Food Stamps Create Jobs… in India

Food Stamps Create Jobs… in India
Several States With High Unemployment Are Outsourcing Food Stamp Services
By SCOTT MAYEROWITZ

ABC NEWS Business UnitApril 29, 2009

Michele Brown has seen Americans' struggles with jobs first hand. She lives in hard-hit Florida, spent 20 years in the real estate business and recently had her days as a nanny cut back after her boss had his own hours reduced. Several states with high unemployment rates are outsourcing their food stamp services to call centers in India, angering many residents. Michele Brown learned about Florida's outsourcing when she called regarding a problem with her benefits.

But nothing prepared her for what happened one day when she called a toll-free line to inquire about her food stamps. "The woman who answered the phone -- it's not like she wasn't nice or anything -- but it was kind of evident that she wasn't in the States," Brown said.

It turns out the woman was at a JP Morgan Chase call center in India. "That really put me over the edge," said Brown, 52, of Jupiter, Fla. "It's not right because we need the work here. People are in a bad way here."

Americans have never liked the idea of jobs going overseas. But for many, it's more offensive when taxpayer dollars -- including those in the federal stimulus plan -- go to create those jobs. And when those jobs deal with food stamps, unemployment insurance and other public benefits, well forgot irony, to many it's just downright plain insulting.

(1 of 10 Americans on Food Stamps IS DOWNRIGHT PLAIN INSULTING)

Unemployment in Florida is now 9.7 percent.

"Why is the state of Florida sending these jobs away?" Brown asked. "The thing that really iced it for me, I knew that JP Morgan had gotten bailout funds." So she called her local politicians and then she reached out to her local newspaper, the Palm Beach Post. The paper did a story two weeks ago about the $50 million Florida paid JP Morgan in the last three years to administer the food stamps distribution.

Those services include 24-hour customer-service call centers. Some of those calls were answered in Bangalore and Gurgaon, India. Others were taken at two U.S. call centers. The next day the head of the state's Department of Children and Families said something needed to change. "I don't want any calls going to India," he said. "We need to take care of this."

The state now has a commitment from JP Morgan to move all of its calls to the United States, according to Judi Spann, a spokeswoman for the Department of Children and Families. Florida isn't alone in sending its customer service calls overseas. There are three major companies that provide debit cards to food stamp recipients: JP Morgan Chase; eFunds, which is now part of Fidelity National Information Services; and Affiliated Computer Services or ACS.

JP Morgan Chase Sends Calls to India

JP Morgan is the only one today still operating public-assistance call centers overseas. The company refused to say which states had calls routed to India and which ones had calls stay domestically. That decision, the company said, was often left up to the individual states. ABC News canvassed the country, asking states about their call centers. Often state officials overseeing the programs had no idea, despite past controversies, where their calls were going. JP Morgan provides food stamp debit cards in 26 states and the District of Columbia. It also provides child support debit cards in 15 states and unemployment insurance cards in seven states.

The 130,000 food stamp families in West Virginia have their calls routed to India, according to Jerry Luck, program director for the state. "We have no complaints with the call center. We get very good service," he said. "I was born and raised in Pittsburgh. There's sometimes a communication issue between somebody from Pittsburg and somebody from Harrisburg, Pa."

The state's contract with JP Morgan expires on Aug. 31. In requests for a new contract, West Virginia has requested a domestic call center because of political concerns. The 488,000 households in Tennessee also have their calls sent to JP Morgan call centers in India. The state's contract runs through February 2012 and there are currently no plans to change it, according to Michelle Mowery Johnson, director of communications for state's Department of Human Services. She noted that there are no federal or Tennessee state laws prohibiting the outsourcing call center operations.

Unemployment in West Virginia is now 6.9 percent and 9.6 percent in Tennessee.

Other states struggled to answer questions about their call center locations. "Who would have ever thought it would be such a difficult question to answer," said Amy Kempe, spokeswoman for the governor's office in Rhode Island. She eventually learned that JP Morgan was sending the state's food stamps calls to India but now keeps them all domestically. Kempe later told ABC News however that JP Morgan was still routing calls for unemployment benefits to India.

Unemployment in Rhode Island now stands at 10.5 percent.

Following a congressional mandate in 1996, states started moving toward electronic delivery of food stamp benefits, now called Electronic Benefit Transfer or EBT.

States Save by Outsourcing

States found it cheaper to outsource these services. By switching to debit cards for food stamps and other benefits, states save millions of dollars in processing and administrative fees. Companies, including JP Morgan, filled the niche. For a fee, the bank will provide debit cards to benefit recipients. Each month, they will load money onto the cards and on a daily basis process transactions at stores. For unemployment insurance, the providers also process ATM cash withdrawals. For instance, in Michigan, JP Morgan allows unemployment recipients two free withdrawals from its network of ATMs. For each addition withdrawal, the bank takes a $1.50 fee. If somebody loses their card, the first replacement is free. The second costs $7.50. The banks also get a fee for each case they handle.

Take Indiana. JP Morgan gets 62 to 64 cents for each food stamp case handled monthly there. With 296,245 cases right now, that means the state is paying JP Morgan $183,672 a month on top of any other fees it collects. Indiana eliminated 100 full-time employees when it hired JP Morgan to make the program cost-neutral, according to Marcus Barlow, spokesman for the state's Family and Social Services Administration.

But unlike Florida, Tennessee or West Virginia, Indiana keeps all its calls domestically. In fact, all of its calls go to a call center in Maryville, Ind., Barlow said, because the state required an in-state call center when soliciting bids. Other states have rebelled against sending jobs overseas. South Carolina used to have its calls go to a JP Morgan call center in India. But in its latest contract, signed a year and a half ago, it stipulated that the calls stay domestically. Indian call-center employees typically earn about $2.50 to $3.50 an hour, roughly 70 percent less than their American counterparts, said Jagdish Dalal, a managing director at the New York-based International Association of Outsourcing Professionals. Overseas call center sites, he said, can vary from small "mom and pop shops" with 15 employees to mass operations with 3,000 seats. But Dalal added that companies that engage in outsourcing often end up facing higher costs related to infrastructure because the transportation and electrical systems in the developing countries often home to call centers, like India, aren't as reliable as in the United States. Despite these obstacles, he said, the savings from outsourcing persists, with companies saving about 25 percent to 30 percent by locating workers in foreign countries.

The Fight Against Outsourcing

In recent years, lawmakers have attempted to curb federal and state governments' use of outsourcing and met with varying degrees of success. In 2005, New Jersey passed a law essentially requiring all services under state contracts to be performed within the United States.
Since at least 2003, Congress has considered several bills related to outsourcing, including those that would limit the practice as well as one -- the "Call Center Consumer's Right to Know Act" that would require call center operators to disclose their location to callers. The act never became law. Most recently, Rep. Sue Myrick, R-N.C., proposed a bill stopping banks that receive funding under the government's Troubled Asset Relief Program -- which includes JPMorgan Chase -- from sending new call center jobs overseas. The bill was approved by the House, but did not move on from there. While JP Morgan would not say what percentage of its calls go overseas, the other two major companies said all of their calls are handled in the United States. "While we do not comment on specific client contracts, the support for all of our food stamp programs is handled domestically," Ken Ericson, director of corporate communications for ACS, said in an e-mail.

eFunds used to route calls overseas. It was acquired in 2007 by Fidelity National Information Services and now keeps all public-assistance calls domestic, according to Anthony Ficarra, who oversees the electronic benefit transfer program for the company. Fidelity is the largest food stamp servicer, handling accounts in 31 states. All of the calls go to centers in Wisconsin, Arkansas, Florida and Minnesota. "We have a large operation in India ourselves, but because of the nature of the programs, we do it all in the U.S," Ficarra said. "For us there's a long-term sensitivity to not handling those things outside the borders of the country."