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In the current administration’s push to bring jobs back to America, Congress is discussing two almost identical bi-partisan bills in the house and senate that are designed to lessen US dependence on foreign outsourcing, with a particular focus on call centers. The bills are relatively simple, but have caused a major controversy in a number of countries where much of US’s offshoring is done. As can be seen below, there are a number of processes that are typically outsourced by US companies, and while customer support is lowest on the list, it seems to be a major focus as the bills specify call centers over the larger share of other IT and business services.
India is thought to be the call center capital, but the Philippines is actually the leader in US offshoring. Given that the business process outsourcing market is estimated to be worth ~$343b this year with an 8.9% CAGR (2023 – 2030) and the IT outsourcing market is thought to be ~$651.5B, the assumption is that if the call center bills were to go though, the next step would be to regulate business and IT service outsourcing, which would be devastating to the top five outsourcing locations (in order), the Philippines, India, Mexico, Columbia, and Brazil.
Here's what the bills call for:
- All US companies that are moving call centers from the US to overseas locations must notify the Secretary of Labor 120 days prior.
- Violations of rule one would be met with a $10,000/day penalty.
- The Secretary will publish a public list of those companies who are offshoring.
- Companies will remain on the list for up to 5 years unless a request approval to be removed are approved.
- Conditions for approval are:
- Either bringing back call center processes to the US or
- Add a call center in the US that has at least the same number of US employees as offshore sites.
- Most important, if an employer is placed on the list and has received a grant or loan from the government, they will see the grant or loan reduced by 8.3% each month.
- Even more onerous is the penalty for being on the list for more than one year, at which point the loan or grant can be reduced further or cancelled outright
- Should a company remain on the list, it become ineligible for any new federal grants or guaranteed loans for 5 years.
- Those with existing overseas call centers, will remain off the list unless they relocate a US call center overseas, or if their overseas center represents at least 30% of the average call center company volume over the previous 12 months.
- While less draconian, the bill also requires that any company with overseas call centers identify the physical location of the center at the beginning of each call and gives the customer the option of being transferred to a call center in the US.
Most of the estimates we have seen for the number of US jobs that are lost to overseas outsourcing locations center around 300,000/year, although finding hard data to back that up is quite difficult. The hard data for 2021 indicated that 6.7m jobs were created that year with 6.4m being domestic, so the assumption was made that the remainder went to offshore service centers, but that remains unconfirmed, along with the more general statement that 4.5% of US jobs are outsourced each year, which we are also unable to confirm.
That said, given the number of jobs offshore call centers represent in other countries, this kind of talk in Congress can be quite disturbing, especially in light of the fact that we are constantly being told that AI will end the need for human accountants, vastly reduce marketing workforces, and offload almost all coding. Obviously there will be a cost to maintaining said list and the administrative work that must be done to insure compliance, but based on the table below, the cost to businesses to return or establish new call centers in the US would be substantial and likely, at least partially, passed on to consumers.
That said, given the number of jobs offshore call centers represent in other countries, this kind of talk in Congress can be quite disturbing, especially in light of the fact that we are constantly being told that AI will end the need for human accountants, vastly reduce marketing workforces, and offload almost all coding. Obviously there will be a cost to maintaining said list and the administrative work that must be done to insure compliance, but based on the table below, the cost to businesses to return or establish new call centers in the US would be substantial and likely, at least partially, passed on to consumers.
The proposed bipartisan bills in Congress represent a policy that will be another push against allies when sensitivities are already at extreme levels. While the legislation specifically targets the call center industry, a segment with a lower share of outsourced processes compared to IT and accounting, the implications are far-reaching. The bills' core provisions, essentially a public ‘shaming list’, the financial penalties on government grants and loans, and the mandatory customer disclosure rules, seem more oriented to holding offshoring at current levels, rather than addressing the root problems. However, this effort creates a direct conflict with US businesses who see offshoring as a way to reduce costs.
The data shows that the cost to businesses for an oversea’ call center is a small fraction of the cost for a U.S.-based call center. If enacted, the bills would force companies to choose between financial penalties or bringing operations back to the U.S., which would lead to increased costs that are eventually passed on to consumers. For the top outsourcing nations, whose economies depend on this business, such legislation could be devastating. Ultimately, the cost of forcing such a change through penalties will cost taxpayers more money.
The data shows that the cost to businesses for an oversea’ call center is a small fraction of the cost for a U.S.-based call center. If enacted, the bills would force companies to choose between financial penalties or bringing operations back to the U.S., which would lead to increased costs that are eventually passed on to consumers. For the top outsourcing nations, whose economies depend on this business, such legislation could be devastating. Ultimately, the cost of forcing such a change through penalties will cost taxpayers more money.
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