The Alamo for telemarketers.

The Alamo for telemarketers.

The Alamo for telemarketers.

Moneybox
Commentary about business and finance.
Sept. 9 2003 5:39 PM

The Alamo for Telemarketers

Will the Do Not Call list really eliminate 2 million jobs?

Illustration by Robert Neubecker

The federal "Do Not Call" list is gaining momentum. On Sept. 4, the Federal Trade Commission said that 48.4 million telephone lines had been registered, meaning they'll be off-limits to cold-callers as of Oct. 1. (Anyone signing up from now on will be subject to 90 more days of solicitations.)

The list will doubtless improve the quality of life for those who cherish a quiet dinner or are perfectly happy with their long-distance telephone service. But the telemarketing industry is predicting a national economic disaster. According to one telemarketing trade group, some 2 million jobs—about 1.5 percent of all nonfarm payroll jobs—will disappear on or shortly after Oct. 1.

Advertisement

Is this true? Is a nation desperately in need of jobs better off with some 2 million fewer people working the phones? Can the appointment of an assistant secretary of commerce for telemarketing jobs be far off?

The 2 million job-loss figure has entered the Google-scape through the good offices of the American Teleservices Association, which is suing to stop the list from going into effect. "We employ 6.5 million people on the telephone," says Tim Searcy, executive director of the ATA. Of those, about 4.1 million are engaged exclusively in outbound calling. If 60 million people opt out of receiving such calls, Searcy expects that half of the $80 billion spent annually on outbound calls will evaporate and take with it 2 million jobs.

Searcy believes that sticking it to a sector that generates some hundreds of billions of dollars of sales annually will harm consumers, too. Since telemarketing is a cheap way of marketing, it helps keep the costs of goods and services low. "When a well-entrenched incumbent is going to receive competition, often that comes in the form of telemarketing calls," he adds. "It wasn't that long ago that long distance was 35 cents a minute." In other words, forget the Internet and lower tax rates—what makes our consumer economy hum is the ability of people to reach out and touch people in their homes.

Worse, says Searcy, the job losses will fall on workers who have few options—5 percent of teleservices employees are physically disabled, more than 30 percent have been on welfare or public assistance, and more than 60 percent are minorities. "These are 2 million people who, within 30 to 45 days, are going to be displaced with no natural market."

Advertisement

But it sounds dubious. Searcy's numbers are predicated on 60 million do-not-callees. So far, only 48.4 million have signed up. Presumably, most of these are people who have made a habit of hanging up on telemarketers. And the federal list doesn't represent a sudden tidal wave of backlash against unwanted phone calls. Over the past several years, 37 states have created their own do-not-call lists,which collectively contain 14 million numbers. By Searcy's account, "so far, the impact has been slowly absorbed over time." In fact, teleservices have been growing at about 10 percent annually for the last decade, despite the state call lists.

What's more, the federal Do Not Call list is not an outright prohibition on all telemarketing. It explicitly exempts political organizations, charities, and telephone surveyors from the ban. And companies that have existing business relationships with customers can keep dialing. Under the new regime, American Express can call its cardholders with vacation offers, and the Gallup Organization can still ask for a few minutes of your time. As important, the Do Not Call list says nothing about business-to-business telemarketing.

Such apparent exceptions in fact constitute a big chunk of the teleservices industry. "For the ATA to say that this will amount to 2 million lost jobs in my opinion is ludicrous," says Thomas Cardella, chairman and CEO of Precision Response Corp., a subsidiary of Barry Diller's Interactive Corp., which has no plans to lay off any of its 12,000 phone-based employees. "Eighty percent of our work is taking inbound calls," mostly on behalf of Fortune 500 companies, says Cardella. And the firm's outbound business is split evenly between business-to-business calls and calls to consumers who have existing relationships with businesses.

True, companies whose entire business model relies on cold-calling consumers may be in jeopardy. But these are the players that tend to sully the reputation of the industry and tend not to provide the sort of durable jobs on which a thriving postindustrial economy is built. "Every job is a good job," said Jeff Hornsby, a professor of marketing and management at Ball State University. "But these are some of the lowest paying jobs out there. This is not like we're losing technology jobs."

The dollars previously spent on cold calls will be channeled into TV and newspaper advertising, direct mail, and e-mail solicitations. Meanwhile, consumers won't simply take all that money they spent on stuff they didn't know they needed and stash it under the pillow. They'll spend it in stores, online, or through catalogues—a process that will doubtless create jobs in other sectors. Of course, the shift will likely lead to a net job loss for the economy because telemarketing is the most labor-intensive sector of the marketing and advertising world. You could easily spend 10 percent more on TV advertising, or direct mail, without employing 10 percent more people. Not so with telemarketing.

Despite the ATA's protests, this isn't a case of the government throwing telemarketers out of work. This is the market in action. In essence, the collective decision of consumers—channeled through a government-run Web site—is forcing companies to change the way they market. And in many cases, it may force them to spend more resources on less labor-intensive, less intrusive methods. It's industrial policy by plebiscite.