From the Office of Senator Kerry

Friday, November 14, 2003

WASHINGTON, DC – In an effort to protect hundreds of thousands of American jobs, Senator John F. Kerry (D-Mass.) today introduced the Call Center Consumer’s Right to Know Act. The bill will address the growing problem of U.S. corporations moving their call centers – centralized locations where consumers use the telephone or Internet to buy goods and services, inquire about transactions and bills, and get technical support or other information – overseas in an attempt to capitalize on low labor costs.

“My legislation will help American consumers make informed choices about the goods and services they purchase, because at a time when millions of Americans are out of work, we should be focused on shipping our goods overseas, not our jobs,” said Kerry.

The Call Center Consumer’s Right to Know Act of 2003 will compel U.S. corporations to require all their call center representatives to disclose their physical location at the commencement of each telephone call. This proposal will go a long way to preserve U.S. jobs, restore confidence in the booming call center market, and help provide a measure of security for telephone and Internet consumer transactions. There are more than 50,000 call centers in the United States and an estimated 6 million employees work in these centers. As companies move these operations abroad, many of these jobs are needlessly threatened at a time when we seek economic growth and job creation.

In addition, U.S. customers are unaware that in many instances they are not conducting business transactions with the U.S. company, but rather are dealing with the third-party contractor in another country.

“Consumers should have the right to know where they are calling, and those that prefer to use American companies should have the right to do so,” Kerry said.

Lastly, consumers are deeply concerned with the growing phenomenon of identity theft. Efforts to stem this tide and keep up with the technological advancements that enable these crimes have done little to allay those concerns. This trend becomes all the more frightening when millions of calls involving personal financial transactions are routed across our borders where laws and law enforcement are even more remote to U.S. customers.

Background U.S. corporations continue to take advantage of rapid improvements in telecommunications by moving an increasing number of hi-tech and service sector jobs abroad. Technical and support services can now be provided from virtually anywhere in the world – completely unbeknownst to consumers. In fact, many companies and public entities no longer operate their own customer sales and service operations, but contract with a third party call center operator to provide the service – and increasingly those call centers are located overseas.

* According to Gartner (Connecticut-based research firm): half a million IT jobs (approximately 1 in 20) will go abroad by 2005. o Forrester Research (Cambridge, Mass., market research firm) predicts that in the next 15 years, 3.3 million U.S. service-industry jobs will be moved abroad — this is 2 percent of the entire workforce and represents an estimated $136 billion in wages. This total includes an estimated 472,000 computer services jobs. o A report by Datamonitor indicates that by 2005, out-sourcing firms are hoping to increase agent counts almost tenfold; however, hiring in the U.S. will increase by only 6 percent during the same period. (1)

* India: Industry experts say that 80 percent of all offshore information technology services work is now done in India. o Merrill Lynch data shows that the cost for the average Indian worker — including salary and benefits as well as telecommunications costs and real estate — is $11,854; the cost for a U.S. employee is $58,598 - While call center workers in the U.S. can make in the high $30,000 range or more a year, their Indian counterparts might earn $4,000 or up to $7,000 for a management-level post. - Average wages for Indian college graduates: $2 to $3 per hour - One technology service company (24/7, a California-based tech support contractor) estimates that by employing 1,200 workers in its two call centers in India, it saves clients between 25 and 40 percent on call center costs o Indian governments are providing incentives to lure call centers; for example, providing corporations with tax exemptions and building Western-style technology parks fitted with telecom infrastructure. o One company in Bangalore, CustomerAssett, hires dialect-training coaches to soften call center workers’ Indian accents and also teach information about state capitals and names of baseball teams; some other call centers encourage agents to make up American names and hometowns, like Stockton, Iowa.

* Examples. U.S. companies operating facilities abroad include (2): o Electronic Data Systems (Plano, Texas) — currently employs 900 people at call center in Mumbai; announced in October, 2002, that it would move 1,500 additional call center jobs from U.S. and Europe to lower-cost customer care centers in India, Brazil, Ireland, and the Czech Republic. - Estimated savings for third-party IT providers like EDS from performing IT services or software development offshore: 30 to 60 percent. - Also, outsourcing customer facilities crucial for remaining competitive in global market; IT firms like IBM Global Services, Hewlett Packard, and EDS are facing competition from Indian-based contractors. o Dell Computer — recently opened call center in India to support US home and small-business customers. o Hewlett-Packard — shifted 1,200 Compaq customer-service jobs from Florida to HP center in India in the last two years. o Oracle — already has 2,000 employees in India and expects to move 2,000 more software-development, accounting, payroll and customer-service positions. o Microsoft — employees estimate that Microsoft is planning to eliminate at least 800 jobs at the Las Colinas, Texas, facility that handles first-contact “help-desk” calls for Microsoft products; the positions will be transferred to India and Nova Scotia, Canada. If this outsourcing goes as expected, it will be the largest one-time firing of full-time Microsoft employees in the company’s history. (3) o Other firms exploring outsourcing to India for email or phone customer support include: Sun, Hewlett-Packard, AltaVista, Amazon.com, and Citicorp.

* Financial Services: U.S. financial services companies have been using outsourcing to handle tech support since the 1990s; now U.S. banks, insurance firms and mortgage companies have also begun to send business operations (e.g. assessing loan applications and credit checks) abroad as well. These companies are expected to move more than 500,000 jobs overseas in the next 5 years. (4)

* North America: call center information (5): o In 2001, there were approximately 2.79 million call center agent positions in the U.S. at 50,200 call centers; there were 187,000 such jobs at 5,600 call centers in Canada. o However, U.S. companies have begun to show interest in near-shore outsourcing of call centers to Canada; provincial governments in Alberta, Ontario, Quebec, and the maritime provinces have launched campaigns and local tax break plans to lure call centers to their provinces. o Datamonitor estimates that the number of call center jobs in the U.S. will increase by 0.52 percent by 2007, while the number of call center jobs in Canada will jump to 285,000, increasing 7.27 percent over the same time.

1. San Francisco Chronicle, “Call center competition: the customer service business has created jobs for workers in rural CA but 800 numbers can also ring abroad,” February 7, 2002.

2. Star-Telegram, “Going abroad: more US technology companies are shifting jobs to India where cheaper, educated labor is plentiful,” July 21, 2003 (http://www.dfw.com/mld/startelegram/business/local/6349542.htm).

3. TechsUnite.org, IT News and Worker Resources, July 1, 2003 (http://www.techsunite.org/news/techind/030701_msjobsabroad.cfm?printpage=1).

4. TIME Europe, “Where the good jobs are going,” August 18-25, 2003 (http://www.time.com/time/europe/magazine/article/0,13005,901030818-474546,00.html).

5. Datamonitor, “Opportunities in North American Call Centers to 2007: A market approaching maturity,” December 2002.