Welcome to IBM Employee News and Links
"News and links for IBM employees, retirees, ex-employees, and persons interested in pension, retirement, off-shoring and corporate governance issues."
Search:
Web This Site

Quick Links:
  Get involved!
  Press articles
  Important Links
  Insider trading
  Lou's Contract
  Total Compensation
Subscribe:
  Add or delete ID
  Change ID
  Contact site owner
Previous Highlights:
  Current
  April 21, 2007
  April 14, 2007
  April 7, 2007
  March 31, 2007
  March 24, 2007
  March 17, 2007
  March 10, 2007
  March 3, 2007
  February 24, 2007
  February 17, 2007
  February 10, 2007
  February 3, 2007
  January 27, 2007
  January 20, 2007
  January 13, 2007
  January 6, 2007
  December 30, 2006
  December 23, 2006
  December 16, 2006
  December 9, 2006
  December 2, 2006
  November 25, 2006
  November 18, 2006
  November 11, 2006
  November 4, 2006
  October 28, 2006
  October 21, 2006
  October 14, 2006
  October 7, 2006
  September 30, 2006
  September 23, 2006
  September 16, 2006
  September 9, 2006
  September 2, 2006
  August 26, 2006
  August 19, 2006
  August 12, 2006
  August 5, 2006
  July 29, 2006
  July 22, 2006
  July 15, 2006
  July 8, 2006
  July 1, 2006
  June 24, 2006
  June 17, 2006
  June 10, 2006
  June 3, 2006
  May 27, 2006
  May 20, 2006
  May 13, 2006
  May 6, 2006
  2006 Stock Meeting
  April 22, 2006
  April 15, 2006
  April 8, 2006
  April 1, 2006
  March 25, 2006
  March 18, 2006
  March 11, 2006
  March 4, 2006
  February 25, 2006
  February 18, 2006
  February 11, 2006
  February 4, 2006
  January 28, 2006
  January 21, 2006
  January 14, 2006
  January 7, 2006
  December 31, 2005
  December 24, 2005
  December 17, 2005
  December 10, 2005
  December 03, 2005
  November 26, 2005
  November 19, 2005
  November 12, 2005
  November 5, 2005
  October 29, 2005
  October 22, 2005
  October 15, 2005
  October 8, 2005
  October 1, 2005
  September 24, 2005
  September 17, 2005
  September 10, 2005
  September 3, 2005
  August 27, 2005
  August 20, 2005
  August 13, 2005
  August 6, 2005
  July 30, 2005
  July 23, 2005
  July 16, 2005
  July 9, 2005
  July 2, 2005
  June 25, 2005
  June 18, 2005
  June 11, 2005
  June 4, 2005
  May 28, 2005
  May 21, 2005
  May 14, 2005
  May 7, 2005
  April 30, 2005
  April 23, 2005
  April 16, 2005
  April 9, 2005
  April 2, 2005
  March 26, 2005
  March 19, 2005
  March 12, 2005
  March 5, 2005
  February 26, 2005
  February 19, 2005
  February 12, 2005
  February 5, 2005
  January 29, 2005
  January 22, 2005
  January 15, 2005
  January 8, 2005
  January 1, 2005
  December 25, 2004
  December 18, 2004
  December 11, 2004
  December 4, 2004
  November 27, 2004
  November 20, 2004
  November 13, 2004
  November 6, 2004
  October 30, 2004
  October 23, 2004
  October 16, 2004
  October 9, 2004
  October 2, 2004
  September 25, 2004
  September 18, 2004
  September 11, 2004
  September 4, 2004
  August 28, 2004
  August 21, 2004
  August 14, 2004
  August 7, 2004
  July 31, 2004
  July 24, 2004
  July 17, 2004
  July 10, 2004
  July 3, 2004
  June 26, 2004
  June 19, 2004
  June 5, 2004
  May 29, 2004
  May 22, 2004
  May 15, 2004
  May 8, 2004
  2004 Stock Meeting
  April 24, 2004
  April 10, 2004
  April 3, 2004
  March 27, 2004
  March 20, 2004
  March 13, 2004
  March 6, 2004
  February 28, 2004
  February 21, 2004
  February 14, 2004
  February 7, 2004
  February 1, 2004
  January 18, 2004
  December 27, 2003
  December 20, 2003
  December 13, 2003
  December 6, 2003
  November 29, 2003
  November 22, 2003
  November 15, 2003
  November 8, 2003
  November 1, 2003
  October 25, 2003
  October 18, 2003
  October 11, 2003
  October 4, 2003
  September 27, 2003
  September 20, 2003
  September 13, 2003
  September 6, 2003
  August 30, 2003
  August 23, 2003
  August 16, 2003
  August 9, 2003
  Pension Lawsuit Win
  July 26, 2003
  July 19, 2003
  July 12, 2003
  July 5, 2003
  June 28, 2003
  June 21, 2003
  June 14, 2003
  June 7, 2003
  May 31, 2003
  May 24, 2003
  May 17, 2003
  May 10, 2003
  2003 Stock Meeting
  April 26, 2003
  April 19, 2003
  April 12, 2003
  April 5, 2003
  March 29, 2003
  March 22, 2003
  March 15, 2003
  March 8, 2003
  March 1, 2003
  February 22, 2003
  February 15, 2003
  February 8, 2003
  February 1, 2003
  January 25, 2003
  January 18, 2003
  January 11, 2003
  January 4, 2003
  December 28, 2002
  December 21, 2002
  December 14, 2002
  December 7, 2002
  November 30, 2002
  November 23, 2002
  November 16, 2002
  November 9, 2002
  November 2, 2002
  October 26, 2002
  October 19, 2002
  October 12, 2002
  October 5, 2002
  September 28, 2002
  September 21, 2002
  September 14, 2002
  September 7, 2002
  August 31, 2002
  August 24, 2002
  August 17, 2002
  August 10, 2002
  August 3, 2002
  July 27, 2002
  July 20, 2002
  July 13, 2002
  July 6, 2002
  June 29, 2002
  June 22, 2002
  June 15, 2002
  June 8, 2002
  June 1, 2002
  May 25, 2002
  May 18, 2002
  May 11, 2002
  2002 Stock Meeting
  April 27, 2002
  April 20, 2002
  April 13, 2002
  April 6, 2002
  March 30, 2002
  March 23, 2002
  March 16, 2002
  March 9, 2002
  March 2, 2002
  February 23, 2002
  February 16, 2002
  February 9, 2002
  February 2, 2002
  January 26, 2002
  January 19, 2002
  January 12, 2002
  January 5, 2002
  December 29, 2001
  December 22, 2001
  December 15, 2001
  December 8, 2001
  December 1, 2001
  November 24, 2001
  November 17, 2001
  November 10, 2001
  November 3, 2001
  October 27, 2001
  October 20, 2001
  October 13, 2001
  October 6, 2001
  September 29, 2001
  September 22, 2001
  September 15, 2001
  September 8, 2001
  September 1, 2001
  August 25, 2001
  August 18, 2001
  August 11, 2001
  August 4, 2001
  July 28, 2001
  July 21, 2001
  July 14, 2001
  July 7, 2001
  June 30, 2001
  June 23, 2001
  June 16, 2001
  June 9, 2001
  June 2, 2001
  May 26, 2001
  May 19, 2001
  May 12, 2001
  May 5, 2001
  2001 Stock Meeting
  April 21, 2001
  April 14, 2001
  April 7, 2001
  March 31, 2001
  March 24, 2001
  March 17, 2001
  March 10, 2001
  March 3, 2001
  February 24, 2001
  February 17, 2001
  February 10, 2001
  February 3, 2001
  January 27, 2001
  January 20, 2001
  January 13, 2001
  January 6, 2001
  December 30, 2000
  December 23, 2000
  December 16, 2000
  December 9, 2000
  December 2, 2000
  November 24, 2000
  November 17, 2000
  November 10, 2000
  November 4, 2000
  October 28, 2000
  October 21, 2000
  October 14, 2000
  October 7, 2000
  September 30, 2000
  September 23, 2000
  September 16, 2000
  September 9, 2000
  September 2, 2000
  August 26, 2000
  August 19, 2000
  August 12, 2000
  July 29, 2000
  July 22, 2000
  July 15, 2000
  July 1, 2000
  June 24, 2000
  June 17, 2000
  June 10, 2000
  June 3, 2000
  May 27, 2000
  May 20, 2000
  May 13, 2000
  May 6, 2000
  April, 2000
 

Join your fellow employees who are fighting for your benefits - Join the Alliance!

Retirees, Vendors, Contractors, Temps, and Active Employees are all eligible to become members of the Alliance.


    Highlights—January 22, 2005
  • Wall Street Journal: IBM Strikes Consulting Deal With U.K.'s Norwich Union Life. By Charles Forelle. Excerpts: International Business Machines Corp. has signed a deal with British insurer Norwich Union Life -- IBM's largest business-consulting contract since buying the consulting arm of Pricewaterhouse Coopers LLP in 2002. The deal, which is valued at about $100 million to IBM over 2½ years, marks one of IBM's more significant steps outside its core area of selling computer-related services and products. An IBM spokesman said a majority of the deal is business-consulting work outside the technology area, and it doesn't include the sale of computer hardware or software. The contract is expected to be announced today. The jury is still out on whether IBM's $3.9 billion purchase of the Pricewaterhouse business in 2002 has been a success. In the fourth quarter of last year, revenue for IBM's Business Consulting Services unit, which includes the Pricewaterhouse assets, grew 12% from the year-earlier period, surpassing services growth as a whole -- but in prior quarters it substantially lagged behind overall services growth.
  • The Australian: Dollar delivers $4bn IBM profit, by Bruce Meyerson. Excerpts: On a more worrisome note, IBM said the soaring costs from employee retirement benefits will be $US200 million higher than expected this year, due to the currency impact on overseas retirement plans and a change in actuarial assumptions. For 2005, pension and retirement benefits are now expected to cost about $US2.1 billion, up $US1 billion compared with 2004 and $US1.75 billion higher than in 2003. But despite the higher costs, IBM issued a positive outlook for the year ahead, standing by Wall Street's current profit forecasts. While retirement expenses were expected to rise by another half billion in 2006, the company said those costs should level off in 2007.
    Revenue from services, including consulting, outsourcing and maintenance, grew 10 per cent to $US12.6 billion. New services contracts signed during the quarter totalled $US12.7 billion, leaving the company with an estimated work backlog of $US111 billion, down from about $US120 billion at the end of 2004. About half of that decrease came from the loss of a major account with JP Morgan Chase & Co., the company said.
    • Ian Andrew comments. Full excerpt: This raises some interesting questions as to how this was calculated. I can only speak from the South African perspective. I know for a fact that the IBM South Africa Pension Fund has not cost IBM a single red cent for many years. If this is increased 100%, the cost remains a big fat Zero. They have been severely criticised for taking 'contribution holidays'. If needs be I think that can find out exactly when the last contribution was made by IBM. In the last reported year's balance sheet the Fund made immense capital growth and it's income was way in excess of it's outgoings. I have just received a pension increase of 2.8% All of these calculations are made in Local Currency, the exchange rate fluctuations do not make any difference. The Trust Fund is balanced in local currency, it's payments are in local currency. The fund is so flush with cash that IBM is trying to get it's hands on what is perceived to be 'The Surplus'. Like in all countries where IBM can get away with it, the South African scheme has been closed for some years, all new hires go into a 'Provident Fund', which seems to be not dissimilar to a US Cash Balance Plan.
  • "finzer_52": Trends in IBM Employment statistics. Full excerpt: Hello All, I've posted a modified version of your file"IBM Pension Statistics 1999to2003_color.xls" I'd say folks haven't hit on the big picture yet. Take a look at the file with color added. The folks in the red boxes are praying they make it to eligibility. Anyone who chose the "old plan" must make it to eligibility or they'll only receive a fraction of their already "downsized" pension due to changes of 1995. Run retirement estimates for each month leading up to retirement eligibility. What I found when doing that, is it's not a steep slope leading up to becoming eligible, but a vertical step up in value. My pension jumped 48% in value from estimates one month shy of eligibility versus actually reaching eligibility. When I looked at what dollars those represented if I was to buy an annuity with my monthly pension amount, the difference was over $100K. Bottom line, for each IBM employee that doesn't reach eligibility, IBM makes out BIG time. Do the math; multiply the red group by $100K each. That's the motivation to change the plan, or should I say "enhance".
    • Linda Guyer, president of the Alliance@IBM, comments. Full excerpt: Very interesting, finzer. The anecdotal evidence we get at the Alliance office would agree with your analysis. We see a lot of people in their 50's with over 20 years of service suddenly get a "3" appraisal and are encouraged by their management to take a severance package, or risk getting fired for poor performance. Others are just plain let go. Wouldn't it be cool to somehow get the files from HR HQ where they figure this out and filter it down to the lower level managers with the chopping block responsibility? Any disgruntled HR HQ employees our there? :-) just joking, of course.
    • "ibmaccountant" comments. Full excerpt: Janet, A most informative file. The Y-to-Y loss of personnel in the 1-4 year bracket is extraordinary. You can't tell if the loss of the new 0-1 year employees is that great (except maybe we see a little of it in 2001), but I'm shocked at the 1-4 year employee attrition. It's clear they are whittling down across the board over the years and at the same time massively churning the 0-4 crowd. If the press sees this, it should make for an interesting story.
    • Linda Guyer responds to "ibmaccountant". Full excerpt: Frankly I'm not the least bit surprised at the 1-4 year attrition rate. If you hang out at the BCS board at Vault for a while, you'll see that the new employees are treated pretty badly and many leave with IBM on their resume after 2 years. The next issue of "Think Twice" will have a story that touches on this topic. Apparently some career checklists say "1. Graduate from college; 2. Go work for IBM; 3. Get 6-12 months industry experience; 4. Go across the street and get 20% salary increase." The Vault BCS message board is here: http://www.vault.com/community/mb/mb_main.jsp?forum_id=6068&ch_id=252
    • Janet Krueger comments on "finzer_52's" post. Full excerpt: I agree; great job, finzer! The one modification I would make is that there seems to also be a sea of red as people approach their 5 year service anniversary -- IBM seems to have figured out that they can substantially reduce their pension obligations by laying off the newer employees shortly before they vest!
  • From Janet Krueger: I just uploaded a new version of the spreadsheet named IBM_Pension_Statistics_1999to2003_twohotzones.xls. This one shows both hot zones... (Editor's note: The following chart shows Ms. Krueger's Excel spread sheet in HTML format).
      Years of Service
    Attained Age < 1 1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 > 40 Totals
    Under 25 576 2,607 36               3,219
    25 to 29 2,070 8,926 1,863 2             12,861
    30 to 34 2,732 8,254 4,255 611 22           15,874
    35 to 39 2,316 6,860 3,981 3,249 2,079 69         18,554
    40 to 44 1,876 6,428 3,582 2,037 6,366 6,059 206       26,554
    45 to 49 1,337 4,623 2,809 1,162 3,103 8,697 4,027 61     25,819
    50 to 54 884 3,084 2,036 625 1,737 4,292 5,428 998 113   19,197
    55 to 59 506 1,570 1,260 377 697 1,397 1,545 1,758 1,268 5 10,387
    60 to 64 155 464 416 128 159 240 174 351 758 104 2,949
    65 to 70 33 50 50 11 32 34 14 29 63 47 360
    70 and Over 6 4 4 - 2 2 2 2 7 10 39
    Totals 12,491 42,870 20,289 8,202 14,197 20,790 11,396 3,199 2,209 166 135,809
     
     =  10,116 employees currently eligible to retire as of date of this information (30 years service, any age; 55 years old with 15 years of service; 62 years of age with 5 years of service, 65 years of age with 1 year of service.
     
     =  30,055 employees who were forced into the cash balance plan. (Less than 40 years old in July 1999; or 40 years old or older but with less than 15 years of service.
     
     =  6,782 employees. Some in the cash balance plan, some in the old retirement plan.
     
     =  33,459 employees holding their breath praying to make Old plan eligibility (Hot zone 1).
     
     =  42,870 employees holding their breath praying to make New plan eligibility (Hot zone 2).
  • "i_be_mad_as_heck": I took a stab at comparing the data from 1999 to 2003, analyzing the attrition rates. I posted the spreadsheet in the files area, called: IBM_Pension_Statistics_1999to2003_attrits.xls. It is an approximate analysis, since the bands are in 5-year groups, and only 4-years of changes was covered. But I think it gives a good indication on what has occurred over the last several years. You will note that it shows a high attrition rate of older employees, along with a high attrition rate from the 1-5 years service group, as pointed out previously by Janet. You will also find little bumps in attrition rates for those just before qualifying for full retirement. I consider this a work-in-progress and sure we can come up with improvements to get a better picture. (Editor's note: The following is an HTML representation of "i_be_mad_as_heck's" spreadsheet:
  • "i_be_mad_as_heck": I took a stab at comparing the data from 1999 to 2003, analyzing the attrition rates. I posted the spreadsheet in the files area, called: IBM_Pension_Statistics_1999to2003_attrits.xls. It is an approximate analysis, since the bands are in 5-year groups, and only 4-years of changes was covered. But I think it gives a good indication on what has occurred over the last several years. You will note that it shows a high attrition rate of older employees, along with a high attrition rate from the 1-5 years service group, as pointed out previously by Janet. You will also find little bumps in attrition rates for those just before qualifying for full retirement. I consider this a work-in-progress and sure we can come up with improvements to get a better picture. (Editor's note: The following is an HTML representation of "i_be_mad_as_heck's" spreadsheet:
      Approximate Attribution Rates, Jan 1999 to Jan 2003 (Percents)
    Attained Age 5-9 10-14 15-19 20-24 25-29 30-34 35-39 > 40
    Under 25                
    25 to 29 61.0 92.9            
    30 to 34 60.0 30.6 31.3          
    35 to 39 57.6 2.3 21.5 -7.8        
    40 to 44 58.3 19.5 10.7 10.8 -5.6      
    45 to 49 58.2 29.9 17.2 14.8 34.9 83.1    
    50 to 54 58.0 42.6 17.7 15.1 18.0 71.6 36.9  
    55 to 59 61.1 54.0 48.6 55.6 59.8 73.4 60.5 78.3
    60 to 64 72.2 69.2 82.2 69.4 74.7 63.0 76.8 74.0
    65 to 70 88.0 93.8 88.2 82.9 90.5 80.5 88.0 84.1
    70 and Over 87.9 100.0 85.7 88.2 80.0 75.0 78.1 54.5
     = 80-100% Attrition Rate
     = 60-79% Attrition Rate
     = 40-59% Attrition Rate
     = 20-39% Attrition Rate
     = 0-19% Attrition Rate
     = Attrition rate not statistically relevant
  • "alwaysontheroad4bigblue": 'Prior Plan' Monthly Payments by Years of Service for a "Red Zone" employee. Excerpts: I ran a number of pension estimates on the netBenefits site this morning and thought I'd share my results. I will turn 50 and have 28 years of service this year, so will be eligible to retire in two years. I created a chart in Excel showing my monthly pension payment should I choose to retire this summer (before 30 years of service) and every year until I turn 70. As you'll see, you lose out substantially if you leave the company before your 30-year anniversary ...hence, the incentive for IBM to terminate employees before their 30 year anniversaries. You'll also see that the increase in the monthly benefit increases in a fairly linear fashion for about 7 years after your 30 year anniversary, then levels out and actually drops a bit at some point.
    As an aside, it was interesting to view my Pensionable Earnings going back to the start of my career. With zero bonus and variable pay last year, my 2004 earnings were the lowest they've been since 2000 and were only slightly ahead of 1999. My peak earnings year was 2002, where my earnings were 25% higher than they were in 2004. From 2002 through 2004 my pensionable earnings have been in steady decline. My net earnings have been in an even steeper decline because of the increased employee contributions to medical insurance and, more recently, the employee contribution required to maintain long-term disability coverage at 2/3rds of salary.
    • "justa_bean_counter" comments. Full excerpt: I just ran my numbers. The day after I reach age 55 (less than 30 years of service), I get a 24% jump. The day after I reach 30 years of service, I get less than 1% jump. You jump when you reach your first retirement eligibility date.
  • "igslifer" posts on the IBM Re-Think message board. Full excerpt: When I started with IBM I was non-exempt. I worked lots of hours and loved the extra pay. The number of hours that I've worked has not changed significantly over the years...I still put in a lot of hours. I also have traveled extensively on business. My family and I have adjusted to this and we are content. What has absolutely changed is the senior management view of billable hours, OT, travel, ect. Where you once got a pat on the back or a "Thanks" for working long hours or exceeding a utilization target or taking a transfer because of a mission change now it is EXPECTED. I think that a lot of our current problems could be addressed if our senior management team brought their compensation more in line with Band 1 thru 10 employees. I know they are working a LOT of extra hours and I have no problem with them being compensated well but I think more open communication about the executive compensation would be a good thing for our company. Not that I want or need to see individual salaries but knowing the upper/lower limits (including options) would be fair.
  • Benefits Restoration, Inc. January 2005 Newsletter. Excerpts: Benefits Restoration, Inc. is an organization devoted to the restoration of retiree benefits with a focus on Legislation, Media Awareness, Shareholder Resolutions and, as appropriate, Litigation. [...] Now that the holidays are behind us and the business of working with Gary Sullivan, VP of Benefits Restoration, to get the Shareholder Proposal in to IBM and the SEC are at least finished for the moment, we can now go to work on plans for the new year. As in the past our efforts will once again be targeted at four areas...
  • New York Times: Talk of Changing Pension Math Raises Concern on Benefit Cuts, By Mary Williams Walsh. Excerpts: AT&T, the once-mighty phone giant, has a pension plan with obligations of about $10 billion, according to its annual report for 2003. Yet the company paints a somewhat rosier picture for employees: an extrapolation from workers' individual statements indicates that the plan owes them roughly $10.6 billion, or 6 percent more. There is nothing improper or unusual in AT&T's approach. Like many other companies, it uses two methods to calculate the value of its pensions: one to tell employees how much they have earned, the other to tell investors how large the company's pension liability is. But that may soon change. The seeming discrepancy in accounting, which has been an accepted business practice for two decades, has begun to bother accounting rule makers, who say the practice allows companies to understate to investors the extent of their pension liabilities.
  • Washington Post: A Health Care Cost Shift, By Dina ElBoghdady. Excerpts: "I think [these Health Savings Account plans] are not going to do the job," Ginsburg said. "For those who need a lot of care, and they are the ones who account for the most health care dollars, the consumer-driven plans are not going to constrain their spending."Some critics say these plans could even wreak havoc on the system, appealing to the young and healthy, luring them away from mainstream plans and fracturing the risk pool. "You segment the market and guess what happens to the older, sicker people?" said Pollack of Families USA. "Their premiums will skyrocket because not only do they face the burdens of generally escalating health care costs, but they're in a pool that's much sicker."
  • San Francisco Chronicle: Balancing the benefit bite. Many firms seek to spare vision, dental coverage as costs rise. Excerpts: In recent years as San Francisco's Dome Construction Corp. was getting hit with big premium increases for health insurance, it did what many other companies were doing -- made its employees pay more of the costs. But two years ago it did something else. It added vision coverage. With health insurance premiums rising at double-digit rates during the past few years, employers have been struggling to find ways to rein in costs. Dropping ancillary benefits like dental and vision insurance might seem like a quick fix, but many firms appear reluctant to do so. For many employers, retaining or even adding such benefits has become a relatively inexpensive way to take the sting out of cutbacks in medical coverage.
  • BusinessWeek: For Big Blue, No Slack in Services. IBM's fourth quarter came in better-than-expected in nearly all segments, but that category and consulting did particularly well. Excerpts: Revenues from services were the big story, rising 10%, to $12.6 billion. Consulting was up an impressive 12%. IBM signed services contracts totaling $12.7 billion and ended 2004 with a backlog of $111 billion. That was down 8% from 2003's backlog, due in part to a termination of a large contract with JP Morgan Chase. Gross profit margins in services were 25.1%, up 0.3%. "This is stronger-than-expected demand," says analyst Mark Stahlman of Caris & Co. "There are still some concerns about the services pipeline, because it's so lumpy. But I think Wall Street should focus on profitability rather than bookings, since quarterly demand for services will always be variable."
  • Kansas City Star: Some retirees are running on empty. Excerpts: One-fifth of recent retirees appear to be on track to deplete their total assets before dying, a new study indicates. The finding has particular bearing in light of the Bush administration's proposal to create voluntary individual accounts in Social Security, giving workers more control over their retirement savings. [...] “One of the most significant research challenges is the increased reliance Americans will have on accumulated ‘lump sum' assets (a single distribution of all retirement plan assets at one time) instead of a guaranteed stream of lifetime payments (i.e. an annuity payment). “Even within ‘traditional' pension plans, workers are increasingly being offered (and are increasingly taking) a lump-sum distribution of their benefit rather than an annuity, and are thereby taking on for themselves all the investment risk involved in making those assets last the rest of their lives.”
  • New York Times: What's $13 Million Among Friends? By Lucian Bebchuk. Excerpts: Ten former directors of Enron have agreed to pay $13 million from their own pockets to settle a class action suit stemming from Enron's collapse in 2001, which wiped out some $60 billion in shareholder value. Because directors almost never have to pay even a penny in such suits, the Enron settlement - announced just days after several former WorldCom directors agreed to a similar deal - was widely viewed as a significant development that could discourage potential directors from serving on corporate boards. This view is mistaken. A close look at the settlement shows that Enron's directors have still not been held accountable in any meaningful way.
    Of the 18 former directors who were defendants in the Enron case, only 10 have to pay under the settlement. More important, according to the complaint against them, these 10 sold Enron shares worth more than $250 million during the period in which Enron was misreporting its financial affairs. According to the lawyer for the lead plaintiffs, the settlement requires each of these 10 to pay an amount equal to 10 percent of his or her pretax profits. They will be able to keep the other 90 percent - which amounts to $117 million - while investors who held their Enron stock lost their shirts.
    The other eight Enron directors will not pay a penny but nonetheless have all claims against them settled. These directors did not sell shares before their value evaporated, which is presumably why they are not contributing. But they played important roles in the board's oversight failure. They include three of the six members of Enron's audit committee as well as six of the eight members of the finance committee, which reviewed many transactions that Enron used to deceive investors. Despite their role in the oversight failure, these eight directors emerge from Enron's ruins without having to pay a cent. In a 2002 report, a Senate subcommittee concluded that by failing to protect shareholders' interests and ignoring questionable business practices, the Enron board "contributed to the company's collapse and bears a share of the responsibility for it." With the cases against them settled without any admission of wrongdoing, determining the directors' precise share of responsibility will be left to the judgment of history. But one thing will be clear: their share of the cost will be trivial.
  • Associated Press: Bush to Seek Cuts in Medicaid, Benefits. Excerpt: President Bush (news - web sites) is readying a new budget that would carve savings from Medicaid and other benefit programs, congressional aides and lobbyists say, but it is unclear if he will be able to push the plan through the Republican-run Congress. White House officials are not saying what Bush's $2.5 trillion 2006 budget will propose saving from such programs, which comprise the biggest and fastest growing part. But lobbyists and lawmakers' aides, speaking on condition of anonymity, say he will focus on Medicaid, the health-care program for low-income and disabled people. Medicaid costs are split between Washington and the states.

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some of this week's posts follow.
  • Answers Pt 1, by "Dose of reality". Excerpt: First one general comments on your premises. If you have spent any time reading this forum, you must know that the IBM bonus will be zero for the foreseeable future – your comment about “it's possible there's no bonus at all” grossly understates the situation here. Discount it to zero when you do your benchmarking. As far as your specific questions:
    1. IBM’s reputation with laymen is meaningless for you, unless you want to get a mundane IT job with your local regional bank or small distribution company. Most top tier employers in industry, and all in the consulting industry have little regard for IBM as a credential. Business schools don’t differentiate in detail among employers when evaluating candidates. Granted, working for any medium – large consulting firm may increase your luster as compared to working for your local hardware store or municipal government etc., but all Fortune 1000 companies carry virtually the same weight
    2. Utilization targets at IBM are north of 90%. What that means is that you will be expected to spend 90% of your working days on billable projects. Add in vacation, downtime, administrative work, and that leaves no time for training, and there is no budget for it either. There is no boot camp – it is more like put you on the front lines and see if you survive. You may receive some just-in-time training on a particular application if a project comes up that calls for it, but training in methods and business concepts is virtually nonexistent.
    3. If you want to work in the private sector long term DO NOT start your career in the public sector. The pace is slower, the clients are lower on the food chain, the bureaucracy is more stifling, the economic backdrop is entirely different, and you will waste a golden opportunity to gain an understanding of a specific industry segment. Expertise in a specific industry is a key competitive advantage that you will be able to use later on to ratchet up your career prospects. Not only will your mindset and skills get off on the wrong track, but you will be pigeon-holed and tarnished in the eyes of future employers.
    4. The worst in the industry. See point 2 – If you are expected to have 90% utilization, you will be forced to take whatever project comes up when your previous project ends, and there are always very few people on the bench when a project is sold. The odds are great that assignments will be misfits with your long term career goals. At IBM, shoe-horning is a way of life in resource assignments.
    5. Stock options – not for you; bonuses – zero; performance evaluation process – excessively bureaucratic, impersonal, inscrutable quota system where you will be rounded down regardless of your project appraisals and there are very few slots in the “1” rating to be had. Anything less than a “1” and your compensation will stagnate. Overall work environment – mixture of stressed out project managers with oversold, under-resourced projects, veteran middle tier consultants that are apathetic given the lousy compensation history, many new recruits that are ignorant or in denial about their meager opportunities, and a healthy layer of long-term veteran games-players that do what they can to stay out of trouble and coast until retirement. Attrition is at an all-time high.
  • Hours of Work, by "shedblue". Full excerpt: Don't forget that in addition to your 40 hours you need to bill at IBM, you will have unbillable travel time, admin time, and that at band 6 and 7 levels, taking all your allocated holiday/vacation days and working 100% of every other hour of the year translates into missing your utilization target. Unless your project allows you to bill over 40 hours, which many do not, you can kiss that bonus goodbye. Not that you will get one anyway, based on the last 3 years of experience. This is when IBM met their revenue targets fine but missed their profit targets - bonuses were based on profit targets. They could have paid out if they wanted to, but they didn't and they won't care more this year.
  • "Just part of the infamous compensation history" by "Dose of reality". Full excerpt: Back in fiscal 2002 and again in 2003 BCS instituted across the board salary reductions in lieu of the normal annual merit increases. So instead of getting salary increases of 3 - 7% as expected, everyone (legacy PwC only?) got a 4% reduction in 2002 and I believe everyone got the 2% reduction in 2003. There was such an uproar about the hit to cash flow that they then decided to give an "advance" on the annual bonus of two 2% increments in 2002 and I believe another 2% in 2003, if memory serves me correctly. So everyone's salary was ratcheted down, and the meager "bonus" was given out to "make it all better". It didn't matter if you were a star with 125% utilization and $10 million in sales credits, or the biggest loafer on the block - everyone was treated the same way!
    To add insult to injury, someone in HR figured out that people might get upset and leave, so they distributed an E-Mail after the fact saying that anyone who leaves before year-end would have to return the "advance". However, since there was no precedence for this, and no formal acknowledgement of the liability, the claim has no legal standing. Of course that didn't stop IBM from going after anyone that refused to pay it back with a whole host of scare tactics. This is just part of the rich legacy of employee exploitation at BCS. Would you say that this is an example of behavior one would expect from a "family friendly" company who believes that "our people are our most important assets"?!
  • "Journalist wants to hear from you..." by "kevmed". Full excerpt: I am a reporter for a business publication and would like to hear about this 2% bonus letter and other BCS issues. Complete confidentiality for anyone who contacts me. Contact me via the following mail address for more info: dirtsmith@hotmail.com. Thanks.
  • "My sense is..." by "deep_eye". Full excerpt: IBM has been bereft of moral and ethical dimensions for quite some time and yes, they do prey on those whose ethical "spine" precludes retaliation. But as my old ethics prof would say - "no matter what the other guy does, you must always take the ethical high ground." I agree, they wrap themselves in the legal shawl, as if that provides legitimacy to their actions, but remember, what is fair does not necessarily derive from what is legal. There are a great many laws and legal decisions that are not particularly fair or just in the harsh light of wider analysis. I still maintain they will get their just desserts at some future date.
  • "Que Sera Sera" by "kindaoldibm". Full excerpt: Predicting the future is easy. Accurate predictions, well, I'd need a charge code to work on that (sorry, just a little internal IBM gallows humor). Anyway, to your question in re: bonus payouts in S&D. As far as I know, the only significantly sized group at IBM last year (2003 payout) that received a 0 bonus payout was ... BCS. Sorry, but I don't have enough friends in S&D that I know well enough to get a statistically significant sample about their payout last year, in terms of the stated beginning of year potential. Dose is likely positioned high enough to know for sure, but the rumor amongst the troops is that the "rainmakers" in BCS believed their own hype, figured they'd overachieve their sandbagged targets, so 'demanded' that their bonus pool be based strictly on their own unit's achievement, while every other unit had circa 40% unit results 60% IBM overall results driving the bonus pool payout. So for everybody else, since IBM did 'OK', you at least got something. I guess the BCS leadership figured, after all, last year (2002) was a "down year", we've got the integration all behind us, so "we're overdue", right? OOPS. This opinion/rumor guaranteed to be worth at least 50% of what you paid for it.
  • "VPP (variable pay program) no more" by "wh1ppersnapper". Full excerpt: it was replaced in 2004 by a bonus program to be allocated at your manager's discretion, from a pot of money that is too small to go around - meaning no bonus for you. This coming payout will be the first time with the new system. Speaking of new systems, any comments on the new PBC process? I've heard 05 described as the year of the employee, as managers are to be rated based on team climate...but no objective method in place to measure this. Likely more smoke and mirrors...
  • "You Should Play the Lottery Today" by "Dose of reality". Full excerpt: You're two for two on instinctive evaluations. I'm not ready to tip my hand on my identity. I have made quite a few career-limiting posts here, like calling a key BCS leader an over the hill cheerleader, only suitable for selling Mary Kay cosmetics door-to-door. Let's just say that I am a bit of a Renaissance Man. I have had a decidedly unconventional career track with a few somewhat successful early forays in the arts. Combine that with a mean contrarian streak, controlled ambition, a lot of disgust at what has happened to this country and our corporate institutions the past few decades, and an increasing desire to help people prosper through it, and you have someone who is both able and willing to call IBM to task. There are others who have this stuff figured out, but most are too career-focused or self-directed to take the time to communicate it. (Editor's note: Some people have speculated that the editor of www.ibmemployee.com is "Dose of reality". This is not the case. The editor of www.ibmemployee.com is identified in the December 27, 2003, edition of these highlights. "Dose of Reality" remains anonymous.)
  • "Something in the air" by "Dose of reality". Full excerpt: What is amazing to me is how many staff continue to jump through hoops aimlessly, despite getting screwed year after year. Has independent thought been bred out of them - are they incapable of letting go of the mother ship? Have all the years of lousy ratings sucked the confidence out of them? Is it a sense of loyalty to clients that compel them to finish every project, only to be smothered by another one as soon as it is over? Are they so provincially focused that they are unable to see how a real company operates? Or maybe there is something in the air in Armonk and all of our other offices - maybe IBM is beaming subliminal messages and invasive white noise in their laptops. I am sure they would if they could. Or maybe it is just the fishbowl syndrome - a fish doesn't know he is in a bowl until he experiences the ocean. Of course a fish is disadvantaged in that he can't read or go on-line, so IBM'ers really can't fall back on this excuse.
  • "No" by "Big_Blue_Balls". Full excerpt: I recently left IBM BCS Public Sector and I can tell you that I do not know one person that is happy there. This is true regardless of band level (including the Partners/Execs), practice area or vertical, civil or defense, the morale is terrible. Everyone I know in BCS is either looking to leave or waiting to retire. The quality of the work is relatively low and declining under the weight of the bureaucracy and the rock-bottom morale.
  • "The Unexclusive IBM Club" by "Dose of reality". Full excerpt: There was a recent (last month or so) thread that discussed the experience of two entry level recruits from their point of view and addressed both HR incompetence and the Mickey Mouse interviewing thresholds. The bottom line is that attrition is sky high and the word is out about the environment and compensation strategy. No one with any marketability wants to work here. We just let everyone in the front door and hope for the best.
  • "Translation" by "Dose of reality". Excerpts: BCS is truly the hellhole depicted on this board. [...] Let me go out on a limb and put the only words in your mouth that allow your comment to come close to making sense. BCS is a miserable environment for employees in terms of both what you are asked to do as well as what you get in return. Those that come in are somewhat willing to put up with being overworked and misused, because they assume that they will be rewarded commensurately for their efforts. After 2 - 3 years they figure out that it isn't the case and are no longer willing to put up with it. Then they can move into another division. Now, I ask you. If that is the case, then why not save the 2-3 years in aggravation and jump right to the promised land? Why waste three years of your life on this nonsense when there are hundreds of better opportunities out there?
    The original poster asked specifically about IBM BCS -quote: "is there anyone that has had a positive experience working for IBM's BCS practice". You answered yes and then backed it up with details that implied something between "no" and "probably not". Pretty standard IBM communication approach - you don't work in HR do you? Legal disclaimer: The writer of this post in no way supports the premise that other divisions in IBM are places where you can be "happy" and "go places". It has been left unchallenged specifically to focus on the subject of this forum, and this thread - BCS, and to facilitate a continuance of the latest poster's line of reasoning. It is by no means an endorsement of the career opportunities available in IBM at-large

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • In These Times: Ground Control to Mr. Bush, By Bernie Sanders. Excerpts: Today, the middle class in our country is shrinking, poverty is increasing, and the gap between the rich and the poor is growing wider. This year, the United States will have a record-breaking trade deficit of almost $600 billion, including an estimated $140 billion trade deficit with China. Over the last four year we have lost 2.7 million decent-paying manufacturing jobs—more than 16 percent of that sector. Many of those jobs have gone to China, a totalitarian society where workers are paid pennies an hour and have minimal rights. Meanwhile, most of the new jobs being created here are low wage with minimal benefits.
    Amazingly, while the U.S. middle class declines, corporate America is helping make China the economic superpower of the 21st century. Not only is China rapidly becoming the manufacturing center of the world, it is quickly becoming the information technology hub as well. Andy Grove, the founder of Intel, predicted last year that the United States will lose the bulk of its information technology jobs to China and India over the next decade. These are some of the best-paying jobs available.
    And John Chambers, the CEO of Cisco, is typical of many corporate leaders when he said: “China will become the IT center of the world, and we can have a healthy discussion about whether that’s in 2020 or 2040. What we’re trying to do is outline an entire strategy of becoming a Chinese company.” The time for playing nice with corporate outsourcers and their enablers in government is over. Congress must repeal Permanent Normal Trade Relations with China and develop trade policies that protect and create good-paying jobs in America. We must create a noise so loud that even the president hears it.
  • CNET News: Another H-1B battle coming? Excerpts: Last month, President Bush approved visa program changes, including an exemption to the cap for up to 20,000 foreigners earning graduate degrees at U.S. schools. This new exemption comes on top of existing exemptions for institutions of higher education, nonprofit research organizations and governmental research organizations. For fiscal years 2000 to 2003, the number of new visas exempt from the annual cap averaged nearly 28,000. (Information about fiscal year 2004 was not yet available.) Cap exemptions could translate into more than 40,000 additional foreign workers this year, said Vin O'Neill, legislative representative for the U.S. wing of the Institute of Electrical and Electronics Engineers professional group. The cap is intended to provide a safeguard, but it's losing its meaning, O'Neill argues. "The greater the supply, the more leverage the employer has to drive down wages."
  • Jim Hightower: Another Loss of Our Sovereignty. Full excerpt: We know that global trade is totally out of whack for our country. We were promised that if we accepted the corporate ideology of global "free trade," millions of new, good-paying , middle-class jobs would be created here to make all of those products that they said the USA would soon be exporting to places like China, thanks to the glorious magic of globalization. But it turned out to be globaloney. Rather than creating manufacturing jobs for workers here, the Wal-Marts and Nikes simply abandoned America, fleeing to places like China to make all those products.
    The corporate globalizers turned America from being a proud, strong, manufacturing nation into a nation dependent on imports. Our global trade balance is an embarrassment– we now buy $500 billion a year more in goods from abroad than we sell in the world market. China alone pockets $18 billion a year from us––selling that much more to us than they by from America. What most Americans don't know, however, is what China and other nations do with this excess cash that they're amassing from our trade imbalance. They've been using much of it to buy the U.S. government's bonds, putting our country deeply – perhaps dangerously––in debt to them. Indeed, the central banks of just four Asian nations – Japan, China, Taiwan, and South Korea––now hold roughly 40 percent of Washington's public debt. In effect, they've quietly become our world banker, giving them inordinate power over America's purse strings.
    On everything from the value of the American dollar to the spending policies of congress, these four foreign banks are in a position to yank our strings...and they are. They're now demanding, for example, that Washington protect the value of their investments in U.S. bonds by cutting back on federal spending––cuts that would come from the education budget, Social Security benefits, and other spending that we Americans count on. When did we vote for this?
  • WashTech News: “Jobloss” Recovery Cited at U.S. Hearings on Trade with China, WashTech Testifies. Excerpts: WashTech rang the alarm bell several years ago about offshoring and visa abuse in the software employment sector, and now people in high places are beginning to seriously consider these and other threats to U.S. economy and workers, caused by trade policies. The U.S.-China Economic and Security Review Commission met last week in Seattle, bringing together panelists from various industries, the investment community and labor. The Commission, comprised of twelve members selected by Congress in 2000, gathers testimony from around the country about the impacts of trade with China. China was admitted to the World Trade Organization (WTO) in 2001. Rick Bender, president of the Washington State Labor Council, told the Commission early in the day, “I’m here to tell you that what labor sees on the ground are thousands of workers losing through trade even though shareholders may be prospering.” Another panelist noted the so-called economic recovery that began in 2001 is not just a "jobless" recovery, but has become a “jobloss” recovery. [...]
    Panels representing the aerospace and agriculture sectors also testified. The International Association of Machinists and Aerospace Workers (IAM) describe a picture of trade in which U.S. companies are willfully trading away jobs to get a foot into the vast Chinese market, making the fate of U.S. employees last on their list of concerns. As one panelist said, “The U.S. is for sale.” The IAM had predicted this crisis for the aerospace sector in their report “Jobs on the Wing,” published in 1995, and their testimony is available at http://www.iamaw.org/. The local IAM represents 40,000 workers, of which only 17,000 are now employed at Boeing and in related industries. (Eight thousand are retired, with the remaining 15,000 laid off.)

Coverage on Social Security Privatization
  • New York Times: Social Security Agency Is Enlisted to Push Its Own Revision. Excerpts: Over the objections of many of its own employees, the Social Security Administration is gearing up for a major effort to publicize the financial problems of Social Security and to convince the public that private accounts are needed as part of any solution. [...] "Trust fund dollars should not be used to promote a political agenda," said Dana C. Duggins, a vice president of the Social Security Council of the American Federation of Government Employees, which represents more than 50,000 of the agency's 64,000 workers and has opposed private accounts. Deborah C. Fredericksen of Minneapolis, who has worked for the Social Security Administration for 31 years, said, "Many employees believe that the president and this agency are using scare tactics to promote private accounts." [...]
    The Bush administration ran afoul of a ban on "covert propaganda" when it used tax money to promote the new Medicare drug benefit and to publicize the dangers of drug abuse by young people. The administration acknowledged paying a conservative commentator, Armstrong Williams, to promote its No Child Left Behind education policy. But on Social Security, unlike those issues, the government has not concealed its role. The agency's strategic communications plan says the following message is to be disseminated to "all audiences" through speeches, seminars, public events, radio, television and newspapers: "Social Security's long-term financing problems are serious and need to be addressed soon," or else the program may not "be there for future generations." The plan says that Social Security managers should "discuss solvency issues at staff meetings," "insert solvency messages in all Social Security publications" and spread the word at nontraditional sites like farmers' markets and "big box retail stores."
  • AFL/CIO: President Bush's plan to replace Social Security's guaranteed benefits with risky private accounts would hurt working families. It would force drastic cuts in benefits and saddle our children with $2 trillion in debt, most of which we would owe to foreign countries such as China and Japan. Find out more about Social Security—America's best run and most effective family insurance program—and how to protect it.
    • Social Security Basics: Information and resources to explain Social Security, the privatization threat and the benefit cuts some are proposing.
    • Myths & Realities: Use these myths and realities to equip yourself with the information you need to respond when you hear somebody say something about Social Security.
  • The American Prospect: Should Old People Have Plumbing? Excerpts: Last week, Peter H. Wehner -- Karl Rove's deputy inside the White House -- shared with us, in a leaked memo, his view that "no one on this planet can tell you why a 25-year-old person today is entitled to a 40 percent increase in Social Security benefits (in real terms) compared to what a person retiring today receives." This was part of his explanation of why the forthcoming Bush plan should solve the phony Social Security "crisis" by freezing the growth in benefits -- thus offering the retirees of the future a 40 percent cut in promised benefits.
    One's suspicions that the Bush economic policy is being crafted in the Gamma Quadrant are only bolstered by talk of this sort, since, on the planet where I live, Earth, plenty of people can tell you why this should be so. As a member of the About to Be Screwed Generation at the tender age of 23, however, a special obligation rests on me to explain why we shouldn't pay for the fiscal profligacy of the Bush era by slashing my Social Security benefits. The underlying issue here is what's known in the business as shifting the program from its current "wage index" system to a "price index" system. Right now, a retiree's initial benefit level is linked to, among other things, the growth in average wages rather than the growth in the Consumer Price Index. [...]
    To let today's seniors live lives that, while normal by the standards of 1804, would constitute appalling poverty in today's terms would be an outrage. But this is what the Bush plan would do to the retirees of 2204, and things would only get worse in 2304, 2404, and so forth. Rather quickly, in the scheme of things, Social Security will only be paying a trivial fraction of average wages (today, it's 40 percent; under Bush's plan, I'll get 20 percent -- dropping rapidly in future years), becoming essentially non-existent. We'd be back to the days before Social Security, when senior citizens were an enormous burden on their younger relatives and when seniors without children capable of supporting them were left as paupers. And this, of course, is the point. Conservatives don't like Social Security, and they never have. The preferred the days in which seniors were the most impoverished group in the United States over the contemporary situation in which they have the lowest poverty rate. But they don't dare come out and say so by just eliminating the program outright. Instead, Bush wants to kill it slowly -- leaving things more or less intact for himself, Dick Cheney, John Snow, Alan Greenspan, and the rest of the gang, while leaving my generation, our children, and our children's children holding the bag.
  • The American Prospect: Why We Need Social Security. It has radically reduced poverty in old age. And it protects the middle class against inflation and the ups and downs of the market. Excerpts: The elderly used to be an age group with an especially high rate of poverty. One of the signal achievements of Social Security, hardly noticed today, is that poverty has fallen dramatically among Americans over age 65 to just 10 percent, lower than the 12-percent rate for the population as a whole. For millions of the elderly who would otherwise be poor, Social Security is the single biggest source of income, the financial bedrock of their lives. Indirectly, their working-age children are beneficiaries of the program because the elderly no longer have to move in with them. People under age 65 also benefit from two other elements of Social Security that often get forgotten: benefits during long-term disability and survivor benefits for dependents if a worker dies before retirement. These are also important anti-poverty programs that don’t carry the stigma of welfare.
    Social Security was never expected to be the sole source of retirement income for the middle class, who ideally also have employment-based retirement plans and personal savings. But if one thinks of these various sources of income as making up a “portfolio” of retirement assets, Social Security’s distinct value is even clearer. While other assets typically erode or become exhausted with advanced age, Social Security pensions keep their value because they have an annual cost-of-living adjustment. Moreover, as many employers convert from pension plans with a defined benefit to 401(k) and other plans with uncertain payouts, workers are already bearing more risk for retirement. In that context, Social Security provides a valuable hedge against the financial markets.
    Republicans opposed Social Security when it was introduced, Barry Goldwater suggested making it voluntary in 1964, and ever since the 1980s, conservative think tanks have sponsored proposals to shift from Social Security to individual retirement accounts. The opponents’ biggest resource in this effort has been public skepticism about government. When a 1981 opinion survey asked how much money out of $100 in Social Security taxes went to administration, the median answer was $52, though the real figure that year was $1.30. Today, Social Security continues to deliver benefits with overhead at a fraction of what private accounts would cost, but few people understand that in this case the government enjoys a huge edge in efficiency.
  • The American Prospect: Bush’s Numbers Racket. Why Social Security privatization is a phony solution to a phony problem. Excerpts: Even with individual accounts, most workers would still see large benefit cuts under the second plan produced by President Bush’s Social Security Commission, the one that Bush indicated would be the model for his proposal. An average wage earner who is age 20 at the time the plan is implemented could expect his or her basic Social Security benefit to be cut by $200,000, or more than 30 percent, over the course of his or her retirement. He or she could expect to make back less than $70,000, or about one-third of this cut, through his or her private account. [...]
    In short, Bush’s plan would undermine a system that has provided security for tens of millions of workers, and their families, for seven decades, and which can continue to do so long into the future if it is just left alone. His private accounts would provide far less security, while hugely raising costs in the form of fees to the financial industry. Finally, the cost of transitioning to this new system could throw the country into an economic crisis. It’s small wonder that Bush is facing increasing skepticism.
  • Boston Globe: Cuts in disability benefits seen in Social Security plan. Excerpts: Disability benefits may not be safe from the across-the-board cuts that are likely in President Bush's proposal to allow personal investment accounts in the Social Security program. Retirement and disability benefits are calculated using the same formula, so if future promised retirement benefits are cut, then disability benefits also would be reduced -- unless the program is somehow separated. This raises big questions about how investment accounts would be structured for the disabled, especially if they are injured at a young age or are dependent on a parent. Disabled beneficiaries typically work less and need benefits sooner, so the accounts would not provide enough income to them. "The Social Security programs are insurance programs, not investment programs, designed to reduce risk from certain life events," said Marty Ford of the Consortium for Citizens With Disabilities. Currently, disabled workers move seamlessly through the Social Security system, often unaware they draw their benefits from the disability program until they reach retirement age and shift to the retirement program. That would change with investment accounts, advocates say, with people falling through holes in a new system. About 16 percent of the 47 million people receiving Social Security benefits are disabled workers and their dependents. The impact of accounts on beneficiaries who aren't retirees has not been publicly discussed by the Bush administration.
  • BuzzFlash: Social Security Hawks Its Own Demise. Excerpt: I called Social Security's 800 number today because I needed to change my bank account information with them. Imagine my HORROR while I waited to talk to someone and heard not one but TWO messages supporting Bush's accounts proposal, telling me we had to move now before it is too late and they would soon be unable to pay benefits. This got me really upset and when I finally got a hold of a real person, I asked them why they are taking a political position. I thought Federal Civil Servants had to be nonpartisan under the Hatch Act. The operator ignored my plea that she should take down my complaint.
  • Dollars and Sense: Social Security Isn’t Broken. So Why Does Greenspan Want to Fix It? Excerpts: Federal Reserve Chairman Alan Greenspan told Congress earlier this year that everyone knows there’s a Social Security crisis. That’s like saying "everyone knows the earth is flat." Starting with a faulty premise guarantees reaching the wrong conclusion. The truth is there is no Social Security crisis, but there is a potential crisis in retirement income security and there may be a crisis in the future in U.S. financial markets. It’s this latter crisis that Greenspan actually is worried about. Social Security is the most successful insurance program ever created. It insures millions of workers against what economists call "longevity risk," the possibility they will live "too long" and not be able to work long enough, or save enough, to provide their own income. Today, about 10% of those over age 65 live in poverty. Without Social Security, that rate would be almost 50%.
    Social Security was originally designed to supplement, and was structured to resemble, private-sector pensions. In the 1930s, all private pensions were defined-benefit plans. The retirement benefit was based on a worker’s former wage and years of service. In most plans, after 35 years of service the monthly benefit, received for life, would be at least half of the income received in the final working year. Congress expected that private-sector pensions eventually would cover most workers. But pension coverage peaked at 40% in the 1960s. Since then, corporations have systematically dismantled pension systems. Today, only 16% of private-sector workers are covered by defined-benefit pensions. Rather than supplementing private pensions, Social Security has become the primary source of retirement income for almost two-thirds of retirees. Thus, Congress was forced to raise benefit levels in 1972.
  • Washington Post: New Doubts On Plan For Social Security. House Republican Says Bush Plan Is Doomed, Seeks Review of System. Excerpts: House Ways and Means Committee Chairman Bill Thomas (R-Calif.) predicted yesterday that partisan warfare over Social Security will quickly render President Bush's plan "a dead horse" and called on Congress to undertake a broader review of the problems of an aging nation. [...] Social Security is funded by taking 12.4 percent of a worker's wage and sending that money to current beneficiaries. An additional payroll tax funds Medicare. Thomas said the payroll tax can be "a problem or a culprit in trying to create more jobs." "There are other ways to achieve revenue increases that -- in fact, by changing the tax code -- enhance business's competitiveness, rather than retarding it," he said. The tax is considered regressive because it is levied on the first $90,000 of income and higher earnings are untaxed, meaning that poorer people pay a higher percentage of their income to Social Security than rich people. Thomas would not say what alternative he favors, but the most obvious would be through a higher income tax.
  • Washington Post: Social Security For a Savings Society. Excerpts: It's a good bet that if you analyze a problem incorrectly, you'll come up with the wrong solution. Case in point: George Bush and Social Security. The first problem is one of semantics. Social Security is not running out of money. If nothing is done, inflation-adjusted benefits might wind up being 27 percent less in 2050 than they are scheduled to be, but still wind up higher than they are today. Undesirable, maybe, but hardly economic calamity. [...] Pay no attention to false claims by Vice President Cheney and others that Social Security offers a measly 2 percent return. Social Security isn't a pension system -- it's a cross between a pension and a pay-as-you-go social insurance program. As such, there is no calculable rate of return. Finally, it is simply a big lie that increasing any tax on anyone will cripple growth, a myth recently peddled by Cheney in a Georgetown University speech. Social Security taxes have been raised 20 times since 1935 -- a period during which the United States became the world's economic superpower. [...] So here's a modest proposal I'll call the 10 percent solution...
  • New York Times: Social Security Bashing: A Historical Perspective, By Daniel Gross. Excerpts: President Bush claimed last week that the Social Security system would be "flat bust, bankrupt" in 40 years "unless the United States Congress has got the willingness to act now." Given that professional economic forecasters are seldom correct when they predict what will happen in the next four quarters, it is difficult to accept 40-year estimates made by an amateur forecaster, even if he is the president. From its very origins, Social Security has tended to inspire apocalyptic economic projections. Now that economic claims and counterclaims about the program's future are multiplying, it is worth revisiting the response that greeted the introduction of Social Security 70 years ago.
  • New York Times: That Magic Moment, By Paul Krugman. Excerpts: Maybe we can't hold Mr. Bush directly to account for misleading the public about Iraq. But Mr. Bush still has a domestic agenda, for which the lessons of Iraq are totally relevant. White House officials themselves concede - or maybe boast - that their plan to sell Social Security privatization is modeled on their selling of the Iraq war. In fact, the parallels are remarkably exact. Everyone has noticed the use, once again, of crisis-mongering. Three years ago, the supposed threat from Saddam somehow became more important than catching the people who actually attacked America on 9/11. Today, the mild, possibly nonexistent long-run financial problems of Social Security have somehow become more important than dealing with the huge deficit we already have, which has nothing to do with Social Security.
    But there's another parallel, which I haven't seen pointed out: the politicization of the agencies and the intimidation of the analysts. Bush loyalists begin frothing at the mouth when anyone points out that the White House pressured intelligence analysts to overstate the threat from Iraq, while neocons in the Pentagon pressured the military to understate the costs and risks of war. But that is what happened, and it's happening again. Last week Andrew Biggs, the associate commissioner for retirement policy at the Social Security Administration, appeared with Mr. Bush at a campaign-style event to promote privatization. There was a time when it would have been considered inappropriate for a civil servant to play such a blatantly political role. But then there was a time when it would have been considered inappropriate to appoint a professional advocate like Mr. Biggs, the former assistant director of the Cato Institute's Project on Social Security Privatization, to such a position in the first place. Sure enough, The New York Times reports that under Mr. Biggs's direction, employees of the Social Security Administration are being forced to disseminate dire warnings about the system's finances - warnings that the employees say are exaggerated. [...]
    Still, there are two reasons why the selling of Social Security privatization shouldn't be another slam dunk.One is that we're not talking about secret intelligence; the media, if they do their job, can check out the numbers and see that they don't match what Mr. Bush is saying. (A good starting point is Roger Lowenstein's superb survey in The Times Magazine last Sunday.) The other is that we've been here before. Fool me once...
  • New York Times: The Free Lunch Bunch, By Paul Krugman. Excerpts: President Bush is like a financial adviser who tells you that at the rate you're going, you won't be able to afford retirement - but that you shouldn't do anything mundane like trying to save more. Instead, you should take out a huge loan, put the money in a mutual fund run by his friends (with management fees to be determined later) and place your faith in capital gains. That, once you cut through all the fine phrases about an "ownership society," is how the Bush privatization plan works. Payroll taxes would be diverted into private accounts, forcing the government to borrow to replace the lost revenue. The government would make up for this borrowing by reducing future benefits; yet workers would supposedly end up better off, in spite of reduced benefits, through the returns on their accounts. The whole scheme ignores the most basic principle of economics: there is no free lunch.
  • New York Times: Republicans Urge the White House to Consider Tax Increases for Social Security. Excerpts: Convinced that they need Democratic support to overhaul Social Security, leading House Republicans have begun urging the White House to consider tax increases as part of any deal. "We want Democrats on board," Representative Jim McCrery, the Louisiana Republican who is chairman of the House subcommittee on Social Security, said in an interview on Wednesday. "I'm willing to listen to their ideas, whether it's raising the payroll tax or raising other taxes or changing benefits. I want to hear their thoughts."
  • New York Times, courtesy of LibertyForum: Social Security Enlisted to Push Its Own Revision, by Robert Pear. Excerpts: Over the objections of many of its own employees, the Social Security Administration is gearing up for a major effort to publicize the financial problems of Social Security and to convince the public that private accounts are needed as part of any solution. The agency's plans are set forth in internal documents, including a "tactical plan" for communications and marketing of the idea that Social Security faces dire financial problems requiring immediate action. Social Security officials say the agency is carrying out its mission to educate the public, including more than 47 million beneficiaries, and to support President Bush's agenda. [...]
    But agency employees have complained to Social Security officials that they are being conscripted into a political battle over the future of the program. They question the accuracy of recent statements by the agency, and they say that money from the Social Security trust fund should not be used for such advocacy. "Trust fund dollars should not be used to promote a political agenda," said Dana C. Duggins, a vice president of the Social Security Council of the American Federation of Government Employees, which represents more than 50,000 of the agency's 64,000 workers and has opposed private accounts. Deborah C. Fredericksen of Minneapolis, who has worked for the Social Security Administration for 31 years, said, "Many employees believe that the president and this agency are using scare tactics to promote private accounts."
    The Bush administration ran afoul of a ban on "covert propaganda" when it used tax money to promote the new Medicare drug benefit and to publicize the dangers of drug abuse by young people. The administration acknowledged paying a conservative commentator, Armstrong Williams, to promote its No Child Left Behind education policy. But on Social Security, unlike those issues, the government has not concealed its role. The agency's strategic communications plan says the following message is to be disseminated to "all audiences" through speeches, seminars, public events, radio, television and newspapers: "Social Security's long-term financing problems are serious and need to be addressed soon," or else the program may not "be there for future generations." The plan says that Social Security managers should "discuss solvency issues at staff meetings," "insert solvency messages in all Social Security publications" and spread the word at nontraditional sites like farmers' markets and "big box retail stores."
  • Chicago Tribune: Dancing in the dark. Excerpts: President Bush has promised to make Social Security reform the domestic centerpiece of his second term in office. But this reform, to be unveiled next month, shows all the unreality, fiscal irresponsibility and overhyped salesmanship of the keystones of his first term, the war in Iraq and tax cuts for the rich. Like these two adventures, Social Security reform is a disaster in the making. For that reason, it is necessary to sort the facts from the fiction in this flawed proposal. No matter what the administration says, there is no Social Security crisis. Social Security isn't broke and doesn't need fixing. It is a system that will run just fine for 40 years, probably more, even if nothing at all is done. A problem will appear at midcentury, but it's a relatively small problem that is easily fixed. Full-scale reform, on the other hand, would end up killing the system it is meant to save. [...]
    Privatization advocates also warn that Social Security's future rests on trillions of dollars of "unfunded obligations." What they mean is that, when it comes time to pay the pensions, the money won't be there. Wrong again. As seen above, at least 70 percent will come from normal payroll taxes. The rest comes from that trust fund, which is invested in government bonds: In essence, the government borrows from the fund to pay its bills now, promising to repay when the bonds come due. To say that these obligations are "unfunded" is to say that the U.S. government will renege on this debt. In fact, the government, unlike a lot of companies that would sell stock to those privatized accounts, has never defaulted on a debt in the nation's history. There's one more reason to keep Social Security as it is now. It has nothing to do with economics and everything to do with America's soul. This is a divided nation. So many of the obligations that once held America together have vanished. But Social Security remains, a promise from one generation to another, perhaps the only program that unites the nation in mutual responsibility. Privatization of Social Security would sever that last remaining tie and make this generational promise just one more item to be bought and sold in the marketplace, which may be exactly what its proponents have in mind.

 


New on the Alliance@IBM Site:

 

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.