Is Telecom the future for Southwest Virgnia?

Is Telecom the future for Southwest Virgnia?

by Lewis Loflin

Telecom is not the god-send politicians make it out to be. We are not getting high-tech or high-paying jobs, just low-end service jobs paying between $7 and $8 an hour. They come here for three reasons: 1) To influence Congressman Boucher who writes Telecom legislation. 2) Cheap labor. 3) Government subsidies costing tens of thousands of dollars per job including free infrastructure, job training, and even office equipment. The New York Times has warned about this since mid 2002 and the recent loss of Travelocity in Clintwood, Virginia has proven them correct.

Major companies such as Sykes Communications are moving call centers overseas and abandoning rural America. $1 an hour for an English speaking college graduate is just too good to miss. Others such as AT&T and Verizon are moving to the region while firing better paid union employees elsewhere. Rural communities have become a rest stop for companies moving to Asia, Latin America, and other cheap foreign labor markets.

Importing workers while firing Americans

If shipping jobs to low wage Appalachia isn't bad enough, many businesses simply fire their workers and bring in cheap foreign labor in on H-1B and L-1 visas. Here is an example of the problem from http://www.HireAmericanCitizens.org for 2002:

Announced High Tech Job Cuts	605,101
New High Tech college graduates	160,000
Available workers before new H-1B visas	765,101
New H-1B visas granted	382,200
Total available workforce	1,147,301
New Jobs Created	80,000
Glut of high tech workers	1,067,301

As they go on to explain:

The future trend is quite clear. Employers are not satisfied to replace American citizens on our own soil. They want more. I mentioned in a previous column that employers have been importing so many H-1B workers that it leaves the H-1B workers who are already here no choice but to go back to their home country when their job ends. Remember that employers don’t want H-1B workers that are already here. They want fresh ones. The plan is simple. Train as many foreigners as you can on your software in the United States at reduced rates via the indentured servitude allowed by the H-1B program. Bring so many here that a glut of workers is created so that domestic salaries are reduced, Americans lose their jobs, and foreigners get churned through the revolving H-1B door. That way you create a solid base of foreign workers who are trained on your software, and had to go back to their home country to find work. Then setup shop in their country at salaries even less than if they were here in the United States.

The IDG NEWS SERVICE reports that unemployment in IT related professions has dropped in 2004, while the numbers of people in the professions dropped as well according to an IEEE-USA analysis of numbers from the U.S. Bureau of Labor Statistics. (BLS)

IEEE-USA blamed the drop in employed software engineers, programmers, hardware engineers and computer scientists and systems analysts on the continuing trend for U.S. companies to send jobs overseas, often called offshore outsourcing.

This contradicts BLS unemployment statistics showing declines in unemployment rates in those fields. The overall number of people employed in IT occupations in the U.S. dropped in the second quarter of 2004 compared to 2003.

The IEEE-USA reported the following:

The number of employed software engineers in the U.S. dropped from 856,000 in the first quarter of 2004 to 725,000 in the second quarter. Yet the unemployment rate among software engineers dropped from 3.3% to 2.9% from one quarter to the next. In 2003, an average of 758,000 software engineers were employed in the U.S.

The number of computer scientists and systems analysts dropped from 672,000 in the first quarter to 621,000 in the second, and the unemployment rate for computer scientists dropped from 6.7% to 4%. An average of 722,000 people were employed as computer scientists and systems analysts during 2003.

The number of people working as computer programmers dropped from 591,000 in the first quarter to 575,000 in the second, although the second-quarter numbers are still higher than 2003's average of 563,000 employed U.S. programmers. The unemployment rate among programmers dropped from 9.5% in the first quarter to 5.7% in the second quarter, according to BLS numbers.

The number of employed computer hardware engineers dropped from 86,000 to 83,000 from the first quarter to the second. The 2003 average was 99,000 employed hardware engineers in the U.S.

Quoting IEEE-USA, "We think a lot of that would be ... people being discouraged and leaving the field...it's kind of strange that the numbers of employed people fell, as well as the unemployment rates." The IEEE-USA attributed much of the employment losses to offshore outsourcing, but didn't mention the H1-B or L-1 visa problems.

See More companies are using L-1 visas to bring in low-wage foreign IT workers--and replace Americans

What about Southwest Virginia?

US Solutions Group is a call center for Fed-X that located in Bristol, Virginia. They received a $25,000 check from the taxpayers as an "incentive," to help with their parking according to Bristol officials. (They are located downtown.) It's claimed by public officials they pay $10 an hour, but have refused to answer my inquiries. Nor will anyone give me any figures on how many people they do employ. They seem a sound company.

Nearby Clintwood, Virginia has put these claims into doubt. According to information sent to me by the VCEDA (http://www.vaswpromise.com/) a company called Nexus hired 550 workers and Travelocity.com the travel/vacation company hired 500. These are listed as projected hires; both companies received together about $10 million in various taxpayer incentives. Local politicians tout these as "technology jobs" when in fact most are answering the phone or taking orders. It includes very little of what is considered traditional IT jobs.

According to economic development officials I have spoken to, they avoid telemarketing firms and firms are required to pay at least 150 percent of minimum wage. That's $7.73 an hour or about $16,000 a year. While better than Wal-Mart, it's below the poverty rate for a family of four. This leaves open another loophole as well: Companies using temp workers and sub-contractors to avoid these wage requirements. These people don't work for the firm.

By November 2000 the local press reported Nexus fired their 188 workers, never hiring near the 550 promised. Company officials called this "temporary." By July 2001, Travelocity announced their new call center in the same building after Telecorp PCS pulled out of the deal. They claimed to start out at $8 an hour and "We are going to get to our 450 to 500 people here very rapidly, within a year." Taxpayers later spent thousands to train their workers and even spent $1.6 million to open an on-site day care because the pay made it difficult to afford day care.

By December 2004 Travelocity was gone and fired their 250 workers. Sykes Communications closed down two call centers in nearby Eastern Kentucky costing another 1000 jobs. Both firms shipped the jobs to India. As of May 2005 Sykes still has their call center in Wise, Virginia claiming about 600 employees. A new AT&T call center in nearby Lebanon, Virginia touts 500 employees, but I'm unable to get either company to respond to my inquiries. I don't believe these figures are accurate.

In Bristol, Virginia Bristol Virginia Utilities multi-million dollar foray into fiber optic has yet to land a single firm anyone will name. We do have Boise Cascade which has been here several years and has a good reputation, but they were here before the Utility got involved in broadband. The services had been available for years. Another company called Cross Stone Products located in a Bristol industrial park, was touted in Virginia Business in January 2004 as proof that broadband is successful. The company was gone by September 2004. Bristol, Virginia, which purchased their building for them, got stuck for about $2 million. I believe the building has been recently sold.

Another call center recently located in Pennington Gap, Virginia (Lee County) and a telemarketing firm located in a closed grocery store in Marion, Virginia. (Smyth County) The Virginia Employment Commission is locating their call center in Buchanan County while firing workers in Bristol and other locations. Most economic development efforts seem aimed at expanding/keeping existing firms, not getting new ones.

The big question is to what extant does government get involved in traditional private business ventures? The rave all the sudden is for municipal utilities to get into the phone, internet, and cable business, often in direct competition with existing private business. We are not getting new services for the most part, but a duplication of services. Part of this trend is because deregulation of the electric industry has made municipal utilities less profitable while telecom could make this profitable again.

But this comes at a risk to other utility customers. In Bristol, Virginia the city owned utility did just that while incurring $50 million in debt directly and indirectly due to their Opti-Net services. Because of the high cost (often $2000 per household) the promised services to unserved area of the community have not been met while simply overbuilding existing private sector infrastructure.

The verdict on telecom being a solution for job problems is a mixed bag. It's the usual "build it and they will come" wishful thinking. We've gotten few of the high quality jobs, which are also being shipped to Asia or being given to foreign workers abusing the visa system. Should we keep sinking taxpayer dollars into this questionable kind of investment? Our public officials do try hard to succeed, but unless there is some effort to halt destructive labor policies at the federal level, the future will remain questionable.

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