Off-Shoring Company Cognizant Gets Tax Breaks To Expand In NC
A major off-shoring company is expanding in North Carolina and receiving state incentives to do so. Last month, the North Carolina Governor’s Office announced Cognizant Technology Solutions, a Fortune 500 company, would create 500 high-paying jobs in North Carolina, including opening a new office in Charlotte.
North Carolina won the company’s business over three other states, the press release said, by offering generous tax breaks. But Cognizant is in the business of off-shoring—shipping U.S. jobs overseas—and the state received no guarantee the new jobs would go to North Carolina workers.
Cognizant and other off-shoring companies like Infosys, Tata Consultancy, and even a division of IBM help companies figure out how to take sections of their business—for instance, doing payroll or software testing—and send it overseas to lower-paid workers.
“The firm’s business model is to ship as many jobs overseas as possible,” says Ron Hira, a public policy professor at Howard University and a vocal critic of how the U.S. regulates off-shoring companies.
Cognizant reports more than 40 percent of its business is from financial companies, so it makes sense it would target Charlotte, but not, Hira says, for the state to incentivize it.
“It’s a bit surprising,” he says. “If I was a North Carolina taxpayer I would be really baffled and shocked that we would be taking our tax dollars and subsidizing a firm that’s actually going to be a net negative for the economy.”
The Governor’s Office and the Department of Commerce have touted the deal, as bringing high-paying jobs to North Carolina. The company already has about 1,500 workers around the state; under the deal, it will add 500 more in the next five years, including 150 in a new office in Charlotte. Cognizant says wages will average about $80,000 per year, well above Mecklenburg County’s average.
In return, the company stands to receive $5 million from a state economic development fund.
“With a job development investment grant program you look for large employment,” says Commerce Department spokeswoman Kim Genardo. “You’re hoping for corporate headquarters. In this case it was a global delivery center, so a large number of jobs.”
It’s not clear that anyone considered Cognizant’s role as an outsourcer. Genardo said she wasn’t aware of any discussion.
The Charlotte Chamber of Commerce assisted with the deal, but declined to comment for this story. Cognizant also declined to make anyone available for an interview.
Senator Malcolm Graham, a Mecklenburg County Democrat, praised the deal in the state’s press release. “We are pleased Cognizant chose to stay and grow in our region,” he’s quoted.
But Graham says he was only told Cognizant is a technology company.
“I got a call from the Commerce Department,” Graham says. “Obviously, I’m always supportive of new industries coming to North Carolina, especially in my district, so lended my voice to the press release.”
Graham says he's "disconcerted" after reviewing the deal and reading news articles about Cognizant’s business and, in particular, the company’s reliance on temporary guest workers from overseas to staff its U.S. offices.
“I was stunned,” Graham says. “Part of supporting incentives and grants for corporations is for them to hire locally.”
Cognizant had about 30,000 employees in North America last year, but Hira says few are hired domestically.
“Those jobs that remain in the U.S. are the jobs that are basically geographically sticky, that they can’t send off-shore,” says Hira. “Instead of hiring or keeping Americans, they replace those Americans with lower cost guest workers on H1-B or L-1 visas.”
Public records requests by Hira, the outlet Computerworld and others show that from mid-2009 to mid-2013 Cognizant received 23,000 H1-B visas, enough to account for 75 percent of its North American workforce. Since some of those positions are outside the U.S. and the company also relies heavily on L-1 visas, Hira estimates 90 percent of Cognizant workers in the U.S. have been brought in from overseas.
Most of them do not put down roots, according to the records. The company sponsors less than 12 percent for permanent residency.
U.S. Immigration Services does not break the visa data down by state, but there is reason to think the national pattern holds true in North Carolina: Data from the Labor Department shows Cognizant is a top requestor in the state for the authorizations necessary to hire guest workers.
As for the 500 new workers the company will employ to get those state incentives, nothing in its contract with the North Carolina prevents Cognizant from filling the new jobs with more temporary guest workers.