States Target Outsourcing

Several states hope legislative efforts will help curb a trend toward outsourcing to companies overseas.

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Politicians in at least 18 states are drafting legislation that seeks to restrict and even punish companies that "offshore," or outsource jobs overseas.

A California bill, for example, would limit bidding on state contracts to companies with employees operating within state or national borders. In New York, lawmakers are considering moving to curtail an offshoring company's access to the state's popular Empire Zone program, which is intended to attract companies to New York by offering tax cuts and public money to help offset building and construction costs. As the bill's sponsors note, several large corporations have taken state subsidies only to turn around and move existing jobs out of state. Offenders include General Electric, IBM, and Kodak. "We're not saying that a company shouldn't outsource," says Jim Malatras, the legislative director for the assemblyman who sponsored the bill. "We just don't want them to do it on our dime."

But critics warn that no matter how well intended, such laws will fail to protect jobs in the U.S., and may actually work against the states that pass them. "I disagree with any mandate against outsourcing," says Alan Day, an economist with the BankNorth Investment Group, a New England bank. "It's a short-run attempt to fix what is a natural part of doing business." Still, with the issue looming large in political campaigns nationwide, more states are likely to contemplate their own versions of these bills.