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Highlights—July 17, 2004
- "m_l_benefit_seeker", one of the first IBMers eligible to retire under the new Future
Health Account details
the charges IBM levies for health care coverage under the FHA. Excerpts:
I'm eligible to retire this week, so I thought I'd check out the
Future Hell Account rates and post them here.
- PPO for FHA:
$499.54/month for employee;
$999/month for employee + 1 dependent; $
1498/month for employee + 2 dependents.
The previous prices are subject to $507 deductible per person.
- HMO for FHA (Health Partners):
$360.85/month for employee;
$721.71/month for employee + 1 dependent; $1082.56/month for employee + 2 dependents.
The above HMO prices are subject to $14 co-payment per visit.
- Medco Health low cost prescriptions are included in the previous prices, but dental and
vision is not.
- Dental for FHA:
$33.70/month for employee; $
67.54/month for employee + 1; $
100.86/month for employee + 2 dependents.
- As an employee, I presently have the PPO; Prices are: $62/month for employee + 2 dependents,
subject to $507 deductible;
IBM Dental Basic: $17/month for employee + 2.
- Janet Krueger
comments on the costs of the FHA plan. Full excerpt: This is not news. The
rates are not very far out of line with what IBM has been charging for COBRA. I posted
in 1999 that those who were allowed to retire with the FHA would get a maximum of 3 years
of insurance out of it, unless IBM eliminated it, or them, before they reached age 55.
As I've observed before:
- Most older workers at IBM aren't being allowed to work until they
turn 55, so they won't get anything from the FHA.
- The FHA is not federally protected and never vests, so it would
be foolish for even those who do stay at IBM until they turn 55 to
rely on it -- IBM can eliminate the plan at any time, and would not
have to replace it with anything.
- Those who do get to use the FHA, are in a non-competitive
(monopoly) situation where the only choice is whatever IBM chooses
to offer, so don't expect all illnesses, drugs, etc. to be covered.
- Current retirees don't have it much better -- before long their
copay will be just as high as those who don't have retiree
insurance -- but because of the latest Medicare hose act, IBM will
get a tax-free subsidy equal to whatever they provide for retirees
PLUS whatever they manage to connect from retirees -- great for
IBM's bottom line, but not much good for the rest of us.
- Current employees have multiple options:
- Work to unionize and get whatever is left of retiree health care
promises protected with a union contract.
- Stick their heads in the sand and pretend everything will be ok.
- Start saving everything they can in hopes that it will be enough
to buy health insurance on the open market.
- Start lobbying for national health care coverage, similar to
what every other industrialized country has.
- Quit and try to find a job with a different company that offers
higher benefits (although unless you find one with a union contract,
those benefits, too, could vaporize).
- Some combination of the above.
- Personally, I'm working on option 4. When I see the millions of
Americans with no health insurance coverage at all, including 2 of
my kids who are grown and on their own, it doesn't seem smart for me
to just focus on the future needs of those who still have good jobs
- New York Times commentary by Paul Krugman: Medical
Class Warfare. Excerpts: If past patterns are any guide, about one in three Americans
will go without health insurance for some part of the next two years. They won't, for
the most part, be the persistently poor, who are usually covered by Medicaid. They will
be members of working families with breadwinners who have jobs without medical benefits
or who have been laid off. ... The other main component of the Bush plan involves "health
savings accounts." The prescription drug bill the Bush administration pushed through
Congress last year had a number of provisions unrelated to Medicare. One of them allowed
people who purchase insurance policies with high deductibles, generally at least $2,000
per family, to shelter income from taxes by setting up special accounts for medical expenses.
This year, the administration proposed making the premiums linked to these accounts fully
Although the 2005 budget presents that new deduction under the heading "Helping
the uninsured," health savings accounts don't seem to have much to do with the
needs of the families likely to find themselves without health insurance. For one thing,
such families need more protection than a plan with a $2,000 deductible provides. Furthermore,
the tax advantages of health savings accounts would be small for those families most
at risk of losing health insurance, who are overwhelmingly in low tax brackets. But
for people whose income puts them in high tax brackets, these accounts are a very good
deal; making the premiums deductible turns them into a great deal. In other words,
health savings accounts will offer the already affluent, who don't have problems getting
health insurance, yet another tax shelter. Meanwhile, health savings accounts, in the
view of many experts, will actually increase the number of uninsured.
This perverse effect shouldn't be too surprising: unless they are carefully designed,
medical policies often have side consequences that worsen the problems they supposedly
address. For example, the Congressional Budget Office estimates that one-third of the
retirees who now have drug coverage through their former employers will lose that coverage
as a result of the Bush prescription drug bill and will be forced to accept inferior
coverage from Medicare. In the case of health savings accounts, the key side consequence
is a reduced incentive for companies to insure their workers. When companies provide
group health insurance, healthier employees implicitly subsidize their sicker colleagues.
They're willing to do this largely because the employer's contributions to health insurance
are a tax-free form of compensation, but only if the same plan is offered to all employees.
Tax-free health savings accounts and premiums would provide healthier and wealthier
employees an incentive to opt out, accepting higher paychecks instead, and would lead
to higher insurance premiums for those who remain in traditional plans. This would
cause some companies to stop providing health insurance, or raise employee contributions
to a level some workers can't afford. If link is broken, view
Adobe Acrobat version
- While answering another person's Yahoo! message board posting, "ctman1452"
describes how society has changed in recent
decades and why the only viable long-term solution to the U.S.'s health care crisis
is a national health care plan. Full excerpt: Well Carl your fatalistic attitude
is one way to look at it but there
are alternatives. Taking care of elders was considered part of the extended family's
duties in the era you mention; today children not only have been
relieved of that obligation legally but socially have been isolated
from their parents by distance and working circumstances in many cases
(out of sight out of mind). As a child I remember visiting friends
houses and usually seeing "granny" in her room which was the case in
my house as well except it was "gramps".
People did not have the longevity they do today so they worked almost
to their demise and were not considered "surplus" before they reached
50 or even 40 as many are in today's high tech world where recent
education is a key job requirement to be effective and careers time
out well before retirement. Age discrimination (caused partially by
fear of health care costs) makes all this talk of "retraining" mostly
a smoke screen and who is going to pay for retraining in any
meaningful way at the same time we are "offshoring" many of those very
same jobs to cheap foreign labor locations. Because of our heritage of not liking
anything "centralized" because
we fear another King George we usually attempt to solve any problem
with a cut and paste solution of private/public content and health
care is a perfect example of this. Lack of cell phone spectrum
standards is another "bad example" unlike the rest of the world that
adopted GSM first and now is gradually becoming the standard for the
US because of its obvious advantages.
The current extended longevity coupled with truncated careers caused
by technology demands a better way. That better way is a national
health plan adopted by the rest of the developed world; there simply
is no other humane and equitable alternative to the inescapable
demands of old age...there is also no "profit" potential
to taking care of destitute old people to incent the market system. Whichever political
party supports this inevitable solution is the one
to favor...that is the easiest aspect of all this discussion
by simple process of elimination. I and many others could go on and on but the logical
conclusion of the obvious "solution" is the same; everything else is a "smoke
the status quo who will try to escape their fair share of the taxes to
pay for it and use every clever strategy to confuse as many people as
possible to delay the inevitable.
- Boulder Daily Camera commentary by Christopher Brauchli: Lower
Prices for Drugs? Good Luck. Excerpts: Just when you thought it couldn't get any
better, it got better. The month of June brought us not only the Approved Prescription
Drug Discount Cards program but a lottery. ... According to the House Government Reform
Committee, in many instances seniors will pay more for the drugs with the cards than
buying drugs retail. The committee discovered that a one-month supply of the 10 best-selling
brand-name drugs would cost more if purchased with a card offered by Pharmacy Care
Alliance than if the same drugs were simply bought retail at Drugstore.com. The other
drawback is that there are 72 cards from which to choose and each covers a different
group of drugs. Once a participant has bought a card because of the selection of drugs
and prices offered by that card, the purchaser is locked into that card until fall
of the following year. The card issuer has slightly more flexibility. It can raise
the price on those drugs in order to increase its profit. It cannot, of course, raise
its prices willy nilly. Price increases can only occur once each week. That protects
the consumer. ...
As if the excitement of trying to buy a lucky card weren't enough
for the elderly, on June 24 the administration announced a lottery. Between 500,000
and 600,000 people will be eligible to participate and 10 percent of them will be selected.
To be eligible to enter the lottery entrants must have cancer, rheumatoid arthritis,
osteoporosis, multiple sclerosis and some other diseases. Congress appropriated $500
million for this program and the lucky winners will be selected at random. Forty percent
of the funds will go to those taking oral drugs for cancer treatments and 60 percent
will go to those with other illnesses. It is a preview of the benefits that will be
available to all Medicare participants in 2006. Tommy Thompson, secretary of health
and human services, explains that lottery winners "will
save thousands of dollars on essential medicines that they can take home" and
everyone who meets the eligibility criteria has an equal chance to win the lottery.
The 450,000 to 550,000 people who need the drugs but don't win the lottery will have
to wait until 2006, assuming they live that long. The losers may wonder what kind
of a wealthy country establishes a program under which medicines to prolong life
are only dispensed to the poor who win a lottery. Instead of carping they should be
grateful that they don't live in a third world country where there aren't any lotteries
to enter for medical care.
- Plan Sponsor: One
Bad Apple. Are all hybrid plans as bad as the negative publicity says
they are? Not for three employers that made successful launches. Excerpts: “If you
deal with the age discrimination issues, we do not think it is a bad plan design,” says
Karen Friedman, policy director at the Washington-based Pension Rights Center. “Certain
parts are good: They are employer-paid, and there are guarantees through the PBGC (Pension
Benefit Guaranty Corp.). Some workers like them because they are easy to understand, and
they can carry the money with them.” Janet Krueger, the former IBM Corp. employee
who helped expose problems with Big Blue’s
cash balance conversion, puts it even more cautiously. “Some do seem to be in the
best interests of employees, and some do not,” she says, “but nobody has
sat down and said what makes a conversion fair and what makes it unfair. What is being
done is ad hoc.”
Saving money was not what motivated Kodak when the company started working on its new
cash balance plan in the late 1990s, Metras says. ... Kodak’s current employees could pick
between the old and new plans. “We offered a choice to everybody. If people had any
concerns about the plan, they did not have to go with it,” Metras says. “Choice
was pretty uncommon when we did ours. We thought this would be the cleanest thing to do.” ...
Beyond giving employees the right to choose, Metras says, the other thing that made Kodak’s
new plan work was the educational materials and resources it provided: “If you are
offering a choice, you need to give people enough information to make a solid decision.
We also did not rush it. They had plenty of time to make their decision.” Kodak gave
every employee a “detailed” decision
guide, Metras says, with a personalized fact sheet with numbers and graphics that projected
their benefits in the old versus the new plan. If an employee could possibly get less
money under the new plan versus the old, the numbers and graphics reflected that. The
company also offered employees modeling software they could use to change assumptions,
such as the interest rate. Other elements included employee meetings, a help line staffed
by financial experts, and a Web site. If link is broken, view Adobe Acrobat version [PDF--33
- Washington Post: Our
Broken Health Care System. Excerpts: When Bill Frist talks about
health care, it pays to listen. Not only is he the majority leader of the Senate, but,
as a physician who specialized in heart transplants, he knows the medical system as well
as he knows human anatomy. What the Tennessee Republican said at the National Press Club
earlier this week confirms what many in the health field, in business and in both parties
increasingly recognize: The American health care system is urgently in need of a basic
overhaul. ... He spelled out some of the scary statistics behind those generalizations.
Expense? The United States spends almost 15 percent of its income on health care, far more
than other advanced countries. That's about $5,540 a year for every man, woman and child.
Costs are rising four times as fast as wages. One informed estimate places the cost of
employer-sponsored health care coverage for the average family at $14,500 in 2006, just
two years from now. The Census Bureau found last year that almost 44 million Americans
had gone without health insurance for the previous year. That number has been increasing
by roughly 2 million a year. Families USA, a consumer group, says that almost 82 million
people, one out of three below age 65, were uninsured at some point during 2002-03, most
of them for at least nine months. Frist also talked about the "inefficiency" of
the system, noting that "according
to a recent Rand study, patients received recommended care about only half the time for
conditions such as my own specialty of heart disease, as well as diabetes."
Last month G. Richard Wagoner Jr., the chairman of General Motors, was quoted in the
Detroit Free Press as telling a business conference that rising health care costs are
crippling the competitiveness of U.S. business and should be the top issue for the winner
of November's presidential election. "It is well beyond time for all of us to put
partisan politics behind us," Wagoner
said, "and get together to address this health care crisis." The message is
coming through -- loud and clear. Whoever is president will find the issue waiting
- Business Week: 10
Employer Secrets Worth Cracking.
From financial health to company culture, here's a look at some of the crucial info any
prospective or current employee needs to know. Excerpts: Thank goodness the labor
market is finally loosening up, and more good jobs are becoming available. Still, finding
a new position is tough enough that you don't want to make a wrong move. So here's
a critical point to consider: All employers have secrets that you'll want to uncover –-
things like a drastically underfunded pension plan, a laissez-faire attitude toward
new regulations, or using high tech to snoop on employees. Then there's the more intangible,
but often the most serious, problem you need to watch out for: Getting stuck in a corporate
culture where you don't fit in and have little chance of getting ahead. ... Will this
company be able to take care of me in retirement? BusinessWeek's July 19 cover story, "The
Benefits Trap", revealed that many
large companies don't have enough assets to cover their pension obligations. At the
same time, many of those companies are reducing retiree medical benefits in hopes of
boosting the bottom line. A classic mistake most people make when contemplating a career
move is to base their decision too much on annual compensation and forget to consider
the value of benefits, says executive coach Paul Bernard, principal of Paul Bernard & Associates
in New York. "For baby boomers this is a big issue," he says. ... What's the
(real) travel and expense policy?
This might sound like small potatoes, but for executives in sales or consulting, it's
something to watch for, says Bernard. Just as cultures vary at different companies,
so may one applaud you for taking clients out to a fancy lunch while another would
wonder why coffee and a donut wouldn't suffice. Bernard says clients have recently complained
to him that it can take 60 to 90 days to get reimbursed for expenses or that they're
now required to fly coach. If you're going to be taking lots of trips to Europe and
are accustomed to flying first class, this is something to check out.
- Washington Post: Vision
of Newt. As Speaker, Gingrich Knew How to Divide. Now He Aims
to Unite -- to Transform Health Care as We Know It. Excerpt: Not that long ago, the
very name Newt Gingrich made partisan blood boil. He was, after all, the renegade who shoved
Democratic Rep. Jim Wright out of the speakership on ethics charges, devised the strategy
for the 1994 Republican takeover of the House and memorably suggested Medicare ought
to be left to "wither on the vine" (a reference he later said was aimed at the
bureaucracy, not the actual program). So it is both a testament to his political skill
and the salience of the issue that Gingrich is playing policy footsie with the likes
of Rep. Kennedy, Sen. Hillary Rodham Clinton (D-N.Y.) and William Novelli, executive
director of AARP. Gingrich recently traveled to Rhode Island to deliver the keynote address
at Kennedy's "Frontiers
of Healthcare" conference. The pair, worlds apart ideologically, have found common
ground around information technology and the promise it holds for revolutionizing the
delivery of medical care.
- New York Times: Medicare
Law Is Seen Leading to Cuts in Drug Benefits for Retirees. Excerpt:
New government estimates suggest that employers will reduce or eliminate prescription drug
benefits for 3.8 million retirees when Medicare offers such coverage in 2006. That represents
one-third of all the retirees with employer-sponsored drug coverage, according to documents
from the Department of Health and Human Services. No aspect of the new Medicare law causes
more concern among retirees than the possibility that they might lose benefits they already
- Bloomberg.com: Automakers,
"Losing Competitiveness," Join UAW in Health Fight. Excerpts: In another
era, Geoffrey Schick and Ken Johnson might have clashed across a bargaining table. Schick,
33, is a health-cost specialist at DaimlerChrysler AG. Johnson, 54, is an autoworker
focusing on benefits for UAW Local 72. Today, they share an office at the 1,400-worker
DaimlerChrysler engine plant in Kenosha, Wisconsin, allies in a ground war against health
expenses that are eating away every dollar the factory saves in hard-won productivity
gains. "We are losing competitiveness," says Dieter Zetsche, 51, the handlebar-mustached
chief executive of DaimlerChrysler's U.S. unit, based in Auburn Hills, Michigan.
- Computerworld: Job
cuts at computer firms on the upswing.
The employment environment remains volatile, the outplacement firm says. Excerpt: Planned
job cuts announced by computer firms rose a staggering 179% in the second quarter of
this year, to 13,465 from 4,828 in the previous quarter, according to Chicago-based outplacement
firm Challenger, Gray & Christmas Inc. Challenger said today that the rise in layoffs
is a reminder that the job environment remains volatile and that significant job losses
in technology-related industries may occur even as new positions are being created.
- Computerworld: Regenerating
IT. Excerpts: When an IT organization is badly damaged, outsourcing
the whole thing is truly tempting, but such a desire often means "Let's abdicate all
responsibility for IT." Such endeavors can be classified as "desperation outsourcing" and
rarely succeed. Outsourcing IT can be successful, but not when the organization is damaged.
Fix the problems first, then revisit outsourcing options. Like the damaged arm of a starfish,
the failed IT organization needs to be regenerated, not amputated. Successful regeneration
efforts require a strong CIO who will say "no" loudly
and clearly when needed, even if it makes powerful executives unhappy.
- New York Times Opinion by Paul Krugman: Machine
at Work. Excerpt: From a business point
of view, Enron is a smoking ruin. But there's important evidence in the rubble. If Enron
hadn't collapsed, we might still have only circumstantial evidence that energy companies
artificially drove up prices during California's electricity crisis. Because of that collapse,
we have direct evidence in the form of the now-infamous Enron tapes — although
the Federal Energy Regulatory Commission and the Justice Department tried to prevent
their release. Now, e-mail and other Enron documents are revealing why Tom DeLay, the House
majority leader, is one of the most powerful men in America. ... Here's the puzzle: if
Mr. DeLay's brand of conservatism is so unpopular that it must be kept in the closet during
the convention, how can people like him really run the party? In Mr. DeLay's case, a large
part of the answer is his control over corporate cash. As far back as 1996, one analyst
described Mr. DeLay as the "chief enforcer of company
contributions to Republicans." Some of that cash has flowed through Americans for
a Republican Majority, called Armpac, a political action committee Mr. DeLay founded
in 1994. By dispensing that money to other legislators, he gains their allegiance; this,
in turn, allows him to deliver favors to his corporate contributors. Four of the five
Republicans on the House ethics committee, where a complaint has been filed against Mr.
DeLay, are past recipients of Armpac money. ... But you shouldn't conclude that the system
is working. Mr. DeLay's current predicament is an accident. The party machine that he
has done so much to create has eliminated most of the checks and balances in our government.
Again and again, Republicans in Congress have closed ranks to block or emasculate politically
inconvenient investigations. If Enron hadn't collapsed, and if Texas didn't still have
a campaign finance law that is a relic of its populist past, Mr. DeLay would be in no
danger at all. The larger picture is this: Mr. DeLay and his fellow hard-liners, whose
values are far from the American mainstream, have forged an immensely effective alliance
with corporate interests. And they may be just one election away from achieving a long-term
lock on power. If link is broken, view Adobe Acrobat version [PDF--18
outlines the details of Sam Palmisano's retirement plan. Full excerpt: Sam will receive
a pension from the normal IBM retirement plan based on the Service and Earnings formula
or the Pension Credit Formula, whichever is greater at the time he retires. That should
provide him with 30 - 40% of his 5 year final average salary. As an executive, Sam
will also receive a second pension from the Supplemental Executive Retention Plan (SERP).
For someone with 30 years of service, as Sam currently has, this will provide a pension
of 63% of his final average salary. If he works 5 more years, it will provide 67%.
So between the two pension plans, Sam will receive close to
100% of his salary as a pension. Assuming Sam continues to receive
the same salary plus bonus of $6.9 million, as he did in 2003, that
comes to about $575,000 per month.
However, if the 15% raise that Sam got in 2003 continues to hold
for 5 more years, his final average salary will be $9.37 million,
giving him a pension of $780,992 per month.
Of course, Sam is extremely thankful that Lou had the vision
to create the SERP plan for the benefit of executives.
Guyer comments. Full excerpt: I have no idea how Sam can look himself in the mirror
each day. At
this year's stockholder meeting, someone in the audience stood up and
told about a retiree who had about $200 a month to live on from his
pension after paying for medical; I believe she said something
like "have you no shame?". So he hears this and then he goes to bed
at night knowing he securely has over $8 million a year awaiting him.
I personally could never do that. And I think it is pretty
- Jim Hightower: Bush's Prosperity.
Excerpts: What's wrong with you people? Don't you know that the economy is humming, that
our very own president has declared "mission accomplished" on
his promise of prosperity, that the stock market is up by 40 percent over last year,
that jobs are cropping up like crabgrass, that the bluebird of happiness is officially
singing everywhere across our land, and that you should be grateful, for gods sake? Republican
politicians, corporate economists, and the media barons are totally befuddled these days,
because their economic statistics tell them that the economy is in great shape––yet
you, you wretches, are still grumpy, even giving Bush the lowest marks of his presidency
for his economic stewardship. George himself has gone into one of his high-pitched whines,
chastising those who "can't see the sunshine." He's sounding a whole lot like
his daddy did back in '92 – like
he's just another rich son-of-a-Bush who is totally oblivious to the realities of Americas
workaday majority. He's looking at rosy economic indicators handed to him by his political
operatives, rather than looking at such real-life pocketbook indicators as jobs that
only pay poverty wages, gasoline topping $2 a gallon, milk at $4.43 a gallon, health-care
costs rising three times faster than wages, and 401(k)s being shrunk to 1(k)s.
- Harvard Business School: How
To Tame CEO Compensation. Excerpts: In their book Working Capital: The Power of
Labor's Pensions, the authors argue that by chasing short-term return, pension funds
ignore the long-term interests of workers. This excerpt looks at the issue of how CEO
compensation damages pensioners. In the 1980s, major corporations were cheered on by
Wall Street as they went cost cutting with a vengeance. The announcement of mass layoffs
generally sent stock prices soaring. Efforts to get cheaper labor through outsourcing
or moving operations to developing nations raised short-term share prices. The market's
rationale was that these measures would mean higher corporate profits, and higher profits
should mean higher stock prices. ...
Also worth noting is a pernicious side effect of excessive CEO pay. As mentioned above,
the years since 1980 have seen a considerable increase in wage inequality, with those
at the top gaining enormously at the expense of workers at the middle or bottom. It is
likely that outlandish CEO pay encourages this trend not only because of its direct effect
in shifting income upwards, but also through an indirect effect in creating new standards
for corporate executives. If the CEO can make $20 million a year, then his or her assistants
might believe that they should earn $1 million a year, and maybe that the employees just
below them to earn $600,000 a year. High CEO pay can push up the whole pay scale at the
top end of the spectrum to the detriment of ordinary workers and the long-term well-being
of the company.
|Coverage on H1-B and L1 Visa and Off-Shoring
- The Register (United Kingdom): IBM
offshores 500 UK jobs to India. Excerpt: IBM
is to move 500 UK jobs to India as part of a reorganisation of its outsourcing
business, according to internal memos seen by The Register. According to the
IBM memo, the consultation on the reorganisation involves 6,100 people. "We believe
that between 1,000 and 1,500 people may have to consider taking IBM Standard
Mobility clause to fulfil the requirements of the ABO [Assignment Based Organisation]",
the memo states. So it appears IBM's plans to send jobs to India forms part
of a much larger plan. According to a company insider, 350 out of 500 posts
in IBM Strategic Outsourcing are to move to Bangalore. "IBM customers (although
they do not yet know) can now expect to be talking to Indian employees," he said.
In a memo announcing the "Assignment Based Organisation", IBM said that
approximately "500 UK roles (300 full-time employees and 200 subcontractors)
would be transitioned to Bangalore between Sept and Dec 2004". We put these
points to IBM, which responded with a statement that implies that affected
UK perms will be offered alternative employment.
- The Register (United Kingdom): BBC
Tech strike over outsourcing. Excerpt: BBC Technology staff have voted in favour
of taking industrial action to show their opposition to the sell-off their
department to Siemens. Bectu union members voted five to one in favour of industrial
action. About a quarter of BBC Technology's 1400 staff are Bectu members. The union
wants a delay to the sale, a three-year job guarantee for its members and pay increases
of inflation plus 2.5 per cent for the same period. The BBC named Siemens as
the single preferred bidder on 7 July. The union said in a statement: "Apart
from the operational and financial risks posed by the sell-off, the savings
target that led to the privatisation decision could have been achieved in-house,
and the union would have agreed to job cuts if required."
- WashTech: Your
Tax Dollars At Work…Offshore: How Foreign Outsourcing Firms
Are Capturing State Government Contracts [PDF]. Excerpts: Offshoring is going
on to some degree in just about every state government.
- At least 18 firms that specialize in offshore outsourcing are positioning
themselves in no fewer than 30 states to capture a larger share of the state
government market, especially in information technology services.
- The 18 firms have already captured at least $75 million worth of work and are
seeking more by gaining access to qualified-contractor lists, hiring former
government officials from the “revolving door,” and even making state electoral
- The total amount or value of state contract offshoring cannot be estimated,
because most state governments do not know where their contracted-out
service work is performed. State officials know whether work is done onsite
the offices of the agency that commissioned it or offsite, but “offsite” could
mean the other side of town or the other side of the world.
- Because subcontracting
is so common, states are often unaware of the exact
identity and location of the company that is ultimately performing the
States award contracts to U.S. firms and assume the work will be done
domestically, but then the company subcontracts to an offshore firm.
that appear to be domestic sometimes are not. States may think they
are dealing with a U.S. firm because it has a domestic mailing address,
sometimes that address is just a marketing office for a company that
offshore; other firms are technically headquartered
- WashTech Call to Action: A new report by the Corporate Research Project of Good Jobs
First spotlights the growing degree to which state governments are contracting
with foreign outsourcing firms for public contracts and are funneling millions
of state taxpayer dollars offshore. Complete the following to send this message
to your State's governor...
- CNET News: Study: States
doing plenty of offshoring. Excerpts: he study was prepared for WashTech by the
Corporate Research Project of Good Jobs First, an organization that aims to help
grassroots groups and policy-makers ensure that economic development subsidies
are accountable and effective. WashTech is a local affiliate of the Communications
Workers of America union. In a conference call, a reporter noted that $75 million
is a drop in the large bucket of state government spending. Philip Mattera, director
of the Corporate Research Project, suggested the tally would be bigger if the study
included state contract work sent overseas by U.S. tech services companies, such as
IBM. "We're convinced
that whatever the (total) quantity is, it's much greater than $75 million," he
Marcus Courtney, president of Washtech, said government agencies lack information
about the wages ultimately paid for state work. "State governments may be undercutting
labor standards," he said.
- McKinsey and Company: Offshoring:
Is It a Win-Win Game? Excerpt: Many businesses have turned to offshoring as a
way to boost profits while many politicians believe that the gain is made only
at the unacceptable cost of American jobs. MGI's latest research and analysis
offer a new perspective: offshoring is as beneficial to the U.S. as it is to
the destination country, probably more so. The most obvious benefits of offshoring
accrue to businesses and English-speaking destination countries. Lower wages
in foreign countries translate into significant savings and, often, improved
quality. A software developer in the U.S., for example, costs $60 an hour whereas
one in India only costs $6 an hour. This and other benefits could translate to
a net impact of a 50 percent increase in profits for American businesses. Destination
countries see increased investment and job creation through offshoring. India,
for example, gains in net benefit at least 33 cents for every dollar of spend
offshored to its country.