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    Highlights for week ending December 13, 2003
  • Wall Street Journal: IBM to Export Highly Paid Jobs To India, China. (If link is broken, view Adobe Acrobat version [PDF--48 KB]). Excerpt: In one of the largest moves to "offshore" highly paid U.S. software jobs, International Business Machines Corp. has told its managers to plan on moving the work of as many as 4,730 programmers to India, China and elsewhere. The unannounced plan, outlined in company documents viewed by The Wall Street Journal, would replace thousands of workers at IBM facilities in Southbury, Conn., Poughkeepsie, N.Y., Raleigh, N.C., Dallas, Boulder, Colo., and elsewhere in the U.S. Already, the managers have been told, IBM has hired 500 engineers in India to take on some of the work that will be moved.

    IBM calls its plan, first presented internally to some midlevel managers in October, "Global Sourcing." It involves people in its Application Management Services group, a part of IBM's giant global-services operations, which comprise more than half IBM's 315,000 employees. IBM's plan, still under development, will take place over a number of months in stages. About 947 people are scheduled to be notified during the first half of the coming year that their work will be handled overseas in the future. It isn't yet clear how many of the other 3,700 jobs identified as "potential to move offshore" in the IBM documents will move next year or some time later. ... Some workers are scheduled to be informed of the plan for their jobs by the end of January. After that they will be expected to train an overseas replacement worker in the U.S. for several weeks. The IBM workers marked for replacement have 60 days to find another job inside the company, likely to be a difficult task at a time when IBM is holding down hiring.

    ...IBM is sensitive to political and employee criticism of its overseas moves. Last summer, union activists obtained a tape of a conference call led by Tom Lynch, IBM's director for global-employee relations, to discuss the delicate issue of offshoring. In that call Mr. Lynch warned other human-resources managers that offshoring "is going to raise a lot of tensions," and is likely to foster union activity at historically non-union IBM. In particular, he predicted "to train someone to do a job that you know will no longer be yours" raises issues of "dignity and fairness" that unions might exploit. Lee Conrad, organizer of Alliance at IBM, an affiliate of the Communications Workers of America union that is trying to organize IBM workers, says "we know it's going on, but getting workers to talk about it is hard," in part because IBM workers worry about being fired. He said IBM "keeps it very close. They don't give any numbers." Neither the U.S. nor individual states have prohibited the use of outsourced foreign workers for any government contracts. However, union activists say they are making efforts to persuade state lawmakers to take action.


  • Computerworld: Union urges IBM workers to fight plan to move jobs offshore. Excerpt: The labor union representing a small but growing number of IBM employees is considering taking action against the company's reported plan to move nearly 5,000 jobs offshore, including asking employees to refuse to train their replacement workers "We are working with our members to organize to fight this anyway we can," said Linda Guyer, president of Alliance@IBM, an Endicott, N.Y.-based union of roughly 6,000 IBM workers (up by more than 1,000 members since this past spring). "We think it's not only unfair to the employees; it's unfair to the U.S. economy."


  • Wall Street Journal: IBM Japan To Adopt Shorter Working Hours In Japan - Kyodo. Excerpt: IBM Japan Ltd. will introduce a new system of shorter working hours in January that includes the option of working a three-day week for 50% less pay, the Kyodo news agency reported Monday, citing a company spokesman. The new system will enable workers to spend more time on child rearing and care of family members, he said. IBM Japan currently requires full-time employees to work a 38-hour, five-day week, Kyodo reported. Under the new system, employees can apply to work a three- or four-day week, or a five-day week of between 40% to 20% less hours.


  • WashTech: Washington state agencies sending IT work offshore/ IBM helps spearhead state's outsourcing efforts. Excerpt: Olympia, WA. For 12 years, Dario Giraldo developed information technology systems for the Washington state government. Eighteen months ago the veteran programmer and software architect was laid off -- and then replaced with a less-expensive Indian programmer brought to the United States on a work visa. "'We love them,'" Giraldo says his former manager at the Washington State Department of Social and Health Services told him. Giraldo says he even offered to cut his standard $65 an hour rate in half to get the job. He said the manager bragged he could hire the foreign workers for "almost nothing, and they work 60 hours a week" without overtime pay, and without complaints.

    An IT systems project at the Washington State Department of Corrections is hardly faring better. The Corrections Department awarded IBM Global Services a $25.6 million contract on Nov. 30, 1999 to replace its aging Offender Based Tracking System (OBTS) with a newer system dubbed OMNI, the Offender Management Network Information system.


  • Poughkeepsie Journal: Ex-IBMers: Data show age bias. Excerpt: Ex-IBMers who have banded together to sue their former employer for age discrimination in layoffs have long suspected their graying hair had something to do with their pink slips. But what really convinced them to sue was the data. It shows older IBMers being dropped at rates that often exceed those for younger colleagues.


  • CBS News 60 Minutes II: Did IBM Know Of A Cancer Link? Excerpt: Mention IBM and the image of a solid corporation comes to mind -- a technology pioneer that forged a special bond with its employees who proudly declared themselves “True Blue.” In the 1970s and 1980s, many of those employees worked in the so-called “clean rooms,” where they built microchips and hard drives. These were boom times for IBM. Clean rooms ran around the clock, feeding the demands of the computer revolution. But, a few years ago, some clean room veterans noticed that colleagues were coming down with cancers -- rare cancers -- at surprisingly early ages. One IBM team had a cancer rate of 80 percent. At about the same time, some children born to IBM families were delivered with terrible birth defects. IBM declined an interview with 60 Minutes II. But some IBM workers say that the company’s clean rooms were hiding a dirty secret. And what shocks them even more is just how much Big Blue knew. Correspondent Scott Pelley reports.


  • Wall Street Journal: Picking A Winner At IBM Trial Is Still Difficult. Excerpt: It is too early to pick a winner at International Business Machines Corp.'s (IBM) emotionally charged employee cancer trial here. ... "I think across the country IBM workers are watching this case to see how it goes," says Lee Conrad, national coordinator of Alliance@IBM, an IBM union with 5,500 members and supporters. A Hernandez and Moore victory could "open up a ground swell of other suits," says Conrad. ... Nevertheless, lots of IBM employees are paying attention. Several current and former IBM workers or their spouses interviewed for this story say they believe there is no shortage of illnesses among their colleagues. "So many people who have worked at IBM have died of cancer," says Martha Cary, who lost her husband, Robert, a 25-year IBM veteran, to cancer earlier this year. "In my opinion, IBM cannot claim they did not know" of the hazards of chemicals, says Conrad, recalling flyers highlighting the dangers that workers passed around inside the company in the late 1970s and early 1980s. Conrad said he came into contact with solvents and epoxies during most of his 26-year career at IBM. If link is broken, view Adobe Acrobat version [PDF--27 KB].


  • Wall Street Journal: IBM Says Pension-Plan Members Are Using 'Unreasonable' Formula. Excerpt: International Business Machines Corp. said in a court filing Monday that pension-plan members who won a case against Big Blue in July are using an "unreasonable" damages formula that could require the company to pay as much as $6.5 billion. But the plaintiffs hadn't specified a dollar amount of damages in the case, one of the largest involving businesses that switched from traditional pension plans to cash-balance plans. Unlike traditional pensions, which grow greatly in value in one's later years on the job, cash-balance plans base the benefits on an annual company contribution, a formula that typically reduces pensions for older workers. In July, Judge Patrick Murphy of the U.S. District Court in Southern Illinois, ruled that IBM had discriminated against older employees when it made changes to its pension plan in 1995 and 1999. The judge ordered both sides to submit proposed remedies.
    • Janet Krueger comments (full excerpt): There is nothing in the Plaintiff's brief for remedy that equates to a $6.5B figure -- that seems to be a figure the IBM spokespeople pulled out of thin air in an attempt to garner public sympathy and outrage. Fortunately, I don't believe most of the public is quite as gullible as you. I would suggest you read the plaintiff's brief for yourself, which is posted on this site as CooperRemedialReliefSubmission.pdf [24 KB], rather than taking IBM's characterization of it at face value.

  • BenefitsBlog: IBM Facing ERISA Section 510 Claims. Excerpt: The following article from the Poughkeepsie Journal highlights what, I think, is becoming an area of litigation which more and more companies will have to deal with as baby boomers continue to age and as companies try to deal with the rising costs of health care and pension liabilities for older workers: "Ex-IBMers: Data show age bias." The article notes how an IBM employee allegedly compiled data showing that older workers at IBM were being terminated at rates that exceeded those of their younger worker counterparts. Apparently, the employee started going through the data, making charts, and "was struck by what he saw happening." (According to the article, the employee states that, in his group, 16 were let go and all were over 50, some having 33 years with the company.) The article notes that a complaint was filed October 7, 2003 against IBM alleging violations of the ADEA, the OWBPA, and ERISA. With respect to the ERISA claims, the complaint alleges employees were terminated in order to avoid increasing pension cost obligation for employees with greater years of service.


  • Wall Street Journal: For Pension Plans, Risky Is Fine. Accounting Rules Let Companies Benefit From Investment Upside, Escape Consequences of Mistakes. Excerpt: U.S. Steel is merely taking advantage of accounting rules that can make pension investments a no-lose proposition for employers. The key to this investing success lies in accounting rules that allow companies to use "assumed" returns for the pension assets. In 2002, large companies generally assumed rates of return between about 8.5% and 9%, though a few used assumptions as high as 10%. If the investments do better than expected, companies can stockpile the excess gains and use them later. Meanwhile, if the investments go sour, companies can postpone the losses, and dribble them into their income calculations over many years. ... In contrast, companies invest their executive-pension trusts more securely. AMR Corp., for example, invests its executive pension trusts in high-grade bonds, in accordance with investment guidelines that state explicitly that the "the primary purpose is preservation of principal and liquidity." "We do invest the funds for the [executive pension] more conservatively than we do the funds for the regular pension plans," says a spokesman for the airline. But he says that the investments must be more conservative because the executive pension has fewer participants -- just 40 or so -- and will have to pay out sooner. Similarly, executive pensions are rarely invested in company stock. Employees with regular pensions have often complained that rules permitting employers to invest as much as 10% of pension assets in company stock leave the pension underdiversified.


  • Wall Street Journal: GM, Others Boost Their Earnings By Pouring Billions Into Pensions. Excerpt: For all the wailing about how the so-called pension crisis might force many employers to put money into their pension plans, there may, in fact, be no better investment for most companies. And many of them are taking advantage of it. Companies have pumped billions of dollars into their pension plans this year, even though most haven't been required to contribute a dime. Rather, by contributing to their pension plans, companies are assured of a guaranteed, effective return that can exceed 40% in the first year, thanks to an interplay of tax and accounting rules. ... Part of the secret to the companies' pension-investing success lies in accounting rules that allow companies to use hypothetical returns on their pension assets -- instead of the actual returns -- when calculating the pension plans' impact on company earnings. Boeing assumed its pension assets would return 9%, for example. In 2002, large companies generally assumed rates of return between about 8.5% and 9%, with some assumptions reaching as high as 10%. Analysts have criticized this practice in recent years, complaining that some companies are using unrealistically high hypothetical -- or "expected" -- rates of return to enhance earnings. Last year, for example, GM assumed its pension assets would return 10%, while they actually lost 5.2%.


  • Atlanta Journal-Constitution: Tax breaks for saving stir debate. Critics say only the wealthy benefit. Excerpt: Studies also show that most of the benefits of tax-advantaged retirement accounts go to the highest wage earners. The poorest 40 percent of households have only about 5 percent of all the assets in these accounts, while the richest 10 percent have more than half, according to a Harvard University study. While the tax breaks help relatively few Americans, they reduce revenue that could shrink the federal deficit or fund programs that help average- and lower-income households, the critics argue. As the accounts proliferate, "we're digging a deeper and deeper hole in the deficit -- one shovelful at a time," said William Gale, an economist at the Brookings Institution, a liberal-leaning research group in Washington. The White House estimated in President Bush's latest budget that tax breaks for retirement would cost the Treasury more than $415 billion between 2004 and 2008. The expansion of tax breaks for savers also reduces revenue for states, which typically base their income taxes on federal taxable income. For example, last year the Colorado Office of State Planning and Budgeting estimated that Congress' decision to raise the IRA contribution limit three times in a decade will reduce Colorado tax revenue by $11 million a year in 2008.


  • The Guardian (England): Corporate emperors still rule, says Enron whistleblower. Excerpt: The "imperial chief executive" who treats the assets of a listed company as if they were his own is as active as ever despite attempts to clean up the corporate world, according to Sherron Watkins, who blew the whistle on her own bosses' excesses at Enron. Too many accounting rules can still be manipulated and analysts' reports remain "broadly inadequate" for giving the real picture to investors, she argued yesterday. ... "I do think that the imperial chief executive officer is not dead in America. You have a lot of CEOs acting more like dictators from resource-rich African countries treating their companies' assets as their own."


  • Wall Street Journal: Shifting Burden Helps Employers Cut Health Costs. Excerpt: Employers slowed their runaway health-care costs more sharply than expected this year, but they did it mostly by shifting an unprecedented share of the expense to employees.


  • In this week's good news...CNN: Shoe plant workers get up to $20,000 bonuses. Excerpt: Instead of receiving typical end-of-year frozen turkeys, the 200 employees of the SAS Shoemakers plant here were handed envelopes when they were called together Friday afternoon. When Lawrence Wyman opened his, he found a check for $19,000. His wife, Charlene, got a check for the same amount. The company this year awarded its employees with bonuses of $1,000 for every year worked at the company. Even those who had worked less than a year got $500 each.
Coverage on the Medicare Bill
  • Washington Post: Thanks For the Medicare Muddle. Excerpt: Lock the nation's smartest health care economists in a room and ask them to come up with the most complicated health insurance system imaginable -- and they wouldn't even come close to the Byzantine system we have in place in America today. And unfortunately, Congress has just deepened the confusion, passing a Medicare prescription drug benefit that will make it harder, not easier, for the nation's senior citizens to navigate health care in this country. ... Walk with me through a scenario that will have senior citizens scratching their heads when it comes time to figure out how this system functions. After the program begins in 2006, Medicare beneficiaries who decide to purchase a drug plan will pay a $250 deductible and then 25 percent of their drug costs up to $2,250. Once the $2,250 spending cap is reached, they will get no help until they have spent an additional $1,350 of their own money on prescription drugs. No public or private insurance plan in existence includes a hole in coverage, and for good reason. It is confusing, costly to administer and bad public policy. Buying insurance is supposed to be about hedging bets, not placing them. But Congress needed to reduce the cost of the program. So if a senior develops an illness that requires spending that falls in the hole, too bad.


  • Boston Globe: Poison pill. Why the new reform bill will make Medicare's problems bigger -- and even harder to fix. Excerpt: The second, darker side of the new Medicare bill is a slew of changes that have little or nothing to do with drug coverage and everything to do with special-interest demands and ideological animus toward Medicare. These include huge new subsidies for private insurers, and provisions that ensure that drug companies will be spared from their greatest fear: that Medicare will use its massive buying power to demand reductions in drug prices. Perhaps most ominous, the bill also contains elements that favor private plans and risk further degeneration of Medicare's all-in-the-same-boat structure. Six sizable "demonstration projects" are intended to introduce greater competition into Medicare; they will also likely raise costs for seniors who remain in the traditional program.


  • Center for American Progress: Lost in the Fine Print: Ten Overlooked Policies That Harm Medicare and Its Beneficiaries. Excerpt: While many features of the Medicare Prescription Drug and Reform Conference Agreement (H.R. 1) have received considerable attention, some important provisions have gone relatively unnoticed. The following is a list of ten issues whose impact has been largely overlooked.


  • Consumers Report: CU and 20 Advocacy Groups Urge Congress to Fix Medicare Drug Benefit. Excerpt: The Medicare prescription drug benefit that narrowly passed Congress in November fails to rein in runaway prescription drug costs, which recently have grown 17 percent per year, seven times the rate of inflation. In fact, the measure actually prohibits the government from negotiating deep prescription drug discounts for seniors, even though other federal departments, including the Veterans Administration and the Department of Defense, have achieved significant savings through direct negotiations with drug companies. Without the government’s ability to negotiate drug prices, the average senior on Medicare will pay more out-of-pocket for drugs in 2007 when the benefit is fully implemented, then what they currently pay now without the so-called “benefit.” Consider this -- the average Medicare recipient who now spends $2,318 a year for drugs without prescription drug coverage will pay $2,911 out-of-pocket in four years under the plan if drug costs continue their historical increase. It’s no wonder seniors and the disabled are outraged over the Medicare drug benefit, and consumers are stunned by this giveaway of their tax dollars to pharmaceutical companies. We know Congress can save money for consumers and taxpayers by simply ensuring that the purchasing power of the government is properly used to negotiate lower drug prices.


  • Las Vegas Sun: HMOs to Reap Benefits From Medicare Law. Excerpt: Health maintenance organizations will receive higher payments under the new Medicare law beginning in March, well before most of the system's clients get significant help with their pharmacy bills. The new prescription drug benefit does not begin until January 2006. Medicare will not cover physical exams for new enrollees until 2005. The HMOs in Medicare, serving 4.6 million older Americans, will receive an additional $1.3 billion in 2004 and 2005 under the law President Bush signed Monday, according to the Congressional Budget Office.


  • New York Times (courtesy of the Minneapolis Star-Tribune): Medicare plan for drug costs bars insurance. Excerpt: Medicare beneficiaries will not be allowed to buy insurance to cover their share of prescription drug costs under the Medicare bill to be signed Monday by President Bush. Millions of Medicare beneficiaries have bought private insurance to fill gaps in Medicare. But a little-noticed provision of the legislation prohibits the sale of any Medigap policy that would help pay for drugs after Jan. 1, 2006, when the new Medicare drug benefit becomes available. This is one of many surprises awaiting beneficiaries, who will find big gaps in the drug benefit and might want private insurance to plug the holes -- just as they buy insurance to supplement Medicare coverage of doctors' services and hospital care.


  • New York Times (courtesy of the Farmington Daily Times): Stalking the giant chicken coop. Excerpt: The bill that Bush will sign Monday is a giant windfall for the drug companies, opening up a huge new market with virtually no effort to restrain prices. It will give Medicare recipients a modest drug benefit, but at a potentially dreadful cost. The bill starts the process of undermining Medicare by turning parts of it over to insurance companies, HMOs and other private contractors. The drug benefit will be delivered almost entirely through private insurance plans. It would have been more efficient and cheaper to deliver it the same way other Medicare benefits are delivered. But that’s not the idea. The Bush administration has mastered the art of legalized banditry, in which tons of government money — the people’s money — are hijacked and handed over to the special interests. Drug company stock prices soared with the passage of the Medicare bill, a sign that another government vault had been blown open and the big Medicare money was in play. The Republicans are not subtle about these matters. The bill, for example, specifically prohibits the government from negotiating discounts or lower drug prices, and bars the importation of cheaper drugs from abroad. If link is broken, view Adobe Acrobat version [PDF--116 KB].
Coverage on H1-B and L1 Visa and Outsourcing Issues
  • Computerworld: Look north, workers advised. IT jobs are available in Canada, where pay, and costs, are lower. Excerpt: Unemployed U.S. IT workers may be able to find work in Canada, where near-shore outsourcers take advantage of their country's lower costs. The average IT salary paid by Keane Inc. to employees at its application development center in Halifax, Nova Scotia, is around $60,000 Canadian, or roughly $45,000 U.S., based on recent exchange rates. While that pay rate might seem low to U.S. IT workers, it's "considerably higher" than the average salary in the Halifax area, said Stephen Lund, president and CEO of Nova Scotia Business Inc., a government-backed economic development agency. "You can live in Nova Scotia with a lot less money than you can live in a lot of other places," he said.


  • Computerworld: Ottawa's Pitch: 'Come to Canada'. Excerpt: U.S. IT workers are needed and encouraged to take jobs in Canada, said Keith Parsonage, director general of Industry Canada's Information and Communications Technologies branch. In an interview last week with Computerworld's Patrick Thibodeau, Parsonage discussed the opportunities and lifestyle that await IT workers in Canada. Excerpts from that interview follow.


  • New York Times: Ruse in Toyland: Chinese Workers' Hidden Woe. Excerpt: Workers at Kin Ki Industrial, a leading Chinese toy maker, make a decent salary, rarely work nights or weekends and often "hang out along the street, play Ping-Pong and watch TV." They all have work contracts, pensions and medical benefits. The factory canteen offers tasty food. The dormitories are comfortable. These are the official working conditions at Kin Ki as they are described on paper — crib sheets — handed to workers just before inspections. Those occur when big American clients, like the Ohio company that uses Kin Ki to produce the iconic toy Etch A Sketch, visit to make sure that the factory has good labor standards. Real-world Kin Ki employees, mostly teenage migrants from internal provinces, say they work many more hours and earn about 40 percent less than the company claims. They sleep head-to-toe in tiny rooms. They staged two strikes recently demanding they get paid closer to the legal minimum wage. Most do not have pensions, medical insurance or work contracts. The company's crib sheet recommends if inspectors press to see such documents, workers should "intentionally waste time and then say they can't find them," according to company memos provided to The New York Times by employees.
This week on the Alliance@IBM Site:
  • The Ultimate Take Away - Your Health. Excerpt: Throughout our careers and work at IBM we made many assumptions based on what we were told by company management.
    We assumed we would have a good pension. We assumed we would have medical benefits and they would be free. We assumed that if we did a good job and played by the rules we would be respected and stay employed until we chose to leave. We also assumed that IBM was a safe place to work and employees and their communities would be safe from the toxic bombardments we saw with other companies. That assumption, like others, has been misleading. Employees and their families have been faced with the ultimate take away-their health and their lives.
  • Alliance believes IBM should do the right thing. Excerpt: The Alliance believes IBM should do the following...
  • New...Endicott Interconnect Technologies (EIT) Employees' Page.
  • About Alliance Membership...
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