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    Highlights—March 19, 2005
  • PC World: CeBIT Attendees Dodge Picket Signs. Workers protest IBM's plan to lay off 600 employees in Germany. By Peter Sayer. Excerpts: Plenty of new products are on show here at the CeBIT trade show this week, but a demonstration of a different kind greeted visitors to the Hanover fairground Saturday morning. As bemused showgoers entered the north gate, a noisy group of IBM employees protested about job cuts at two of the company's customer support sites in Germany. Around 270 workers in Hanover, and a further 330 at Schweinfurt in the southern half of Germany, will lose their jobs by the end of September when their offices are closed, one of the threatened employees explained. Customers will likely experience a decline in the quality of service, said the IBM worker, who declined to be named.
  • San Francisco Chronicle: IBM to Lay Off 500 Workers in Sweden. Excerpt: International Business Machines Corp., the largest provider of computer hardware and consulting services, said Thursday it will lay off about 500 workers in Sweden, or nearly 9 percent of its work force in the country, shutting down most of its operation in five cities. IBM spokeswoman Aasa Barsness said the company will close offices in Vaesteraas, Eskilstuna, Linkoeping, Alingsaas and Huskvarna, and that all workers on those sites were given notice Thursday of the pending layoffs. A report posted on the trade union Sif's Web site said 300 of the jobs will be cut in Vaesteraas, a city located about 60 miles west of Stockholm. IBM has been providing mainly outsourcing services in Vaesteraas, for companies like LM Ericsson and the Swedish postal service. Union officials said they feared the jobs would be outsourced to countries like India where expenses are cheaper, but Barsness said no decision had been made whether to move the jobs.
  • InfoWorld: IBM plans service job cuts across Western Europe. Big Blue eliminates jobs in Germany and Sweden while eyeing cuts in France as well. Excerpts: Two weeks after announcing plans to cut 600 service jobs and close two locations in Germany, IBM (Profile, Products, Articles) on Friday said it intends to eliminate 538 similar positions and shutter five sites in Sweden. Additionally, as many as 2,000 jobs could face the axe in France, according to French news reports. A spokesman for IBM in Europe, Fred McNeese, confirmed the planned reductions in Sweden and Germany. Yves Ravez, a spokesman for IBM France, said the company is in discussions with unions about "the evolution of IBM in France," but has not announced any cuts. In Sweden and Germany, IBM plans to cut the jobs of people who provide help desk, application management, and other services to IBM customers who have outsourced their IT operations to the Armonk, New York-based company, McNeese said. Customers should not notice a lapse in service because of the reorganization, according to McNeese.
  • Globes: IBM Israel to lay off 100. Excerpt: The “Yediot Ahronot” Hebrew daily reports that IBM Israel has begun cutbacks, which will include laying off 100 employees, mostly in its services division. Informed sources in IBM Israel said yesterday that, in view of the crisis in the division, which is not profitable, a senior executive from IBM Italy had visited the company’s offices in Israel, in order to personally observe employee productivity.
  • New York Times, courtesy of the Saratoga Spirit: Harbingers of Harder Times. Excerpts: The $58.3 billion, the United States' trade deficit for January exceeded everyone's worst expectations. The huge mismatch reported yesterday between imports and exports just missed breaking the monthly record, set last November, and is all the more remarkable for occurring in a month when the price of oil actually declined. The trade deficit is the single most important factor in measuring the extent to which the nation lives beyond its means. As such, it should force us to own up to the dangers of rampant deficit spending. But the White House is showing no sign of action, as if doing nothing might make the problem smaller. [...] Since the trade deficit is intimately connected to the federal budget deficit, the best way to reduce the trade imbalance is to reduce the budget gap. But President Bush is calling for more tax cuts, politically implausible spending cuts and costly Social Security privatization. Both parties in Congress must address the twin trade and budget deficits - or risk being forced to do so by events beyond their control.
  • Creators Syndicate: The bankruptcy bill: a tutorial in greed. Lesson No. 1 -- Campaign cash is worth more than family values. By Robert Scheer. Excerpt: One extremely modest amendment that was rejected by the Senate would have blocked creditors from recovering debts from military personnel if the loans had annual rates higher than 36%. Also killed were sensible amendments designed to protect those ruined by a medical emergency, identity theft, dependent-caregiver expenses or loss of income due to being called to full-time military duty through the National Guard or the Reserve. In the end, these individuals are simply not powerful enough to earn the protection of our by-the-powerful, for-the-powerful government. Creditors can scam consumers, Enron can burn California, Halliburton can gouge the Pentagon, the rich can enjoy obscene tax cuts, our "conservative" president can run up the deficit like a drunken sailor -- and none of it seems to faze our elected leaders. For them, "fiscal responsibility" is just a high-minded prescription appropriate only for the commoners.
  • San Jose Mercury News: Overworked -- and angry about it. By Nicole C. Wong. Excerpt: Overwork in America, a 54-page report issued by the non-profit Families and Work Institute, underscores the irony that the very factors giving companies a competitive edge and healthy bottom line -- technology, multitasking and globalization -- may be undermining their workers' physical and emotional well-being. "Technology has made staying in touch instantly much more available. That creates the expectation of an instant response," said Ellen Galinsky, president of the New York research institute. "How many times have you seen people at parties with their BlackBerry? Or sitting in church with their BlackBerry?" And you can bet they're often answering work e-mails. [...] And So never took advantage of his 15 annual vacation days "because nobody else did." The 33-year-old is happier now that he works elsewhere. But others remain miserable. Employees who toil without enough down time to rest and recover make more mistakes, exhibit poorer health and show more symptoms of clinical depression, the study stated. Also, 39 percent of intensely overworked employees say they are angry at their employers for expecting so much of them, vs. only 1 percent of employees who have low levels of overwork. And 34 percent of extremely overworked employees often resent their co-workers who don't work as hard, compared with 12 percent of employees at low levels of overwork.
  • MarketWatch: United Air ends special retirement plan. Excerpt: United Airlines said Wednesday in a regulatory filing that it has ended a special executive retirement program that protects their pension payments to save money. The supplemental retirement plan was ended on March 11, the airline disclosed in a 10-K filing with the U.S. Securities and Exchange Commission. It works by ensuring pension income when the benefits can't be paid because of IRS limits, United said in the filing. "We believe we have a responsibility to limit costs wherever possible," said United Airlines spokeswoman Jean Medina. United would not say how much it expects to save by ending the plan. About 125 people were included in the program and 25 of them had been receiving benefits, Medina said. The special plans have caused great controversy in the industry before. American Airlines, for one, fought with its unions in 2003 over the airline's plan to safeguard executive payouts in the case of bankruptcy.
  • New York Times: When It Comes to Managing Retirement, Many People Simply Can't. By Eduardo Porter. Excerpts: The "ownership society" envisioned by President Bush from creating private Social Security accounts is nothing new for the many millions of Americans already investing for their retirement through 401(k) plans and the like. One thing stands out from that quarter-century of experience: those with relatively large surpluses to invest - mostly those at the top of the earnings ladder - have managed to amass enough wealth to serve them well in retirement. But farther down the income scale, a number of workers have been unable to handle money intended for their old age as successfully.
  • New York Times: Captains of Piracy. By Nicholas D. Kristof. Excerpts: In Russia, those who manipulate capitalism to gain fabulous wealth are called the oligarchs, and they sometimes end up in prison. Here we just call such people C.E.O.'s, and we put them in prison less often. This is the time of year when corporate financial statements offer snapshots of their executives' mugging shareholders. Over the next few weeks, we'll find out precisely how much public companies overpaid their chief executives, but the news filtering out so far underscores the market failure in the boardrooms. [...]
    A study for The Wall Street Journal by Mercer Human Resource Consulting found that at 100 major U.S. corporations, bonuses for C.E.O.'s last year rose more than 46 percent, to a median of $1.14 million. Both the amount and the percentage increase were the highest since comparable studies began five years ago. Companies have shaved costs by laying off workers and reducing health care coverage - and then using those savings to slather more pay on top executives. It's true that companies are now cutting back on stock options for C.E.O.'s, but it's hard to be impressed by that restraint when bonuses are soaring. Since 1993, the average pay for C.E.O.'s of the S.&P. 500 companies has tripled to $10 million at last count, while the number of Americans without health insurance has risen by six million.
  • New York Times: Washington's Fiscal Meltdown. Excerpts: Before leaving town for a two-week spring break, Congress indulged in its own form of March Madness. The Republican majority in the House and the Senate passed budget blueprints for 2006 that slash domestic spending by upwards of $150 billion over the next five years. Yet they still managed to increase the projected deficit by more than $125 billion over the same period (and by more than $1 trillion through 2015). How is it possible to produce that much red ink while slashing spending? Easy. Just cut revenue by giving huge tax cuts to - surprise, surprise - high earners and wealthy investors. The lawmakers will not make any final decisions until they cobble their separate proposals into one official budget later in the year, but the early signs are all bad - pointing to the least sensible tax cuts for the least needy recipients with no thought to the exploding deficit. [...]
    Of all the favors they are determined to dispense, tax cutters in both the House and Senate are most intent on extending the special low tax rates for dividends and capital gains, through 2010. The preferential rates are not scheduled to expire until 2008, but lawmakers want to act now, apparently to spare their constituents worry about the future. And who are those fretful constituents? In 2005 alone, almost half of the tax savings from dividend and capital gains rate cuts will go to investors who make more than $1 million a year, the top 0.2 percent of the income ladder. Nearly three-quarters of the tax benefits will go to those making more than $200,000, about the top 3 percent. The cost to everyone else in the form of forgone revenue will be $23 billion. [...]
    And then there is the 11th-hour tax cut slipped into the Senate proposal. It would repeal an income tax on Social Security benefits that applies to the wealthiest 20 percent or so of beneficiaries and whose revenue is dedicated to the Medicare hospital trust fund. The repeal would accelerate the fund's projected insolvency by four years, to 2015 from 2019. Now there's a plan! Give the best-off elderly a tax break and put all of the elderly who may have to go into the hospital at greater financial risk.
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.
  • "High Utilization / High Turnover" by "Scouter1". Full excerpt: The SAP bench is very low - main reason - at least in my practice area 20% of the SAP consultants voluntarily left BCS last year. Most were from PwCC heritage. So we continue to hire both experienced SAP consultants and college graduates and train on SAP. The biggest complaint I have heard over last couple years : The SAP practice runs at high utilization, probably meets or exceeds the BCS objective yet we get no bonus AND each year the utilization target for the SAP practice increases (burning out a lot of people). Reason : the bonus was not at the SAP practive level - so with BCS BT0 failing badly - all BCS consultants received no bonus. Now just this month the consultants I have talked to have receive a 3% to 10% bonus (all 2's and 2+'s - any 1's probably got more).
  • "Expect 100%" by "IGS_Consultant". Full excerpt: I'll answer your second question. Cheers to the IBM recruiter that was honest with you about 100% travel. Many tend to downplay the travel. I once had a manager that promised potential employees that travel was only 60%. The assumption, of course, was that you'd be out of town every week of the year but that you'd "only" spend four nights a week in a hotel...hence 57.14% "travel." :-) The "normal" work schedule depends on the "needs of the project" and where you live. Do you live on the west coast but have a project on the east coast? If so, and if the project expects your butt in the office on Monday morning, you'll spend all day Sunday traveling. If you're lucky, your projects will be close by and in the same time zone. Under the best of circumstances you can travel on Monday morning, get into the office early enough to bill a substantial number of hours on Monday, work 12 hour days Tuesday through Thursday, then travel home late on Thursday night. Somehow, you've got to get at least 44 hours in during that time period to make your numbers...not to do an outstanding job, mind you, just "meet requirements." On the other hand, your client, the IBM project manager, or the nature of the work may require more "BIS" (butt in seat) at the client location. In this case, your weekends at home will be very short. Don't expect to have a life outside of IBM. If you're currently married, make sure your marriage is very sound. If you're single, forget about having any kind of relationship.
  • "WWER - New Expense Policy" by "howard stern". Excerpt: Some of the key WWER enhancements are:
    The "Charge To" setup - Validates of the entered "Account/ Project ID" value = automatically defaults to your personal Visa card. All expenses are rounded to the base dollar i.e. $34.95 will be reimbursed at $34.00 New Hotel Plan - All consultants share hotel's with other IBM consultants. The client will be billed assuming individual rooms. Consultants using tents will be entered in a raffle. The winner will get $100. Charge the client for a suite at the most expensive hotel in town. Airline lowest fare - All consultants must use the lowest fare using solutions involving a maximum of 4 stops. The travel window for cost purposes is now 12 hours. Therefore the consultant must take the cheapest flight within a 12 hour window involving a maximum of 4 stops. Hitch hiking bonus - consultants who hitch hike to client will be entered into a drawing for an official IBM back pack. Odds of winning are 1 in 500. Consultants should charge the client for all mileage.
  • "WWER - New Expense Policy - Part 2" by "howard stern". Excerpt: Out of Town Meal Policy - A daily meal allowance will no longer be offered. IBM will provide each consultant a spatula and can of propane to pry road kill of the street and cook it. The client should be billed for the standard meal allowance. Mileage Allowance - IBM is reducing the mileage allowance following a detailed review of an episode of the Flintstones. IBM will now provide each consultant a pair of sneakers (every quarter) and a saw to cut a hole in the floor of their car. Consultants must now pedal like Fred Flintstone. The full mileage allowance should be charged to the client.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • WashTech: WA Senators Told of Threat Offshore Outsourcing Poses. Excerpts: A Washington State Senate hearing became the focal point in the ongoing battle to pass legislation that would create a statewide task force to investigate offshore outsourcing and its impact on the state’s economy. Dramatic testimony from tech workers informed Senate members why such legislation is needed. [...] Members of SPEEA, the union which represents Boeing engineers and technical employees, also testified in favor of the bill and warned that relentless outsourcing threatens U.S. innovation. “When private sector employers, such as The Boeing Company, use offshore outsourcing as a method to increase their profitability, are they really taking into account all of the costs incurred?,” said Cynthia Cole, a 26-year employee of Boeing and a union member. “Where the technical jobs are retained, experience is retained and this is where we will see the next advances in technology.”

Coverage on Social Security Privatization
  • Washington Post: Transcript: Bush News Conference. President Discussed Social Security, Iraq and Other Issues. Excerpt: QUESTION: Mr. President, you say you're making progress in the Social Security debate, yet private accounts is the centerpiece of that plan, something you first campaigned on five years ago and laid before the American people -- remains, according to every measure we have, poll after poll, unpopular with a majority of Americans. So the question is, do you feel that this is a point in the debate where it's incumbent upon you, and nobody else, to lay out a plan to the American people for how you actually keep Social Security solvent for the long term?
    BUSH: First of all, let me -- if I might correct you -- be so bold as to correct you -- I have not laid out a plan yet -- intentionally. I've laid out principles. I've talked about putting all options on the table because I fully understand the administration must work with the Congress to permanently solve Social Security. And so one aspect of the debate is: Will we be willing to work together to permanently solve the issue? Personal accounts do not solve the issue. Personal accounts will make sure that individual workers get a better deal with whatever emerges as a Social Security solution.
  • Tallahassee Democrat: GAO: Personal accounts could hasten Social Security shortfall. Excerpts: Private investment accounts such as those President Bush endorses not only will not save Social Security, but they also could accelerate the retirement system's financial problems, a nonpartisan government official told Congress Wednesday. [...] They wouldn't shore up the system, he said, if they were financed, or "carved out," from current Social Security taxes, as Bush proposes, and accompanied by no other changes. By themselves, he said, such private accounts would "exacerbate" the system's problems and accelerate the date for when it would start spending more on pension benefits than it receives in annual revenue. "I hope everyone takes note of what you said. I just hope the world hears you," said Rep. Sander Levin, D-Mich.
  • New York Times courtesy of LibertyNews: Under Bush, A New Age of Prepackaged Television News. Excerpts: Under the Bush administration, the federal government has aggressively used a well-established tool of public relations: the prepackaged, ready-to-serve news report that major corporations have long distributed to TV stations to pitch everything from headache remedies to auto insurance. In all, at least 20 federal agencies, including the Defense Department and the Census Bureau, have made and distributed hundreds of television news segments in the past four years, records and interviews show. Many were subsequently broadcast on local stations across the country without any acknowledgement of the government's role in their production.
  • Los Angeles Times: Bush's Overhaul Riles a Roosevelt. In dueling radio talks, the president and FDR's grandson square off over Bush's plan to create private Social Security accounts. By Peter G. Gosselin. Excerpt: The FDR descendant has stepped into the debate over Social Security at several points in recent months. In January, he objected when an interest group favoring private accounts used his grandfather's image in television ads. Last month, he criticized Fox News anchor Brit Hume as citing comments that made it appear that FDR favored private accounts, labeling the claim an "outrageous distortion." At a political gathering in Maine this month, Roosevelt said his grandfather's position on accounts was clear. "He was all for investment programs; he started out as a Wall Street lawyer," Roosevelt said. "But he also believed … that people should be able to count on secure bases of income and retirement so they could have decent food, clothing and housing in their retirement."
  • BluePrint Magazine: Fixing Social Security. By Will Marshall. Excerpt: Democrats are right: President Bush has conjured up a phony crisis to justify his push to "reform" Social Security. But as they fight the president's misbegotten plan, Democrats shouldn't miss an opportunity to offer the nation a better one. Just saying "no" to Bush may appeal to paleoliberals who are in denial about the need to modernize the 70-year-old retirement program. But simple rejectionism is a loser for Democrats, substantively and politically. Social Security's financial problems seem manageable now, but the baby boomers' impending retirement will overwhelm the current pay-as-you-go structure. Doing nothing to prepare Social Security for the coming age wave is the surest way to bring on the crisis that White House Cassandras now foretell.
  • Center for Economic and Policy Research: The Burden of Social Security Taxes and the Burden of Wage Inequality [PDF]. By Dean Baker. Excerpts: Numerous politicians and commentators have claimed that the prospect of higher Social Security taxes in the future will threaten the living standards of our children and grandchildren. However, the tax increases that the Social Security trustees and the Congressional Budget Office project would be needed to maintain the program’s solvency would have far less impact on the living standard of a typical worker than the rise in wage inequality the nation has experienced over the last quarter century.
    A typical worker lost an amount equal to 9 percent of their wages due to the increase of wage inequality over the last decade. By contrast, the Social Security trustees and the Congressional Budget Office project the size of the tax increase needed to keep Social Security fully solvent over its 75-year planning period as 1.9 percent and 1.0 percent, respectively.
    In fact, the amount of money that typical wage earners have lost in the last year alone, due to the upward redistribution of income, is comparable in size to the tax increases that would be needed to maintain Social Security’s solvency for the next seventy-five years. Trends in inequality pose a much greater threat to the living standards of most young workers than the prospect of paying higher Social Security taxes in the future. If wage gains were more or less evenly shared, then future generations of workers would experience large increases in living standards regardless of what happens to the Social Security tax rate.
  • New York Times: The $600 Billion Man. By Paul Krugman. Excerpts: The argument over Social Security privatization isn't about rival views on how to secure the program's future - even the administration admits that private accounts would do nothing to help the system's finances. It's a debate about what kind of society America should be. And it's a debate Republicans appear to be losing, because the public doesn't share their view that it's a good idea to expose middle-class families, whose lives have become steadily riskier over the past few decades, to even more risk. As soon as voters started to realize that private accounts would replace traditional Social Security benefits, not add to them, support for privatization collapsed.
  • Los Angeles Times: Group Leaves Social Security Overhaul Bloc. By Peter Wallsten. The move by Financial Services Forum is the latest indication of the dual pressures facing corporations in Bush's drive to revamp system. Excerpt: Signaling more troubles ahead for President Bush's campaign to overhaul Social Security, a group representing the nation's biggest financial companies said Monday that it had decided not to renew its membership in a business coalition raising millions of dollars to back the effort. The Financial Services Forum, which represents chief executives from such corporate heavyweights as American Express, Citigroup and Goldman Sachs, was a co-founder of the Coalition for the Modernization and Protection of America's Social Security, or Compass. But it left the coalition last month after its members failed to agree on Bush's plan to let workers divert some of their payroll tax into individual investment accounts.
  • Media Matters for America: Hannity, Bennett misrepresented success of retirement systems in Texas, Chile. Excerpt: In an attempt to advance the Bush administration's plan to partially privatize Social Security, FOX News host Sean Hannity and nationally syndicated radio host and former Reagan administration official William J. Bennett made false and misleading claims about the purported success of privatized retirement systems in Galveston, Texas, and Chile. In fact, in each case, the privatized systems have provided lower retirement benefits for low- and middle-income workers than the guaranteed benefits in the systems that they replaced.
  • New York Times: Retirement, the Federal Way. By Louis Uchitelle and Riva D. Atlas. Excerpts: Brenda Barnett, an electronics technician for the Federal Aviation Administration in Oklahoma City, offers one model for how Americans may fare under President Bush's plan for private Social Security accounts. Her retirement account, part of the pension system for federal employees, has had an average return of just over 6 percent a year since 1997, achieved through a mixed investment in stocks and Treasury securities. "On the whole, I've made money, not a ton of money, but enough," she said. Jason O'Dell had a much different experience. Mr. O'Dell, 29, went to work for the government in 1999 as a sheet-metal mechanic at Tinker Air Force Base in Oklahoma City. He joined the Thrift Savings Plan for federal employees two years later, put most of his savings in a stock fund, and got caught in the market's steep decline. His account lost nearly 30 percent of its value. The experiences of Ms. Barnett and Mr. O'Dell, who are among two million civilian employees of the federal government enrolled in the thrift plan, show how giving investors control over their retirement savings can have widely varying results. [...]
    President Bush holds up the federal savings program as a model for the retirement accounts he wants to add to Social Security. He is counting on those accounts to earn enough to offset the cuts that his plan calls for in the current fixed Social Security pensions. The federal thrift plan, however, differs in an essential way from the retirement accounts that the president wants to carve out of Social Security. The thrift accounts are on top of a generous fixed pension for federal employees, while President Bush's proposal envisions the accounts replacing a substantial part of Social Security's fixed pension. The thrift system functions like a 401(k)-type plan. Each of the five funds in the plan has done well enough to meet President Bush's minimum goal of an average annual return of 3 percent, adjusted for inflation.
  • Jim Hightower: Asserting the Common Good. Excerpts: An all-out, four-pronged political assault is now underway to privatize Social Security, with the Four Horsemen of Privatization being Wall Street lobbyists, right-wing think tank theorists, corporate-funded front groups, and of course, George W. But as powerful as these establishment forces are, their scheme and their strategy overlook two countervailing forces of humble: one, the common sense of common folks, and two, the American people's strong belief in our nation's ethic of the common good. [...] Their political strategy also tries to divide the public. Bush's plan leaves Social Security's promise of guaranteed benefits intact for everyone 55 and older, hoping this will buy them off so they won't object to slashing the retirement benefits of younger people. To their amazement, however, this cynical appeal to selfishness is not working. Seniors everywhere are up in arms about it – as Martin Berger, a Pennsylvania retiree, says: "We refuse to accept this concept of 'you got yours, now back off.' We built the system. We believe it should be available for our children and grandchildren." Americans are not selfish, and polls confirm that at least 70 percent of folks – old as well as young – don't want to give up the founding idea of Social Security, which is that we really are in this together.
  • Cox News Service, courtesy of The State: Britain's private pension plan has been a bumpy ride for many. By Shelley Emling. Excerpt: Indeed, countless pensioners across Britain are worried their golden years are going to wind up tarnished and are seeking ways to supplement their income. But wasn't Britain's introduction of private accounts to its old-age pension program — similar to what President Bush is proposing in the United States — supposed to alleviate such concerns? Unfortunately for many pensioners here, the answer has been a resounding no. Adair Turner, chairman of the Pensions Commission, an independent body set up by the government, warned last October that Britons faced a stark choice: either pay higher taxes, save more, retire later or prepare for a drastic change in lifestyle in old age. In recent months, Americans have been encouraged by both Republicans and Democrats to find out how voluntary accounts work by looking to Britain. Bush's critics believe Britain's experience should be enough to make Americans think twice. “A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn,” said Norma Cohen, who covers pension issues for the Financial Times newspaper. “On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement.”
  • Atlanta Journal-Constitution: Solving Social Security: Chile's System: Small deposits, small returns. Model for U.S. fails to serve many workers. By Mei-ling Hopgood. Excerpts: "The idea is good --- the idea," Vargas said of private accounts. "It's a good system for the capitalist businessman, but not necessarily for the worker." Despite the system's drawbacks, backers of President Bush's plan for personal Social Security accounts in the United States often point to Chile's retirement system. It has been praised for boosting the income of retirees, teaching people to save and improving the economy. "I think some members of Congress . . . could take some lessons from Chile, particularly when it comes to how to run our pension plans," Bush said at a 2001 news conference with Chilean President Ricardo Lagos. "Our Social Security system needs to be modernized, Mr. President, and I look forward to getting some suggestions as to how to do so, since you have done so, so well." But the true impact of the reform in Chile is not so clear, according to interviews with experts, retirees and workers here.
  • New York Times: Social Security as Dramamine. By Daniel Gross. Excerpts: Income volatility has long been a hallmark of the American economy. Compared with those of workers in other developed countries, the earnings of Americans tend to bounce around drastically from year to year. And that's not necessarily bad. "People don't realize that income volatility and income mobility are the same thing," said Peter Gottschalk, professor of economics at Boston College and a pioneer in the study of income volatility. People who start out at the bottom of the income ladder frequently wind up at a higher rung. Conversely, just because you earn $300,000 this year doesn't mean you'll be making that much 10 years from now. The economist Joseph A. Schumpeter, who coined the term "creative destruction," described the upper strata of society as a hotel in which the guests are always changing. Income volatility is the mechanism through which guests check in and check out. [...]
    The factors that functioned as internal shock absorbers for families have weakened. And so, too, have external buffers. Over the last three decades, the percentage of workers covered by defined-benefit pension plans and employer-provided health insurance - guarantees that provide ballast for fluctuating incomes - has declined. Add this to the trend of rising volatility - especially for people in the lower and middle income levels - and it's easy to understand the reluctance to transform a government program that guarantees seniors an income. "Social Security provides a vital kind of insurance," Professor Hacker said. "The real issue lurking behind this debate is whether we should have a program that provides the bedrock protection against economic risk."
  • New York Observer: Bush's little secret. Private pensions aren't as successful as the GOP wants you to believe. Excerpts: Appearing recently on Fox News Channel, Senator John McCain mentioned foreign experiments with privatization, although he observed the official Republican speech code in calling the accounts "personal" rather than "private." "I would remind you that countries like Sweden, Chile, England, others, all have personal savings accounts," he explained. "And they have all been very successful." [...] Perhaps somebody in the Senator's office skimmed a right-wing think-tank report and passed along this dubious bit of tripe as the boss hustled off to the Fox studio. Before he ventures out again to promote the Bush plan, Mr. McCain ought to devote further study to the unappetizing results of those British, Swedish, Polish and Chilean programs. On closer inspection, he might realize that Sweden, Poland and Chile all differ significantly from the United States in important ways. [...]
    After two decades of scandal, mismanagement and bad planning, the verdict in the United Kingdom is nearly unanimous. Their privatization has failed, the elderly are suffering, and analysts from left to right agree that our Social Security system is more efficient, more generous and more socially sustainable than theirs. So the chairman of the Confederation of British Industry has called for tax increases to fund increased retirement benefits, and the brightest Tory M.P. has expressed his admiration for the existing U.S. system. British workers are quickly abandoning their privatized accounts to return to the state system -- on the advice of their chastened insurance agents.

New on the Alliance@IBM Site:
  • Poughkeepsie Journal: Retirees will keep pushing for benefits. Group looks at some options. By Craig Wolf. Excerpt: Keeping up the pressure on IBM Corp. to preserve retirees' medical benefits appears to be the best strategy for now, leaders of a national movement called Benefits Restoration Inc. said Saturday in Poughkeepsie. None of the efforts have so far reversed the basic decisions made in recent years by executives to force retirees to pay for health plans the former employees say were promised to them for free and forever. Gene Moser of the Town of LaGrange retired in 1991 and spoke of what he heard from managers then. "I was told if you retire this year, you will have all the benefits you now have," he said. Now, he and other retired IBMers must make unexpected monthly payments to stay insured. Some report monthly payments of hundreds of dollars. [...] Benefits Restoration Inc. is an organization of retirees, spouses and employees of corporations that offers retirement medical benefits. For information, visit www.benefitsrestoration.org.
  • Poughkeepsie Journal: IBM retirees bemoan higher costs. Ex-Big Blue workers say company's benefit promises not kept. By Craig Wolf. Excerpt: Twice a day, Bruce Williams drives a bus for the Red Hook School District. Weekends, he's often out on his free-lance job videotaping couples getting married. That may not look like retirement, but it is, 21st-century style. "You cannot retire any more," said Williams, 65. "I drive a school bus and I have a video business, or I couldn't survive."
    But Williams did not have a low-paying job during his 26 years with IBM Corp., whose pay and Cadillac-style benefits were the envy of most in the mid-Hudson Valley. "I had good jobs there. I can't complain," he said. What he does freely complain about is the hit that his finances took when IBM cut retirees' medical benefits. It started around the time he retired in 1993. IBM had capped how much the company would pay on average per retiree, forcing retirees to cough up a share. Two years ago, the plan changed again and Williams' monthly contribution jumped from about $50 to $350. "This is from a company that said the retirees will never have to pay," Williams said. "They say plan for retirement. How do you plan for retirement when they're going to change the rules of the game?" [...]
    In response to requests for personal experiences from retired IBMers about changes in their retirement medical plans, the Poughkeepsie Journal received more than two dozen stories. Most said they felt the company had misled them. "In exit interviews ... they kept saying, 'At least you'll always have your medical and you'll be treated like an employee,' " said Bob Wilbarg of Hopewell Junction, who retired early in 1992. "That was words, not what was written down." [...]
    IBM's standard recruiting pitch emphasized benefits as part of total compensation, Pilch said. As a manager, he delivered that pitch often. ''I used to tell these kids (they'd) have benefits for the rest of their (lives),'' he said. ''I probably lied to a thousand people, and I don't like that.'' Bonnie Bartivic of Fishkill was impressed with IBM's benefits when she joined the company ''young and naive,'' and stayed for a career. Benefits were stressed when she was hired, Bartivic said. ''Managers said that was the big thing.''
  • New York Daily News: Did his duty - then lost his job. Excerpt: Michael Warren, a native of Port Jefferson, L.I., is suing International Business Machines Corp. for firing him because since 9/11 he's been called up too often by the Army Reserves. Today, Warren serves his country in a time of war as he wages a second David vs. Goliath war against one of the giants of corporate America. Warren's attorney Brendan Chao says IBM is in violation of Uniformed Services Employment and Reemployment Rights Act and the New York State Soldiers and Sailors Civil Relief Act, laws that protect reservists from being fired for military service. [...]
    "The most egregious part of this ruse is that IBM allowed Warren to keep working until a big $6 billion Chase-J.P. Morgan deal was completed," says Chao. "They needed him on that deal." In fact, Chin, in his ruling, also said: "Under these circumstances, a reasonable jury could surely find that the most likely explanation - indeed, the only logical explanation - is that IBM discharged Warren because of the continued absences caused by his membership in the reserves and the possibility that he would be summoned to additional and possibly extended service." Kevin Lauri, IBM's attorney in the case, declined comment, referring inquiries to the IBM communications office, which didn't return a phone call.
  • MSNBC News: IBM pact nixed, Spherion closes local office, lays off 163. By Leo John. Excerpt: Spherion Corp., a temporary staffing company, is shuttering its Triangle offices and laying off all 163 employees. Spherion, which lost a contract to provide staffing services to IBM, informed the dislocated worker unit of the North Carolina Department of Commerce of the cuts on Feb. 16. "Spherion will be permanently terminating the employment of all of its employees working on the IBM Complementary Workforce contract at this facility," the company wrote in a letter to the Commerce Department.
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