Monday Morning Thoughts: UC Outsourcing Demonstrates the Privatization of the Largest Public Higher Ed System in the World

Last week, Janet Napolitano reminded us that the ambition of UC may be at odds with our goals as a community.  But a more sinister development comes from an LA Times column this weekend, which details “How the University of California exploited a visa loophole to move tech jobs to India.”

LA Times columnist Michael Hiltzik writes, “Using a visa loophole to fire well-paid U.S. information technology workers and replace them with low-paid immigrants from India is despicable enough when it’s done by profit-making companies such as Southern California Edison and Walt Disney Co.

“But the latest employer to try this stunt sets a new mark in what might be termed ‘job laundering.’ It’s the University of California. Experts in the abuse of so-called H-1B visas say UC is the first public university to send the jobs of American IT staff offshore. That’s not a distinction UC should wear proudly,” he said.

In July, the UC San Francisco Medical Center, the largest in the system, announced “it would lay off 49 career IT staffers and eliminate 48 other IT jobs that were vacant or filled by contract employees. The workers are to be gone as of Feb. 28. In the meantime they’ve been ordered to train their own replacements, who are employees of the Indian outsourcing firm HCL Technologies.”

This a process known as “knowledge transfer.”  Ron Hira of Howard University noted that, while private companies are or should be driven to maximize profits, “UC is a public institution, not driven by profit. It’s qualitatively different from other employers.”

However, Mr. Hiltzik writes, “By sending IT jobs abroad, UC is undermining its own mission, which includes preparing California students to serve the high-tech industry.”

Mr. Hiltzik explains, “H-1B visas were created to allow American technology companies to import uniquely talented individuals from abroad; visa holders can work in the U.S. for three years, with the goal of obtaining permanent residency and ultimately citizenship.”

However, the program is being co-opted by firms wishing to outsource by importing workers, primarily from India, in order to replace Americans in middle-level positions.

Worse yet, as Mr. Hiltzik chronicles, “The workers they import often live here barracks-style and are at the beck and call of supervisors who can revoke their residency at will. Eventually they return home to continue their assignments, without workplace benefits and at wages a fraction of what their American counterparts were paid.”

There are of course reasons for this decision.  Economic challenges.  “The hospitals recorded a $42-million deficit in the last fiscal year on $3.4 billion in revenue.”  The red ink reported is partially the result of “an increased caseload from Medi-Cal, the state’s Medicaid program, which was expanded under the Affordable Care Act. Medi-Cal reimbursements are so low that UCSF loses 40 cents on every dollar it spends on those patients’ treatment.”

Mr. Hiltzik writes, “UCSF officials have convinced themselves that most of the laid-off workers will have little trouble finding new jobs in the vibrant Bay Area technology industry; they say three of the workers already have accepted other positions at UCSF and some have been offered work by HCL.”

He continues, “The university says outsourcing their work to HCL will save $30 million over the five-year term of the HCL contract, which will cost $50 million.  That’s a meager savings of 0.1% of the UCSF budget, which was $5.83 billion in 2015-16. But the key question is what the university may be giving up in terms of system security and other important considerations.”

Aside from questions as to whether the outsourced workers can do the job are policy questions.

Mr. Hiltzik writes, “Disclosure of the layoffs triggered an uproar last fall. Letters went out to UC President Janet Napolitano from House Minority Leader Nancy Pelosi (D-San Francisco) and Lofgren, who urged Napolitano to reverse the outsourcing plan and suspend the HCL contract until UC can ‘thoroughly examine’ the public policy issues raised by the plan.”

Senator Dianne Feinstein reminded President Napolitano “that UC received about $8.5 billion in federal funding in 2014-15, and said she was unhappy to hear that the funds would be used ‘to replace Californian IT workers with foreign workers or labor performed abroad.’ She added, ‘this is not the way’ to cut costs.”

President Napolitano “seems to be trying to dodge responsibility for this policy.”

But Mr. Hiltzik is clear: “The outsourcing of IT jobs to India isn’t UCSF policy, but emerging UC policy. Napolitano’s staff says this is UCSF’s deal. But the HCL contract on which UCSF is operating applies system-wide, and it’s up to individual campuses and schools to opt in; UCSF simply was the first to do so. According to notes from an Aug. 5 meeting of UC’s IT Architecture Committee, chief information officers at other campuses are happy to let UCSF act as a guinea pig and will “wait for a year before jumping in with HCL” in order to gauge UCSF’s experience.”

This is a critical point.  For years, student protesters have pointed to rising tuition as a sign of the increasing unaffordability of a college education.  But the issue that seems to have the most resonance is the privatization of the university and this is a key cog – outsourcing of IT staff.

This is a reminder that student protesters’ concerns were on the mark – and the UC President is the driver in this.

—David M. Greenwald reporting