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Highlights for week ending December 20, 2003
- Christian Science Monitor: Healthcare costs are up.
Here are the culprits. Excerpt: It is no secret to Americans
that healthcare costs are soaring. But some of the causes of this escalation are startling. For example: • Drug
companies spend roughly as much on advertising and promotion - $20 billion a year - as they do on research and
development of new drugs. • Overall, American pharmaceutical firms employ one sales person for every physician
in the country. They also pick up the tab for doctors to attend seminars promoting their products, which happen
to take place in desirable locations, such as Florida and the Caribbean. If link is broken, view
Adobe Acrobat version
- Center for Retirement Research at Boston College: How Do Cash Balance Plans Affect the Pension Landscape? [PDF--125
KB]. Excerpt: So Why Were IBM Employees
The process of converting to cash balance plans has
received considerable attention in recent years
because employees at IBM and elsewhere felt that
they would not receive the benefits they planned on.
In 1999, IBM decided to convert their pension plan
to a cash balance plan and, in doing so, initially
only allowed individuals within five years of
retirement to remain in the old plan. Employees
with high levels of tenure but not within five years
of retirement objected because the conversion
would result in substantially reduced prospective
retirement benefits.24 After a barrage of negative
media coverage, IBM eventually relaxed the
constraint and allowed employees with 10 years of
tenure and 40 or more years of age to remain in the
old plan. Since then, other firms have
grandfathered their older workers under the
existing defined benefit plan rules. Eastman Kodak
took this one step further by allowing all employees
to choose between the traditional defined benefit
plan and the firm’s new cash balance plan.
Beyond the transitional issues, IBM employees
have challenged the legality of their cash balance
pension plan more broadly, arguing that its method
for paying benefits violates ERISA’s prohibition
against age discrimination. In fact, a host of regulatory issues surround cash balance plans, mainly
because the rules governing them were initially
written for traditional defined benefit plans.
- Raleigh News & Observer: IBM jobs
headed abroad. The plan to move programming jobs to India, China and elsewhere is bad news for RTP. Excerpt: EDS,
a rival computer services company, wants 20,000 workers in low-cost countries within two years, Tapper said. Accenture,
the consulting company, has 5,000 in India now and wants 10,000 there by the end of next year. And Tapper predicts
that IBM, which has 9,000 workers in India and China, will boost its work force in those countries to between 15,000
and 20,000 within the next couple of years. ... The newspaper said that it's not clear how many of the other 3,700
jobs considered prime for sending overseas will be moved next year. Workers in RTP; Dallas; Boulder, Colo.; Poughkeepsie,
N.Y.; and other sites will be affected. Some displaced employees will be expected to train the new, overseas, workers,
The Wall Street Journal reported. "It's despicable," said Conrad, national coordinator for the Alliance@IBM,
which represents 6,000 workers. "It's
like building a gangplank and before pushing the employee over saying, 'Please train your replacement.' "
- Poughkeepsie Journal: Activists fear
local IBM job losses coming. Excerpt: But it will get worse, perhaps 30,000
to 40,000 jobs by the end of 2005, if Lee Conrad's sources point in the right direction, as they often have.
Conrad is lead organizer for the Alliance@IBM, a unit of the Communications Workers of America. He said Monday
the trend is becoming a crisis not just for workers but for the American economy. ''We should start discussing
concerted activity to stop this flow of our jobs being offshored,'' Conrad said. The paper's story said the ''offshoring''
would come in 2004 and the company has already hired 500 engineers in India who will get some of the early work
in a group called Application Management Services, part of IBM Global Services, which contains half of the company's
- USA Today: U.S. workers feel burn
of long hours, less leisure. Excerpt: A backlash is building against America's work epidemic. More employees are
resisting companies' demands for longer hours on the job, the 24/7 pace of business that means operations never
cease, and the surrender of leisure time to work because of new technology such as cell phones and e-mail. "People
are putting in 40 and 50 hours a week, and there's not enough time for anything," says Gretchen
Burger, in Seattle, an organizer with Take Back Your Time, a grass-roots movement aimed at focusing attention
on the issue of overwork. "There is an alternative." Some workers, unwilling to clock extra hours without
extra pay, are suing their companies over alleged overtime violations. In fiscal 2003, the Labor Department collected
$212 million in back wages, which include overtime violations. That's a 21% increase over the record-setting
amount collected in 2002. Some economists also believe that many productivity gains of the '90s can be attributed
to longer work hours rather than the efficiency of new technology.
- BNA Tax Management: Practitioner's Forum Discussion
on the Future of Cash Balance Plans. Excerpt: The following
is the transcript of an informal discussion
of employee benefit practitioners held in Washington, D.C., on
October 22, 2003. The topic is the future of cash balance plans in
light of recent statements made by Pam Olsen, Assistant Secretary of
Treasury for Tax Policy, that the Treasury Department will not
finalize the proposed cash balance plan regulations but, instead,
would wait for legislative direction from Congress."
- Janet Krueger comments. Full extract: The
transcript referenced below is fascinating, from several
- Corporations have always insisted they were not switching to
cash balance plans to 'save money', but now they cannot switch back
to normal pension plans because it would be 'too expensive.'
- Apparently a decision has been made NOT to finalize the treasury
regulations that were attempting to legalize cash balance plans
(that is good for us!)
- More threats from the corporate world that if they cannot bend
the defined benefit rules the way they want, then they will take
their tows and go home (ie plans will be frozen, a threat that the
employees won't get anything more if Congress doesn't 'fix' the
- The treasury has decided not to issue favorable determination
letters to companies that converted to cash balance plans, thus
preventing these companies (including IBM) from telling the courts
that they have IRS support or approval on their conversions.
- An acknowledgement that if Congress does decide to legalize cash
balance plans, they probably cannot do so retroactively. (ie the
various sectors of DC that have been attempting to bail IBM out may
be giving up, and telling IBM they cannot help any more!)
- Companies with cash balance plans are going to have a tough time
with their annual audits, although the American Bar Association
seems to be coming up with a policy to allow attorneys to pussy foot
around the issue.
- An acknowledgement that Cooper v IBM won't reach the appeals
court until at least mid 2004. The implication is that while other
companies seem to understand now that the plans are illegal, they
are waiting to see what sorts of 'remedies' IBM is forced to pay
before they do anything.
| Coverage on H1-B and L1 Visa and Outsourcing Issues
- Business Week:
The Rise Of India.
Growth is only just starting, but the country's brainpower is already reshaping Corporate America.
The nagging fear in the U.S., though, is that such assurances will ring hollow over time. In other industries, the shift
of low-cost production work to East Asia was followed by engineering. Now, South Korea and Taiwan are global leaders in
notebook PCs, wireless phones, memory chips, and digital displays. As companies rely more on IT engineers in India and elsewhere,
the argument goes, the U.S. could cede control of other core technologies. "If we continue to offshore high-skilled professional
jobs, the U.S. risks surrendering its leading role in innovation," warns John W. Steadman, incoming U.S. president of Institute
of Electrical & Electronics Engineers Inc. That could also happen if many foreigners -- who account for 60% of U.S.
science grads and who have been key to U.S. tech success -- no longer go to America to launch their best ideas.
- Business Week: Corporate
America's Silent Partner: India.
Businesses are off-shoring more and more white-collar jobs there, though you won't hear them talk about it
much in an election year. Excerpt: The shift of skilled work to India is becoming one of Corporate America's
worst-kept secrets. Almost daily, India's newspapers carry items on new plans by U.S. software, finance,
or pharmaceutical companies to open or expand call centers and research labs. Officials from Bombay to Bangalore
point to splashy new office parks that are soon to house major facilities by companies like Morgan Stanley,
General Motors, or Dell . Tour a busy call center run by an Indian outsourcing specialist at midnight, and
you'll likely see hundreds of staffers fielding calls for clients like American Express, MetLife, J.P. Morgan
Chase, or Citigroup.
Yet it's still very hard to get these companies to talk in the U.S. about the increasingly important role India
is playing in their business models. For BusinessWeek's Dec. 8 cover story, "The Rise of India," only
a few BW 1,000 corporations were brave enough to grant on-the-record interviews about their R&D and back-office
operations. They included General Electric, Intel, and Cummins. A number of small software, chip-design,
and e-commerce startups, for whom the ability to tap global brainpower is regarded as a competitive edge,
also cooperated. But dozens of America's biggest investors in India -- don't worry, I won't name names -- simply
refused to talk.
- Seattle Post-Intelligencer: State jobs
moving to workers overseas. Bill would ban contractors from this kind of outsourcing. Excerpt: The Boeing Co. is building its next generation
jetliner in Everett, thanks in part to a multibillion dollar tax package from the state. But the same state
government that worked hard to preserve the Boeing jobs is contracting with companies that are sending information
technology projects and call center work to lower-cost operations in India. That irony was not lost on some
politicians yesterday, who said they plan to introduce legislation next month that would prevent state contracts
from being awarded to companies that take the work overseas.
- Washington Alliance of Technology Workers (WashTech): Tech
Workers Testify Before Washington State Legislators.
Excerpt: The Washington State House Commerce and Labor Committee heard testimony earlier this month about the
languishing high-tech industry in the state. WashTech President Marcus Courtney told committee members Dec.
4 that Washington’s high-tech sector lost
more than 10,000 jobs in 2002, setting the state unemployment rate for tech workers at 10 percent, nearly
twice the percentage of the state’s industrial unemployment rate. Committee members appeared rapt when Courtney
presented a slide presentation, originally prepared by Microsoft Corp. for company managers, in which they
were urged to select projects to outsource to India. Microsoft Senior Vice President Brian Valentine presented
the "Thinking About India" Microsoft PowerPoint
presentation on July 2, 2002. In it, Valentine told managers that they could leverage the Indian economy’s
lower labor costs and extend the effective workday to up to 18 hours. “Any technical resource can be had
(in India),” Valentine had said in the presentation. Managers could “easily
add and subtract resources for ramp ups and ramp downs” and “Quality work (could be had) at 50% to 60%
percent of the cost…That’s 2 heads for the price of 1.”
- WashTech: Tech Visa Lawsuit Raises
Questions About New Jersey Politicians. A five-year wait for two software
programmers who were granted federal class-action status in their lawsuit against a software company with
ties to a U.S. Senator may be nearing a close. Sona Shah and Kai Barrett allege that Wilco Systems, Inc.,
a financial services company based in New York, discriminated against its employees based on their citizenship
and immigration status. Shah and Barrett say they filed the lawsuit on behalf of U.S. workers who are discriminated
against in favor of foreign workers, and on behalf of foreign H-1B visa workers who are paid less than
the prevailing wage for U.S. workers with similar qualifications.
- CNET News: Where did my IT job go? Excerpt: I just received an e-mail from an old friend who left Colorado and
moved to Silicon Valley to work three years ago. His first company laid him off about a year ago, but he
found another position. Now, he says he is looking to return to the mountains. His company is moving software
development to India and hardware production to China. What happened to his dreams of making cash and driving
a new Porsche? He did all the right things. You remember the things you were told to do. Graduate high
school, complete college and major in computers. At least that was the plan for the last 20 years of the 20th century.
Now, however, that is no longer a guarantee of success. The American Electronics Association has stated that
we have lost 540,000 high-tech jobs in 2002 in the United States. And we also lost 146,000 software positions,
a first for the United States. In Colorado, we lost 27,000 high-tech jobs in 2002. El Paso County lost
approximately 3,000 positions. The average wage for these positions was $69,277. So, my county lost more
than $207 million in wages last year alone. That is one huge hit to a local economy of 420,000 people.
- Computerworld: Washington
state agency grapples with outsourced IT project. Excerpt: A decision by Washington
State Health Care Authority to use offshore labor for a major IT project was based in part on some pretty
simple arithmetic: The contractor's bid was about $3 million below the next lowest bid.
But the project hasn't worked out as planned. It's running over budget, an internal state document written
in October warns of a "significant risk" that it won't meet the agency's requirements, and it has prompted
state legislation that would effectively bar state agencies from future use of offshore contractors. "I don't
think that Washington state tax dollars should be used to create jobs overseas when we've got skilled workers
State Rep. Zack Hudgins, a Democrat. Hudgins plans to introduce legislation when the Washington legislature
convenes in January that would block the state from sending work offshore. ... The approximately $3 million
winning bid from Healthaxis Inc. -- the Irving, Texas-based prime contractor that worked with India-based outsourcer
Satyam Computer Services Ltd. -- was the only bid to come in under the $3.6 million budget set by the legislature
for building a new insurance benefits administration system. Written proposals were received from PeopleSoft Inc.,
Oracle Corp. and Physmark Inc. and Deloitte Touche Tohmatsu.
- Computerworld: State,
U.S. Lawmakers Pushing to Hinder Offshore Outsourcing. Issue could be a hot topic in next
year's presidential election. Excerpt: Federal and state lawmakers are accelerating efforts to stem offshore
outsourcing, chiefly by setting restrictions on the use of foreign labor in government contracting.
At the same time, the issue is drawing attention in the presidential race. For instance, Sen. John Kerry
(D-Mass.), who's seeking the Democratic nomination, introduced legislation last month requiring call center
employees to disclose their location at the commencement of each call. When introducing the legislation,
Kerry cited a Gartner Inc. estimate that one in 20 IT jobs at user companies will move offshore by the
end of next year.
| This week on the Alliance@IBM
- ThinkTwice December 2003/January 2004 Newsletter [PDF--243 KB]. Articles in this issue
- IBM Retirees Shocked by Health Care Increases
- An open letter to The IBM CEO
- New Band Changes to Affect
- The Utimate Takeaway—Your Health
- Former IBM
Suit on Age
in Job Cuts
- Legislative Actions Relating to
- Rollback Health Care Increase
- Australia IGS employees bring
IBM to negotiation table.
- Computerworld: Union
urges IBM workers to fight plan to move jobs offshore. Company reportedly plans to move 4,730 jobs to India, China
and other countries. 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." ...
IBM officials aren't commenting on that report, but in a prepared statement, the company said that "the vast
majority of the growth in application services that will occur in markets like India, China and Latin America
will result from winning new contracts, especially in high-growth areas like Business Transformation Outsourcing." ...
Guyer said the union has heard from its own sources that as many as 30,000 U.S. jobs may move offshore over the next
two years. IBM officials weren't immediately available to comment on this report.
- Transcript of IBM Management Offshoring Conference
Call. Full text of IBM HR Director's Presentations on "Offshoring" - March, 2003.
Excerpt: Government reaction? It is hard for me to imagine any country just sitting back and letting jobs go
offshore without raising some level of concern and investigation, and I think we're going to see some of that in
the countries where jobs are moving from.
And then finally, the industrial relations reactions. We're already seeing some of this. Washtech is a part of
the CWA, the same way that the CWA, the Communications Workers of America, has the Alliance@IBM as an IBM local
union affiliate, Washtech is set up out on the west coast, in Washington state, trying to organize employees at
Microsoft and at Amazon.com. If you log on that web site there is a whole lot of stuff as to why this offshoring
stuff is terrible for employees, why employees need to unionize to fight it. That's where you can get the Microsoft
pitch as well in its entirety, the power-point presentation that the senior vice president took out, and you can
see some of the fairly appealing arguments that they're making to why employees need to do some things like organizing
to help fight this.
There is a dignity issue You know, those of us who track union campaigns realize that unions rarely have success
saying you need to unionize to get more money. Issues like dignity and justice and fairness, those sort of gut
sort of issues tend to raise or strike an emotional chord after which the money issues, pay and benefits issues
can come in, but the dignity of being told that it's not that your job is going away it's just that's it's moving
and you're going to be put out of work as a result of that. It certainly raises those kind of dignity issues.