Indiana Economic Development Corp. and Job Creation and Economy and Government & Economic Development and Economic Development and Technology

Many of state's new jobs are at call centers

March 3, 2008

Many of the calls to customer service that were handled overseas a few years ago soon could be answered in Indiana.

The state's economic development leaders have been touting 2007 as a banner year that brought commitments for more than 22,000 new jobs, including positions in manufacturing, logistics and life sciences.

But almost 20 percent of the announced jobs would be in call centers, answering phones, providing customer service and selling products--jobs that typically pay near or below the state's $35,000 average annual wage. Eight of the 13 largest job deals last year are connected to the call-center industry.

Among the deals: Dallas-based Affiliated Computer Services plans to open a 500-employee call center in Anderson; Orlando, Fla.-based Connextions plans to employ 750 people at a new health-care-related call center in Jeffersonville; AT&T Mobility pledged to hire 600 employees for a new call center in Evansville; and Indianapolis-based Defender Security Co. said it will hire 1,134 Hoosiers to help it sell ADT security systems and Dish Network subscriptions from call centers across the state.

If you add in the state's final job-creation deal of 2006--an 850-employee IBM call center planned for Daleville--about 5,000 new call center jobs are on the horizon. The trend disturbs some economists, but economic development leaders insist the jobs are needed and worthwhile. Call-center positions are not on the state's target list, but they often are appropriate for entry-level employees or as a second job, said Nathan Feltman, Indiana's secretary of commerce.

"Certainly, when there are opportunities out there in the call-center sector, and especially ones that are higher-paying, we look for areas around the state where those jobs would be coveted," Feltman said. "We don't want to be in the position of turning away opportunities when many communities in our state would love those opportunities."

Call-center jobs require minimal investment and can provide employment to a lot of people, but Indianapolis economist Morton Marcus wonders whether they are the kind of jobs the state should be boasting about.

"If we're trying to get a reputation as a state with high-tech employment, this certainly isn't giving us that type of reputation," said Marcus, a former director of the Indiana Business Research Center at Indiana University.

A thriving industry

The call center industry is growing fast in the United States, but exact figures are tough to pinpoint because just about every company uses some form of call center. Many companies that once exported customer service jobs to countries where labor is cheaper now believe customers are better served by U.S. employees.

"It's not just about money--it's about being understood," said Nosa Eke, publisher of Call Center Times, a Dallas-based newsletter and Web site that serves the industry. "The thinking shifted toward paying a little more and making sure customers are satisfied."

The move toward in-sourcing the jobs has become an employment driver for many states, particularly in the Midwest. The time zone in states like Indiana allows employees to take calls from both coasts while still working reasonable hours.

Another factor is the Midwestern disposition.

"The perception is that Midwest states have a more friendly base of people and a common-sense way of dealing with the world," said Eke, who worked in call centers for 10 years before starting his company. "Once there's a feeling in the air that a certain part of the country is better, that drives an influx of business."

A job is a job?

Thanks to beaten-down economies, many Midwesterners are looking for work.

In December, the Midwest had the highest unemployment rate of any region in the country, about 5.5 percent. Indiana's rate was 4.6 percent, better than both Ohio and Illinois and the national average of 5 percent, U.S. Bureau of Labor Statistics data shows. But the state also had the fourth-largest monthly employment drop in the country, shedding more than 3,000 jobs. Indiana's labor force shrunk by 56,000 from December 2006 to December 2007.

As the nation's economy sputters, elected officials are ready to pounce at the slightest whiff of potential new jobs.

"These obviously are not the high-paying professional positions--aren't the kind of jobs most people are looking for," said Stephen Graham, a political science professor at the University of Indianapolis. "Obviously for political purposes, I guess a job is a job. But not all jobs are the same."

In the case of Defender Direct, the jobs will average either $18 an hour or $16 an hour, depending on whether you believe the state's estimate or the lower estimate the company included in its application for city incentives. The figures also factor in expected commissions for call center employees--so wages could go lower if sales are sluggish. At $18 an hour, an employee would earn about $37,400 a year.

The company readily admits in its application that it isn't creating the kind of jobs that require extensive education: "In order to accommodate significant business growth, the company focuses on identifying employment candidates who might not otherwise be presented with good work opportunities because of academic background or other employment challenges."

Elected officials are overlooking the downside of call-center jobs and grasping at any positive news about job creation to counter the continuing loss of manufacturing employment, Graham said. Indiana has shed more than 100,000 manufacturing jobs since hitting a peak of 672,000 in 1990.

The state also appears to be avoiding describing the new jobs as call centers. The Connextions jobs, for instance, were categorized by the Indiana Economic Development Corp. as "services." The Defender Direct deal was listed as an "information technology headquarters," even though most of the jobs would be in call centers.

Answering the call

The call-center boom also is bringing higher-paying jobs to Indiana--including customer-service jobs that go beyond reading a script or calming angry callers.

As more companies interact with their customers online, traditional call centers are evolving into phone, e-mail and instant messaging "contact centers" where product expertise and problem-solving skills are a must. Many of the centers are buying systems from locally based Interactive Intelligence Inc.

The company has become a go-to source for so-called customer relationship management software that facilitates the interaction between customers and call- center employees. Interactive Intelligence agreed in 2007 to invest $40 million and add 637 new jobs at its Indianapolis headquarters.

Another local company, Phone Pro Inc., trains call-center employees across the country. The company has eight full-time employees, including four trainers who listen in on calls and train associates. Locally, the company has trained call center employees at Eli Lilly and Co., Roche Diagnostics, Anthem and Duke Energy.

"It doesn't take a lot of education, so a lot of people are employable in this area," said Lisa Raven, Phone Pro's CEO. "As long as you can speak and type and enter data into a computer, you can be a call-center rep, with the proper training."

But more jobs with minimum skill requirements do not add up to progress, Marcus argues. If companies flock to put "cheap jobs" in Indiana, the state's economic development engine isn't working well enough.

"I think the state is not being very successful, so they're using everything they can get," Marcus said. "I think it is a very difficult time to be successful. Perhaps bringing new jobs shouldn't be their only goal. Perhaps they should think about training people so they can attract companies here that need people other than to answer a telephone."

The state hasn't overlooked training; most of the incentive packages it offers as part of job-creation deals include grants to help build skills in the work force.

Promises delivered

The most important yardsticks of economic-development success are median income, college graduation rates (Indiana is at 54 percent, the national average) and the number of new patents a state is producing (Indiana produced 1,500 patents in 2006, lagging Illinois' 4,000 and Ohio's 3,300), said J. Mac Holladay, a consultant with Atlanta-based Market Street Services who worked on economic development for former Gov. Joe Kernan.

The most prominent stats mentioned at job-creation press conferences--the number of new jobs created and the company's investment--don't tell the whole story, Holladay said.

"They really don't tell you anything about what's going on," he said. "The one thing we know about this economy is, it's changing at a rate of speed that's faster than anything we've ever seen."

Typically, 10 percent to 15 percent of jobs pledged to Indiana's economic developers do not come to fruition, Feltman said. The biggest culprit in 2006 was the promised construction of four new ethanol plants that never materialized.

Most of the state's biggest deals in 2007, including a Medco mail-order pharmacy in Whitestown (1,300 jobs) and a Getrag-Chrysler transmission plant in Tipton (1,400 jobs), are moving forward as planned.

The call centers also appear to be on track, thanks in part to low startup costs. The state offered Connextions $3.3 million in tax credits and $450,000 in training grants to open its call center in Jeffersonville. The company will invest $6.7 million. Defender Direct could get $6 million in tax credits and $345,000 in training grants to invest $15 million to keep its headquarters in Indianapolis and create call-center sales jobs across Indiana. The incentives won't be awarded until the companies prove they created jobs.

No glamour

Feltman said IEDC officials are targeting higher-skill, higher-paying jobs and carefully considering return on investment with every deal. They aren't content with call centers.

After all, phone banks probably won't contribute much toward delivering on a 2006 pledge from the governor and IEDC to boost Indiana's personal income per capita to the national average by 2020.

The state's per-capita income rank has languished in the bottom half of the 50 states, and improvement has been slow. In the fourth quarter of 2007, Indiana's per-capita income was $34,226, up 1.0 percent from the third quarter. Meanwhile, U.S. per-capita income rose 1.1 percent, to $39,245.

Feltman plans to travel to San Diego in June to meet with life sciences companies, hoping to land more of the kind of jobs every state is scrapping over.

But for now, even call-center jobs are welcome news compared to the alternative, said Sam Smith, CEO of locally based Resource Commercial Real Estate.

"There are a lot of companies that are going the other way right now," he said. "It may not be the glamour salaries everyone might want, but it's good jobs that help pay the bills and give people a chance to own homes and support their family."

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