ISSUE IN BRIEF:
Outsourcing
The Business Council
strongly opposes legislation that would place restrictions on the ability
of business to engage in either "outsourcing" or "offshoring" activities.*
These proposals
ignore the realities of our increasingly global economy, and will do
more harm than good to New York's economy, businesses and workers. Mainstream
economists from both parties have said "outsourcing" of some jobs cuts
costs for consumers and makes businesses more efficient, ultimately resulting
in more U.S. jobs, rather than fewer.
Moreover, New
York's economic problems are not caused by the off-shoring of jobs, and will not be solved by
anti-outsourcing legislation. The legislature would do more to secure
jobs, and promote job creation, by focusing on key economic climate factors
such as the cost of health care insurance, workers' compensation, electric
power and property taxes, which impose significant competitive disadvantages
on New York State businesses.
The most onerous
bill now under consideration in New York (A.1213/Brodsky) would prohibit
a business that has received state financial assistance from moving any "employment,
jobs or positions" out-of-state. "Violators" could be required to repay
the state the value of state financial assistance received after the
effective date of this bill, and could face a mandatory five year ban
on receiving any additional state assistance.
This bill has
several major shortcomings:
- it
would impose severe economic penalties against businesses that have fully
met their obligations to the state under
existing economic development programs. A business would be subject to
benefit recapture and a prohibition on future incentives if economic
conditions force a job reduction in one facility or division, even though
the facility or division receiving assistance under a state assistance
contract has met all requirements of that agreement.
- This
bill would have other adverse impacts on state development programs.
For example, under the Empire Zone program, a business could have
a temporary reduction in in-state employment. Under existing Empire Zone
law, that business would be denied benefits for that year, but would remain
eligible for benefits in subsequent years in which it meets its employment
test. Under this legislation, if that company also had moved even one job out
of New York State, it would be forced to repay the value of state incentives,
and be banned from any additional state incentives (including Empire Zone
benefits) for a five year period.
These prohibition
on, or penalties for, "outsourcing," would significantly impair the state's
ability to retain existing businesses, or attract new business or new
investments to
New York. Under these proposal, the acceptance of state assistance would
come with severe limitations on a firm's ability to move employees or
business operations to meet business needs, irrespective of the justification
for doing. We question how many businesses would be willing or able to
accept such stringent conditions in order to qualify for state assistance.
The Business Council
does not oppose measures to increase the accountability of major state
economic development programs, where needed. For example, we believe
the Governor's Empire Zone reform proposal contains appropriate provisions
regarding the tracking of, and reporting on, costs and benefits within
that program.
However, we strongly
oppose measures that place unreasonable limits on business activity,
and impose draconian, retroactive penalties based on unreasonable criteria.
* The term "outsourcing" typically
refers to situations where a function had been performed within a company,
but is now done under contract by non-employees. The reference to "off
shore" jobs would apply to purchase of services from businesses performing
the work overseas, irrespective of whether such jobs or services were ever performed by
New York or U.S. businesses or employees. Often, it is unclear which of
these different economic scenarios the intended target of this legislation
is.
