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Bernie Sanders

Labor Pains

Job outsourcing reveals the human costs of making money


Published April 7, 2004 at 1:17 p.m.

Tim Abraham doesn't like to bad-mouth his former employer, National Life Group of Montpelier, even though the insurance company tossed him out of a well-paying job after three years just to boost its profits. "Getting a job at National Life was truly a blessing... I was proud to work for such a company," says Abraham, a 25-year veteran of the information technology profession. "But I need to tell you that there is a dark story here that needs to see the light of day."

That story began on January 31 when Abraham and 157 other National Life employees -- 16 percent of the company's workforce -- saw their jobs outsourced to Keane, Inc., a Boston-based international outsourcing firm. Abraham was offered a painful choice: He could either be laid off in a few weeks, or accept a short-term position to train workers from India who were taking his job for a fraction of the salary. Like 54 other "unallocated" employees, Abraham bit the bullet and took the temp job, knowing that he'll be terminated sometime between May and November. Thirty-seven others will continue to work for Keane, but with reduced benefits.

In some respects, not much has changed for Abraham and his co-workers who are now employed by Keane. Each morning they drive to the same office building, sit at the same desks and work on the same computers. Only now, their jobs are called "KAP," or "knowledge acquisition process." Abraham doesn't mince words when he describes how it feels. "We have been reduced to knowledge whores," he says. "Our pay will be a severance check from eight to 12 weeks if, and only if, we lie down and perform the intercourse of knowledge transfer."

The 158 employees took a hard hit. Marshall Breakstone, director of systems management with National Life for 24 years, was 15 months short of retirement. He not only lost his $50,000 life insurance policy, but also saw his pension slashed by 40 percent. He will now retire without medical benefits.

The layoffs might have been somewhat easier to accept if National Life were in dire financial straits. But Breakstone points to a recent internal company newsletter that congratulates National Life's executives for record sales last year in every division and product line. "It was a December of Decembers, a year-end run like none in the company's history," the newsletter reads. It quotes National Life President Jim Mallon saying, "In fact it was far beyond anything anyone could have hoped for. And I'm an optimist."

But there is very little optimism among Vermont's outsourced workers. For years, Vermonters have heard the giant sucking sound of manufacturing jobs flowing overseas -- more than 9000 in the last three years alone. But Vermont, reflecting a growing national trend, is now experiencing a record number of white-collar jobs moving offshore, in areas as diverse as medical transcription, software engineering, and even state-funded human services.

Last week, Abraham and Breakstone were two of eight panelists who participated in a town meeting in Montpelier sponsored by Rep. Bernie Sanders to address the growing problem of job outsourcing. The 200 or so people who attended the meeting didn't just hear from current and former employees of National Life and IBM whose jobs are being outsourced to India, China, Brazil and Mexico. Other panelists included local business owners who are desperately trying to keep their jobs in Vermont. They face the enormous challenge of competing with overseas companies that pay their workers pennies a day, abide by no environmental laws, prohibit labor unions and have no respect for other human rights.

Among those panelists were Mitch and Ric Cabot, owners of Cabot Hosiery Mills in Northfield, one of the last remaining sock manufacturers in the United States. Mitch Cabot says that over the last three years, he and his brother have been approached on an almost daily basis with offers to move their operations abroad.

"Almost every Third World country wants to make our socks," says Cabot, whose company pays approximately 140 employees between $10 and $23 per hour, plus benefits. Although Cabot admits that he and his brother could make a lot more money if their socks were manufactured in China or Pakistan, where workers are paid as little as 30 cents per hour, "That's not what it's all about," he says.

Cabot, who is also a civil-rights lawyer, says that outsourcing hits home for him on another level. "Go look at pictures of the workers in China. They live in cages!" he says. "They pay a dollar a day for their housing, they get two measly meals a day, and nine to 12 of them live in one bunk-bedded room. That's our competition. But we're not going that way and we never will."

Although economists agree that outsourcing is a growing phenomenon, they disagree on how many American jobs have been lost as a result. They cite other factors, such as technological innovations and cyclical fluctuations in the economy, to explain shifts in the labor market. Data from the Center for American Progress suggests that outsourcing has resulted in the loss of between 300,000 and 995,000 U.S. jobs. Goldman Sachs projects that some 6 million more jobs will move overseas in the next decade. A study released last week by the Information Technology Association of America found that 104,000 information technology jobs moved overseas last year. But that report also claims that outsourcing created a net gain of 90,000 new U.S. jobs in 2003.

Free-trade advocates, including President Bush, frequently assert that outsourcing fuels domestic job growth and is good for the economy in the long run. But recent research suggests that the newly created jobs are in lower-wage occupations. Sanders refers to a study which found that those lost jobs paid 29 percent more than the jobs that were created. Likewise, the recent biennial report by the Bureau of Labor Statistics found that of the 10 fastest-growing occupations in the United States, seven require only a high school diploma and on-the-job training.

Sanders adds that America's largest employer is no longer General Motors, a union shop that pays high wages with good benefits, but Wal-Mart, which pays low wages with few benefits.

Clearly, last week's town meeting offered more questions than answers. Sanders blames 20 years of failed free-trade policies such as NAFTA, for which large corporations spent millions lobbying. "These policies were not an accident," Sanders says. "When you have the heads of large multinational corporations making it very clear that they intend to continue throwing large numbers of Americans out on the street and go abroad, we know how it's happening and we know why it's happening... People have to put pressure on Congress and the president of the United States and say, 'Enough is enough!'"

Sanders suggests one place where Vermonters can begin reversing the outsourcing trend: by urging the government to set a better example for the business community. It is still legal for both the state of Vermont and the U.S. government to contract work out to foreign laborers. As the Bennington Banner reported last week, the Vermont Agency of Human Services has been outsourcing about $90,000 worth of support services for food-stamp recipients to workers in India through a multi-state contract with Citibank. That revelation prompted the Douglas administration to review all state contracts to determine which ones are being exported out of the country.

No one knows how many federal jobs have been outsourced, since the U.S. government doesn't track that figure. Legislation now in the U.S. Senate would ban the outsourcing of federal jobs, though it was revealed last month that a last-minute revision would allow exemptions for jobs in defense contracting, intelligence and homeland security.

A different bill in the U.S. House of Representatives, sponsored by Sanders and others and called the "Defending American Jobs Act of 2004," would require companies applying for federal assistance to report the number of domestic and overseas workers they employ. Companies that lay off more U.S. than foreign workers would be prohibited from receiving federal assistance such as tax incentives, grants, loan guarantees, and low-cost insurance.

Closer to home, there are other glimmers of hope. Fletcher Allen Health Care recently decided to reverse its practice of outsourcing medical transcription jobs, Sanders says, while Southwestern Vermont Medical Center in Bennington is also rethinking a decision to outsource some of its work.

But while the full cost of public and private outsourcing hasn't been tallied in economic terms, its human price is indisputable. Abraham says that the impact of National Life's layoffs will ripple through Vermont communities for months, if not years, to come. "Many [employees] haven't slept through the night since the day of the announcement in mid-January. Many are under the care of physicians," he says. "In their eyes, National Life has reduced itself to no more than a body shop. All this in the name of corporate profitability."