

Immigrants -- illegal or otherwise -- usually catch the blame when jobs are tight in California. But the flurry of bills in Sacramento that would restrict outsourcing suggests that exported jobs, rather than imported workers, is now the bugaboo.

Politicians always look for villains when the economy grows murky. Robust corporate earnings were supposed to drive new hiring, yet July’s employment numbers were anemic at best, and wages remain stagnant.

So what gives? Employer angst about a weak economy, rising oil prices and the ever-growing costs of healthcare? Or is it that American companies really are hiring new workers, but they’re doing it in low-wage countries like India and Mexico?

No one really knows how many jobs have been sent abroad, but legislators clearly believe that outsourcing is the problem. Six bills that in some way would limit outsourcing await the governor’s signature. One would prohibit the state from contracting its hotline or data-center work to any company that would outsource jobs to companies abroad. Another would require companies operating in California to declare how many employees worked outside the country, and a third would prohibit healthcare companies from sending patient data abroad without first asking permission. These and the other three bills represent wrongheaded solutions to a complex problem.

Assembly Democrats, the group behind most of this legislation, commissioned a report by the nonpartisan Public Policy Institute of California on the effect of outsourcing in California. Apparently they didn’t read it. The report cited a wide variety of negative economic effects from restricting free trade in labor.

To begin with, there’s the huge question of how these proposal would benefit consumers. Imposing limits on hiring abroad would increase business costs and raise consumer prices. The laws also risk sparking retaliatory strikes in other countries -- which actually send more work to the United States than the U.S. exports, according to the Department of Commerce. And why should the cash-strapped state of California (which has used call centers in Mexico and India to answer questions about social services programs) be required to stick with higher-cost domestic labor if the added costs would force even deeper cuts in basic services?

The governor should veto the anti-outsourcing bills. If there is a state-level solution, it is to stop raiding education funding to help balance the budget. Other societies around the world are improving the education and skills of their workforces, and California must do the same to remain competitive in the free market.