Monday, July 09, 2007

Outsourcing's challenge


Presidential candidates pressured on both sides of complicated labor issue

It may not be as big a campaign issue as the war in Iraq or universal health insurance, but outsourcing of U.S. jobs is becoming one of the hottest topics of the 2008 presidential race, with Silicon Valley leaders playing key roles.

The subject will almost certainly come up today when Sen. Hillary Clinton, D-N.Y., speaks to a powerful group of alumni of India's most prestigious technology school, the India Institute of Technology, including many whose businesses use or supply outsourcing services.

Outsourcing is a dicey subject that has both Republican and Democratic candidates scrambling for coherent policies that don't anger voters who worry for their jobs, or influential campaign back ers - including tech leaders who rely on outsourcing and hiring of foreign workers.

Underscoring the sensitivity, Sen. Barack Obama, D-Ill., last month had to rush to quell a controversy over a memo released by one of his campaign staffers. The memo, which Obama said he knew nothing about, painted Clinton as too cozy with Indian-American leaders and others, including Cisco Systems, that have large operations in India. Translation: Her backers seek to export U.S. jobs.

The memo boomeranged, sending Obama to smooth over the feelings of Indian-American leaders, even some of his own backers. They feared the campaign appeared to be scapegoating the Indian-American community, a growing source of votes and campaign dollars.

Differing arguments

Business leaders argue there is a severe shortage of skilled worker visas required to keep U.S. businesses competitive. On the contrary, labor and U.S. engineer groups claim the system is poised to cost Americans millions of jobs.

Not surprisingly, the leading Democratic and Republican candidates are treading softly, mostly offering similar prescriptions focusing on helping displaced U.S. workers, ending tax incentives for companies that export work and calling for cleaning up the visa system.

Despite two months of heavy advertising by IIT touting Hillary Clinton's role as keynote speaker today, the senator's office said delivering the remarks in person was "not logistically possible."

Her Senate spokesman, Philippe Reines, said the decision was not influenced by growing scrutiny of outsourcing and her ties to Indian-Americans, who do aggressive fundraising for her campaign. IIT officials said they understood the "last-minute change" in Clinton's hectic schedule. Among the hosts of the IIT event are leaders of McKinsey and Headstrong, which provides outsourcing consultancy services.

"When push comes to shove, the candidates don't know what to do about it. They don't want to anger the business community in any way," said Ron Hira, author of the 2005 book, "Outsourcing America," and an assistant professor of public policy at the Rochester Institute of Technology. "There's not a silver bullet. But part of it is lack of political courage to say what's good for these companies isn't always good for the country. It isn't business bashing."

California primary

"What makes this issue of even more interest to us is you have a California primary that matters and candidates can't just come to raise money," said Robert Hoffman, an Oracle vice president who co-chairs Compete America, an alliance of tech employers seeking pro-business immigration reforms. "One of the questions that our employees and the companies will want to know is what are these candidates going to do to represent our innovative leadership" and preserve competitiveness.

And labor leaders, often key allies of Democrats at election time, also intend to put on the pressure as the issue grows in voters' minds.

The Republicans are more aligned with business, saying weaker U.S. companies will lead to even more job eliminations.

Republican presidential candidate Mitt Romney hired as a campaign adviser a former key George W. Bush White House economist who in 2004 declared outsourcing is "probably a plus" over time.

"The problem is that there hasn't been any serious discussion by either party's candidates," said the Hoover Institution's Whalen. "The Democrats angrily claim that Republicans don't care about working men and women. The Republicans say the Democrats are just loony protectionists. It makes for good sound bites and doesn't solve the problem."