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Highlights for week ending August 23, 2003
- The Register (U.K.): IBM lays
off 15,000, HP 1300. Excerpt: Veteran IBM-watchers know how testing it is to read one of
the company's financial statements. In the early days of the cold war, Churchill described the
Soviet Union as "a riddle wrapped in a mystery inside an enigma". But compared to
earnings releases from companies such as Apple and Sun - who provide terse and lucid declarations
- you can be forgiven for thinking of IBM's announcements as a cloud wrapped in a fog containing
a temporary heat-haze. However, this much is clear: IBM has shed 15,000 jobs in the past quarter:
1400 from the microelectronics division and a staggering "14,213 Global Services personnel"
in response to "the recent decline in corporate spending on technology-related services".
To balance the books, IBM also bunged its recent acquisition, PwC, by almost $400 million. ...
When capitalism went digital, the first casualties were manual laborers. Now that skilled engineering
jobs are being transferred offshore, the middle class is in the firing line, and this poses
a very real crisis for a large and not-entirely unimportant section of society. Go to college,
learn tech skills and - oops, sorry - your job has just gone offshore. Please accept this redundancy
slip and some small token that your worthless (hard-earned) contribution has enriched the global
economy. Or as the creepier types insist, the global "eco-system".
- Business Week: Commentary:
Pensions That Discriminate against Older Workers. Excerpt: Kathi Cooper is something of
a rarity in America these days. She has spent her entire career with a single company. For the
past 24 years, Cooper has thrived at IBM, first in finance and planning and now working in internal
controls. "I absolutely adore that company," she says. Yet that didn't stop Cooper,
53, from taking IBM to court over changes it made to its traditional defined-benefit pension
fund in 1995 and '99. She and thousands of other employees had tallied up their payouts under
the newest plan, a so-called cash balance plan, and compared them with the old one. Younger
workers with shorter tenure at Big Blue would make out better under the new plan, but to veterans
like Cooper, the math didn't look right. And on July 31, Federal Judge G. Patrick Murphy of
the Southern District of Illinois agreed. He concluded that the plan was indeed unfair, and
in fact illegal. ...
The IRS is in the process of writing regulations for cash balance plans and may publish them
before the end of this year. But employee activists argue that Murphy's decision proves existing
law doesn't cover these plans and a new law is needed. "We need to create plans anew, authorized
by Congress," says Karen Friedman, Director of Policy Strategies at the Pension
Rights Center, "not created in the dark of the night and that don't fit the statutory
framework of the pension law." Pension plans that are fair to both long-term older workers
and more mobile younger ones should be the goal.
- Philadelphia Inquirer: IBM
case already affecting pension plans. Excerpts: With help from a federal judge, Kathi Cooper
has thrown a monkey wrench into the world of corporate pensions. In late July, Cooper, 53, an
internal auditor at International Business Machines Corp., won a ruling that could make it tougher
for companies to convert traditional pension plans into "cash-balance" retirement
plans. U.S. District Judge G. Patrick Murphy, ruling in IBM v. Cooper, found that the computer
company illegally discriminated against older workers when it switched to a cash-balance plan
in the 1990s. ... Court filings in Cooper's case indicated that IBM expected to save $500 million
a year by converting to a cash-balance plan. Cooper said she and other older IBM workers could
not afford to have that savings come out of their pockets. Until the penalty phase of the trial
is complete, Cooper will not disclose how much the cash-balance conversion cost her. But the
loss was significant, she said.
For many articles on the Cooper v. IBM case, refer to the August
2 and August 9 issues of these highlights.
- Burlington Free Press: IBM
cuts 500 Essex jobs; work force at 10-year low. Excerpts: Beyond the trauma to individual
workers and their families, however, was the growing fear among surviving workers, state leaders
and economists that IBM is turning away from what once was its leading edge plant. Further,
the short-term blow to the Vermont economy might become more severe as more of IBM's high-skilled
workers leave the state. The Douglas administration reacted with an air of inevitability saying
there was little that could be done about the cause of the layoffs and that while the state
would hope that IBM would remain loyal to Vermont and its workers, the state needed to continue
to diversify its economy.
- Reuters: IBM Cuts 600 Jobs from Microchip
Division. Excerpts: International Business Machines Corp. on Monday said it cut 600 jobs
in its money-losing chip-making division and would require 3,000 employees to take a week of
unpaid leave. ... About 500 of the 600 cuts are at the company's Burlington, Vermont, microchip
facilities and include manufacturing support positions like maintenance workers. The other 100
are split among other technology division locations including East Fishkill, Poughkeepsie and
Endicott, New York; Austin, Texas; and Raleigh, North Carolina, Sykes said. The 3,000 employees
being asked to take unpaid vacation include executives and manufacturing support employees.
- Triangle Jobs (Raleigh, Durham & Chapel Hill): IBM
to cut 600 jobs. Excerpt: The actions are part of a larger strategy by IBM Chief Executive
Sam Palmisano to make the computer services company more agile amid sluggish customer spending
and rising competition. Since January 2002, he has transferred about 2,300 workers from IBM's
payroll to contract manufacturers and used layoffs to adjust staffing across all divisions.
... William F. Zachmann, president of Canopus, a technology research firm in Dexbury, Mass.,
said IBM's actions will help preserve its operations for now but won't secure a strong future.
He said piecemeal job cuts like those announced Monday are intended to keep investors from noticing
fundamental problems. "It's now three years really of stealth layoffs, stealth reductions,
stealth cutbacks while working to maintain the outward illusion that everything is OK in Armonk,"
he said. "Everything is not OK. IBM is going down for the count over the next decade."
- Silicon India: Big
time IT recruitment in the offing in Kolkata. Excerpts: There is good news for IT students
here as software companies are again looking to hire. After months of a job meltdown, firms
like IBM, Cognizant Technology Solutions (CTS) and Tata Consultancy Services (TCS) are set to
embark on a recruitment drive for their units in Kolkata. ... In the jobs roster, IBM has the
most to offer with an almost 250 percent jump planned in its staff strength. The company now
has about 800 people working at its software package competency centre here. "We are planning
to recruit a good number of people soon to keep up with our growth requirements," said
an IBM official. ... Although the official wasn't willing to put a figure on the manpower requirement,
industry sources said a 250 percent increase over IBM's present strength here was being planned
in the next 18 months.
- Linda Guyer, president of the Alliance@IBM, comments
on the different between the union that represents German IBM employees and the U.S.-based Alliance@IBM.
Excerpts: It all comes down to strength and power, and the balance of those two between employees
and management. Let me illustrate by comparing two unions in IBM.
First, in Germany. Over 70% of IBM employees belong to their union. They have the ability to
negotiate and pressure IBM to consider employees' interest. For instance, at one site they recently
walked off the job for 1/2 hour, to illustrate their concern over a particular job issue. No
harm done, but they sent a strong message to IBM management that employees would stick together,
support each other, and take action to protect their interests. In another example, IBM was
planning to close a manufacturing plant in Mainz. They were required to sit down with the union,
state exactly what the plans were, and work with the union to agree on the best course for the
employees. In this case, IBM agreed to pay two years of salary to each employee that was displaced.
No, the union could not prevent the plant closing - but they got the best possible package for
employees, and there were no secrets, no one was subject to the horrible anxiety that we have
here in not knowing what's going to happen to you.
Now, go to the U.S. We have a culture of "every man for himself". I know most high
tech workers would rather hide behind their computer screens than stand up to management. The
Alliance has about 5,000 members - nowhere near the 50% we would need to win the right to negotiate
with management. So the strength and power balance means we are inherently weaker here. ...
Ultimately we want the power to negotiate with IBM directly. To do that we need 50% membership.
I would ask that you join us, and
ask everyone else you know to join. Only then will we have the greater strength and power to
truly change the weak position of employees today in the U.S., which management indeed exploits.
- Congressman Bernie Sanders (I-Vermont): Sanders
Opposes EEOC's Dismissal of IBM Employees' Complaint. Excerpts: am writing to express my
strong opposition to the EEOC’s recent dismissal of the age discrimination complaints
filed by approximately 100 laid-off IBM employees in Vermont, and urge you to reconsider this
decision. Blatant age discrimination in layoffs is a matter of deep public concern. Simply put,
it is wrong that older workers who have devoted most of their lives to IBM should be thrown
out of their jobs merely based on age as the laid-off IBM employees allege.
- AlterNet: Vacation Starvation.
Excerpts: "How do Americans do it?" asked the stunned Australian. He had zinc oxide
and a twisted-up look of absolute bafflement on his face, as we spoke on a remote Fijian shore.
I'd seen that expression before, on German, Swiss and British travelers. It was the kind of
amazement that might greet someone who had survived six months at sea in a rowboat. The feat
he was referring to is how Americans manage to live with the stingiest vacations in the industrialized
world – 8.1 days after a year on the job, 10.2 days after three years, according to the
Bureau of Labor Statistics. The Aussie, who took every minute of his five weeks off each year
– four of them guaranteed by law – just couldn't fathom a ration of only one or
two weeks of freedom a year. "I'd have to check myself into the loony bin," he declared.
In the early '90s, Juliet Schor first called attention to skyrocketing work weeks and declining
free time in her book, "The Overworked American." In the decade since that groundbreaking
work appeared, things not only haven't gotten any better – they've grown worse. We're
now logging more hours on the job than we have since the 1920s. Almost 40 percent of us work
more than 50 hours a week. And just last month, before members of the House of Representatives
took off on their month-plus vacations, they decided to pile more overtime on working Americans
by approving the White House's scrapping of 60 years of labor law with a wholesale rewrite of
wage and hour regulations, turning anyone who holds a "position of responsibility"
into a salaried employee who can be required to work unlimited overtime for no extra pay. ...
"The Dutch work just as hard as their American counterparts," Perkins said, "but
they have that knowledge that they're going to get that one month or more where they can really
recharge the batteries. Guess what? Things don't come to a halt." The stats back him up.
Contrary to myth, a number of European countries have caught the United States in productivity.
In fact, Europe had a higher productivity growth rate in 14 of the 19 years between 1981 and
2000, according to the U.S. Federal Reserve Board. The Australians, with their five-week vacations
have also outperformed the U.S. in recent years.
- Katherine D. Wolter on Yahoo!'s IBM Issues message board: IBM
Continues Epidemic of Workplace Discrimination, Wrongful Termination: Atlanta Professional Sues
IBM For Sex Discrimination. Excerpt: The United States District Court [Northern District
of Georgia] is set to rule on summary judgment in the sexual discrimination and wrongful termination
case of Katherine D. Wolter vs. IBM. Ms. Wolter, an Atlanta resident and former IBM Global Services
Division employee, has charged that IBM both terminated her because of her pregnancy and denied
her consideration for any other IBM positions because of her condition and its related expected
time off. According to IBM, Wolter was terminated for "economic reasons" during the
company's 2001 layoffs. However, Global Services grew faster than any other IBM division that
year, witnessing nearly 14,000 new hires against approximately 2,000 job cuts.
Currently there are more than 30 other charges against IBM for wrongful termination, and one
recently settled charge for pregnancy discrimination. In the Wolter case, summary judgment is
expected to be denied (won) the week of Labor Day, which will subsequently provide a court date.
"I was terminated 11 days before the due date of my first child, without being offered
maternity leave," says Ms. Wolter, who holds a Masters of Business Administration (MBA)
degree and whose corporate experience includes Ernst & Young, MCI and Vanstar.
- Accounting Web: New York Tallies $13 Billion
Toll of Corporate Scandals. (Free membership may be required to view). Excerpt: New York
State Comptroller Alan G. Hevesi has done the math and doesn’t like what he sees. By his
count, in the past two years New York State has taken a $13 billion hit as a direct result of
corporate scandals of the past two years. The $13 billion consists of a $2.9 billion loss in
the state economy, $1 billion in lost tax proceeds, and over $9 billion in declines in state
pension fund value. In 2002, the Brookings Institute published a report called, "Cooking
the Books: The Cost to the Economy," which used the stock market decline to estimate that
corporate malfeasance cost the U.S. economy $35 billion in the twelve months following the meltdown
of Enron. ... "The wave of corporate corruption scandals didn't just hurt the companies
involved and their employees," Hevesi said in the release. "The scandals imposed a
huge cost on every American. As investors, they lost hard-earned savings. As honest business
people, they faced unfair competition and higher costs of capital. As workers, they confronted
increased job losses. As taxpayers, they have to pay higher taxes and face cuts in services."
- Toronto Star: U.S.
health no bargain. Excerpts: For years, the United States has spent more than twice as much
per capita on health care as Canada and other leading industrial countries. A new report helps
shed light on why this is so. A study published by the New England Journal of Medicine this
past week reports that 31 cents of every dollar spent on health care in the United States goes
to pay administrative costs.
The report found the U.S. spent a whopping $300 billion, or $1,059 for each American, on the
salaries of health plan, hospital and physician-office billing specialists; compensating doctors
for time spent handling paperwork instead of seeing patients; and funding marketing campaigns
for hospitals and insurance companies. By comparison, paperwork in Canada's publicly funded
health-care system was a relatively lean $307 (U.S.) per person.
Paper-shuffling costs tell only part of the story. The report doesn't include how much of the
U.S. health care dollar is handed over as profit to the private-sector companies that dominate
the system. Using conservative estimates, profit would take another 10 to 15 cents out of each
health-care dollar. All in all, a lot of money in the system is diverted from spending on actual
patient care. And still, 41 million Americans are medically uninsured.
- Business Week: A
Chill East Wind. Eastern Europe's dynamos are losing jobs to Asia. Excerpt: At first glance,
IBM (IBM )'s computer disk-drive factory in Szekesfehervar, western Hungary, doesn't look the
picture of industrial decline. Built just eight years ago, its bright blue, green, and white
facade still glows from a hillside overlooking a bustling shopping plaza. But a closer look
reveals an unnatural stillness. Loading docks that once were piled high with components lie
empty. Turnstiles that admitted 3,700 workers a day are chained. IBM shut the plant last November,
moving the work to China, where wages are 75% cheaper.
| Coverage on H1-B and L1 Visa and Outsourcing Issues
- Robert X. Cringely, Public Broadcasting System: Body
Count. Why Moving to India Won't Really Help IT. Excerpt: There was a story in the
news a couple weeks ago about how IBM was planning to move thousands -- perhaps tens of
thousands -- of technical positions to India. This isn't just IBM, though. Nearly every
big company that is in the IT outsourcing or software development business is doing or
getting ready to do the same thing. They call this "offshoring," and its goal
is to save a lot of money for the companies involved because India is a very cheap place
to do business. And it will accomplish that objective for awhile. In the long run, though,
IT is going to have the same problems in India that it has here. The only real result
of all this job-shifting will be tens of thousands of older engineers in the U.S. who
will find themselves working at Home Depot. You see, "offshoring" is another
word for age discrimination. ...
If a U.S. employer said out loud, "Gosh, we have a lot of 50-something engineers
who are going to kill us with their retirement benefits so we'd better get rid of a few
thousand," they would be violating a long list of labor and civil rights laws. But
if they say, "Our cost of doing business in the U.S. is too high, so we'll be moving
a few thousand jobs to India," that's just fine -- even though it means exactly the
same thing. ...
- Fortune Magazine: The
U.S. Is Falling Asleep on the Job. Jobs have left before, but this time America's place
in the global economy is at stake. Excerpt: The issue du jour is being framed as "jobs,"
which is a shame because that sounds like a movie we've seen before, and it isn't. Yes,
American companies are firing U.S. workers in rising numbers while hiring more foreign
workers, and unions are yelping about heartless bosses, and politicians are solemnizing—all
that does sound familiar. But the surprising fact is that while CEOs are happy to be saving
money by hiring good accountants for $6,000 a year in New Delhi, those CEOs are actually
as worried about the trend as anybody, and they should be. The issue isn't just jobs but
America's place in the global economy.