However, analysts questioned whether the good margins in the services business were due to labour migrations outside the US.
“We were very specific in our overall business model for the 2010 road map and 2015, of our intention to pull spend and drive productivity as a global corporation,” Mr Loughridge responded. “Services businesses are a big beneficiary of that large structural corporate take-out.”
Consumption drives the economy, not profits. You don't get much consumption laying waste to the middle-class, sending millions to the unemployment line and then declaring record profits. 1/2 of all capital gains are "earned" by only 300,000 Americans. Taxed at the lowest tax-rate of 15%.
I don't want to hear "hats off" to Sam and Ginni, them is fightin' words. Sure it trickled down to us - we who were lucky enough to be (so far) grandfathered into the world of pensions (though mine is frozen), and medical benefits (FHA for me). Quarkie, the world is changing and the new Gilded Age is almost upon us.
You won't have a middle class until the COST of hiring employees in US and expanding businesses here is lowered. I would expect Unions and others would want to lower the cost of doing business is US. Instead the fighting seems to be always Unions/workers versus management. Lowering the cost of doing business in US may sound like a right wing position but I don't think it should be.
With the current cost per employee for companies in US, companies are sending 'portable' investments overseas and with trade imbalance China and others are buying operations in US (those with cost or location advantages) and taking the profits out of US. History is not a good guide because of the post WW2 global advantage the US had in the world and then the debt driven consumption masked the underlying problems. A strategy which views the company as the only problem will not be a long term winner, in my opinion.
I see Germany still one of the largest manufacturers in the world with manufacturing some 25% of their economy...versus 15% here. And Germany is certainly highly regulated with high living standards, strong labor unions, and workers rights. What they have that we don't have, is a government that helps keep manufacturing in their country. Also the severance policies in many European nations mean that firing someone can cost up to 2 years pay. So there's fewer layoffs in Europe.
A lot of conservatives are making the case that Greece, Portugal and Italy are examples what happens when too much "social-reform" interferes with the workings of free trade. To those people I say, stop cherry picking data - the following countries in Europe have LOWER unemployment rates than the USA and higher labor costs: Germany, Sweden, Belgium, Denmark, Norway, Netherlands, Finland, Austria, and more.
German banks do not readily lend to German entrepreneurs seeking to open factories in China either.
I think this whole conservative revolution has spawned a rash of amateur economists whose pet theories nicely support the destruction of worker's rights, pensions, healthcare, etc. For years our model worked and the new model causes more money to pile up in the hands of fewer and fewer people. The 6 Walmart heirs now have combined wealth greater than the wealth of 105 million American adults. 1 out of every 105 jobs is a Walmart job. 1/2 of the capital gains from profits now coming from the 8 million middle-class jobs destroyed are going to .1% of Americans. You not only favor this, you think it's sustainable.
I point up this example again and again - the Chinese worker making iPads cannot afford to pay the US price for one, or probably even the much lower Chinese price. Our recently doubled-profits depend on many well-off people buying the goods produced by many people working in slavery conditions. Eventually profits will have to come down, and eventually, growth in the world must slow, and now only China and India are growing at 9%.
The latest PBC cycle might be an indication that IBM is gearing up for a leaner 1st QTR 2012. That is probably a reason why many, many employees got a lower PBC and more have entered the twilight world of receiving a PBC 3. It is strange that IBM posts higher and higher profits and the employees suffer more and more. Employees make the money for IBM and allow IBM to earn their revenue. So shouldn't the employee's PBC at least stay the same or improve (less PBC 3s, more PBC 2+s and 1s)? I guess now in IBM the executives have convinced themselves and everyone else that they only make the record profits and bigger and bigger revenues and non-executive employees are an evil expense to blame for not making more of a record profit which hurts IBM and also executive compensation, bonuses, stock options, and awards.
We know how IBM reacts when they beat the 'street each and every quarter. We see it so regularly it's now routine. It's easy to lead and be on top when all is going rosy, but it takes real leadership to do the right things, with conscience and conviction, when storm clouds finally do arrive.
This is another reason IBM is saddling many more employees with unfairly low PBCs. Every little bit of benefits IBM can continue to take from an employee means more IBM profit and ultimately more wealth and entitlements for the likes of Sam and Ginny and the rest of the IBM executives.
Also some Cash balance folks who were almost 40 in 1999 got an enhanced Annuity option. A friend of mine had Cash Balance, was given a 9 month bridge to 30 years, was age 51, and receives $1500.00 a month from the enhanced annuity. Benefits should inform you of this option but it pays to do your research, and if you have a 3 PBC you might have extra time. I do know of PBC 3's who made their way back to a 2+ recently, but they were absolutely indispensable to their group.
LOA's and bridges: If you are within a year of retirement eligibility, I believe they are still offering a bridge to full retirement if you lose your job. The 1 year pre-retirement LOA is for when *you* decide to retire, but you get nothing for a year, except maybe COBRA coverage, which is expensive. For that LOA you need to be exactly 54 (with at least 14 years service) or 29 years service regardless of age. FHA eligibility is a factor.
For the enhanced annuity and the traditional pension there is a bump in payment amounts when you retire at full eligibility.
Again, most people don't bother to understand their benefits so thinking they might join a union to help our cause is maybe asking a lot. What a placid lot the IBMers are. Maybe it takes slave blood to work here for so many years.
The only reason I can think of the 40 year old criteria was used by IBM is to avoid age discrimination suits. But you can say you were discriminated based on your age since you were not yet 40 years old at the time of the retirement medical change to the FHA.
It still amazes me how misinformed and the assumptions IBMers make about the provisions of the FHA since it was instituted in 1999 (the same year of the cash balance pension changes). IBMers are all convinced they'll get it no matter what.
I am curious on how much the post retirement IBM insurance costs.
Is it something like $10k a year for a couple with a $10k deducible?
I am guessing when FHA runs out, I can pay for it. Is IBM's post employment health insurance cost competitive? I was wondering if maybe it is cheaper to buy health insurance on the open market than from IBM.
I believe that for two people (you and a spouse) you can figure on around $15,000 or more a year, not including dental or eye insurance. That will probably go up rapidly year to year as IBM puts its retirees in a different insurance pool than its employees. This saves the company money since the rates for employees (who are younger) will be much lower than those for retirees (who are older.)
A key point of the FHA is to never spend it down to zero. As long as you have some money in it, you can continue to buy insurance from IBM...at whatever cost they choose to charge you, of course.
If you are one of those rare individuals who has managed to avoid all health-related baggage you can probably actually get coverage at that rate. More likely, having watched several of my friends go through the process, the insurance companies will find things that cause your premiums to go up, sometimes dramatically, as they go through the underwriting process.
So, unless the company has offered to actually write YOU coverage at the price(s) you have in front of you be very wary of what you see! TK
I looked at the IBM offerings and considered the Aetna Integration Plan A but because I was comfortable with last years BC/BS PPOII plan I chose to go again with it for myself and to add enroll my wife also this year. The plan includes the features I want and the price was significantly lower on the open market than what a BC/BS plan cost through IBM.
The IBM BC/BS plan (an HMO) covered things like primary and specialist visits at a lower per visit cost but the monthly premium was $570 for my wife and I. The BC/BS PPOII that I called up for on my own cost $94 for the both of us. Neither of us was asked to verify our health status. This is the second year I am on it and the first year for my wife.
I just don't see any benefit to the $3000 that IBM contributes for me showing up in the monthly cost if I chose to use it. Am I totally missing something. Thanks, George
And also consider a plan with no cap for prescription. Some plans have none or are capped at a few thousand a year. You never know when a serious illness will hit with huge drug costs (and why we have insurance).
If you are healthy, consider a high deductible plan. You are essentially self-insuring for the small stuff. This all depends on the risk you can accept and can afford.
Also pre-existing conditions and others issues may change that open market premium. Get a formal quote. Sometimes agents might be a source to help pick the insurer best for your needs. Watch out at renewal as insurers make their money here by auto renewals as people get lazy and don't check premiums/feature changes. (True for auto and home insurance as well).
If you leave the IBM FHA with zero money in the account or had access-only coverage, you cannot get back in and cannot consider the IBM Medicare supplemental FHA plans. These plans have a different pool of people and different pricing and benefits. But then, you are far away from age 65 and perhaps have different considerations like hopefully getting a job within that 10 year span.
Fortunately for newly RA'd IBMers, I assume you still get something similar to the 6 months TEMP coverage (continue with your employee plan "as is", and mine was zero premium), and then the next 12 months (that gives the full 18 months COBRA) paying for the cheaper employee plan (cheaper than early retiree FHA plans). So you only have 6 really painful months until 2014 of paying the higher costs for insurance on the open market or an IBM early retiree FHA plan.
Like ncdad1, I'm also struggling with unemployment/pension decision. I live in a state (yep, one of those southern conservative states) where you cannot collect unemployment with pension. My pension would increase $30 a month (in 6 months) if I delay pension for now and play the unemployment game. Not sure it's worth it. Any comments welcome and thanks to everyone for theirs.
I couldn't delay the pension and of course it's peanuts, not an unbelievable amount like some here, but it's something.
But overall, even given the humiliation of being fired along with 5K others by moronic managers and the joke that is the FHA and the incredible density that is the administration of the UI in NY and the paltriness of the pension for the real workers? Life after IBM is glorious, it's fantastic. It's not economically rewarding or just or even viable, but being out of IBM with a cessation of the soul crushing life shortening stress?
As they say in the commercial: priceless! Good luck to you, teamb562.
The low deductible plan has a deductible amount of $507/$1521 for individuals/family. The high deductible plan amounts are $2500/$7500.
Once the money in your FHA account runs out, you can continue to buy insurance with your own money. There are some restrictions that you have to be careful about if you want to continue to have access to this coverage.
Once you are covered under Medicare, you can continue to buy supplemental insurance through the FHA plan. Although the IBM plans aren't inexpensive, you will be hard pressed to find insurance on the open market that is less expensive.
The number of high-tech manufacturing jobs in the United States has declined by 687,000, or 28 percent between 2000 and 2010, according to the report. Although the long decline of manufacturing employment in the United States is often attributed to the cheaper wages in developing countries, China and developing countries in Asia have in recent years sought to lure more sophisticated manufacturing operations — and better jobs — by expanding their engineering prowess through government investment in education and research.
The decline in U.S. manufacturing as a share of the nation’s economy and employment over the past decade “is not solely due to low-wage competition,” the president’s Council of Advisors on Science and Technology wrote recently. “We cannot remain the world’s engine of innovation without manufacturing activity.”
Fewer companies plan to use global outsourcing, the practice of sending computer work out to professionals in other countries, the study called 2012 Canadian IT Staffing Outlook reveals. ...
Some 49 per cent of firms surveyed plan to add more IT staff this year, while only 10 per cent plan to cut staff, the report found. The rest, 41 per cent, plan to hold steady at current staffing levels. Contract employment is recovering faster than permanent jobs. ...
The use of global resourcing, previously called outsourcing, appears to be on the wane after a period of “explosive growth,” the study said. Some 50 per cent of companies surveyed sent work outside North America in 2012, up from a third of companies in the previous two years.
However, only 34 per cent of those using global resourcing plan to expand the practice this year, the survey found. “People have tried it but now are starting to see the chinks in the armour, the not-so-rosy side of doing that,” he said, referring to issues that arise when dealing with different languages, cultures and time zones. “People would rather hire locally as long as the price is right and the talent is there.”
Cons: Middle management has taken to politics big time - and its become a sad state of affairs. I hope IBM goes back to its glory days under Ginni and specifically in India. But the overall mindset of middle level managers is really depressing. Have been with IBM for more than 6 years. and it's sad to see how deteriorated it has become. I have tried to analyze this as rationally as I could - and trust me- the quality has gone from being good to just average.
Your peers would prefer gossiping more than talking about work at hand. Moreover, I have seen this prevalent across the IBM geography. Have traveled quite a lot - and this is really prevalent.
Lastly, when taking interviews the set *quality* criteria have been reduced by 70% to increase strength-reducing the overall quality of peer group. These guys (mid level managers) have gone to threatening people if they decide to go against certain policies. There is NO fear among them. Sad state of things.
Advice to Senior Management: Reverse things that were implemented during last 3 years. You need STRONG people managers at the mid level. Right now I see most as politicians.
Cons: I.B.M. - "It's better manual"! No useful applications with user-friendly interface to work with. Not a software company at all! Everything is done manually and as far as people make mistakes other people are employed to control the first ones and some other people to control the second ones and so on and so on. A lot of people who work in a company for 10-15-20 years, who are not ready for changes, are even afraid of young dynamic newcomers.
Management is more about politics, image, impression, moving themselves forward than about truthful forecasts, caring for employees, there work-life balance, etc. Friends bonuses/promotion mostly. Very bureaucratic. Everything takes a very-very long time.
Boring. Boring to be on that "certain position" and feel like you're wasting your time, using only 10% of your barin capabilities, sitting in the office doing nothing, just waiting in case your Manager needs some help. At IBM you either work 24x7 or do almost nothing.
Ability to work abroad or completely change your career path is declared, but rarely fulfilled.
Advice to Senior Management: Become open to changes, inspire creative ideas, creative approach to work and processes, promote young and dynamic, look around (i.e. outside IBM) and inspire all managers on all levels to do the same. Finally load your software development programmers and write user-friendly software for finance forecasting at least or buy that software!
Cons: I was hired to work 40 hours per week but because they keep raising the BU targets (almost 90% for 2012 for my particular situation), they expect me to work many hours OT for free just to meet my BU target. This effectively eliminates my vacation benefit of 5 weeks per year and also 2 of the statutory holidays. Either vacation is a benefit or not, you can't give it with one hand and take it back with the other. This BU target is up over 3% from last year. Oh, and that doesn't include any admin activities (training, time reporting, etc.) that they expect you to do on your own time or heaven forbid that you may be sick or on the bench for a day or two. Makes me wonder if they are just raising BU target each year to see when the uprising will come. For me, it's soon.
Advice to Senior Management: You're burning your employees out. When I started a few years ago, I kept hearing the message about work/life balance but NEVER hear it anymore. I think IBM Management has changed from a culture of caring about their employees longterm because they wished to retain healthy happy productive employees TO pushing employees so hard that they have no work/life balance. Be warned, this is not sustainable, your workforce is becoming increasingly disillusioned with your company.
Those talks, formally known as the U.S.-India Trade Policy Forum, are now off indefinitely. Reports suggest the talks fell victim to American negotiators' belief that India would not yield on their number-one priority: Increased access for U.S. firms to India's roughly one billion consumers.
Indian officials have of late been voicing concerns that it's becoming more difficult for skilled IT workers from their country to obtain work authorization in the U.S. "Uptake of H-1B visas this year is less than half of the annual prescribed limit and the rejection rates have gone up," said Sharma at an economic forum in Washington, D.C., in October. The annual H-1B cap, which stands at 65,000 for overseas workers, has since been reached.
Experience with U.S. companies not only benefits individual Indian workers, it helps fuel the growth of India's domestic IT market as those returning home facilitate the transfer of key tech and business skills to indigenous firms. U.S. proponents of a more-open immigration system, including New York mayor Michael Bloomberg, have argued that the H-1B program also benefits the U.S. economy by adding to the pool of skilled workers.
Not everyone is in favor of looser immigration rules for tech workers. Groups that represent American IT workers, such as WashTech and Alliance At IBM, have noted that a number of tech companies, including Microsoft and IBM, have laid off thousands of U.S.-born employees in the past several years even as they have brought in H-1B workers from India, China, and other offshore locations.
Critics also point to a recent study by the General Accountability Office that found that 54% of H-1B visa recipients were entry-level-caliber workers, even though the program was originally designed for highly skilled professionals.
Selected reader comments follow:
We (Americans) cannot go to India and compete for their jobs, but they want to have complete control of the IT arena. They are NOT the Best and Brightest as was sold to the politicians and managers within companies; they are ONLY CHEAP.
As the story goes, they came to help us for the Y2K window - they started showing up around 1998 or so. They were to help - as companies needed some extra assistance to review applications and make code fixes etc. Somewhere along the line, the story changed. India built an IT temp worker industry around exploiting the H1B visa, and now there is a sense of entitlement to the share of the American IT market. Supporting evidence is the resistance and complaints to changes and modification to the visa program i.e. increased fees. Running parallel to this, the temp workers began to regard themselves as 'immigrants' - when in reality, the H1B visa is a non-immigrant visa. More on this later.
As American corporations recognized the value in cheaper labor and easy to dismiss workers that they didn't have to provide benefits for, the Indian body shops became successful and regarded this as a legitimate business model. In support, they began working the resumes, honest or not, to appeal to HR departments and fraudulent resumes became accepted practice. Bear in mind, here in the US as a citizen, you get fired if they find you lied on your resume.
Resistance from the veteran IT workers that built the industry from the ground up started to grow
Recognizing that their business model was at risk and evidence began to mount surrounding the fraudulent practices, nepotism and corruption, the Indian body shops began a propaganda campaign through NASSCOM. The program is designed to protect their model by claiming worker shortages, brain drain, inferior American skill sets and recently, the dire potential of these workers going home and the US will lose out on innovation. There are claims of globalization, and the world is flat and free trade... the spin goes on and on.
The temp workers organize and conspire to find ways to extend their stay in the US as 'immigrants' although it was known that there were no guarantees to citizenship when they set foot in this country - in such groups as immigration voice. They coordinate, as non-citizens, to lobby our politicians to pass bills to further their agenda to enable them to stay. This is where the term 'immigrant' ties to the alarming theory of potential innovation loss. There is an O-1 visa for truly gifted individuals, and the H1B visa recipients are chosen by lottery. Referencing the number of H1B visas available every year, one has to question the true skill sets of so many people waiting to be chosen from the lottery.
With unemployment rates so high in the US, there is no reason to continue to utilize foreign temp workers. There isn't a shortage of workers, just a lack of willingness to pay Americans a fair wage to support their cost of living.
On Thursday, Pension Benefit Guaranty Corp. director Josh Gotbaum fired back, stressing that American has benefited from congressional breaks that have reduced its pension expenses. "American has more than $4 billion in cash; some of that money should already have been paid into its pension plans," Mr. Gotbaum said in a statement. "However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress's generosity by turning around and killing the plans anyway."
That is among the findings of a study by the Urban Institute’s Eric Toder and Karen Smith, which was published last month by the Center for Retirement Research. Traditional pension plans tended to be an extra perk that employers provided on top of salary. In the past decade or so, though, many companies closed those plans in favor of 401(k) savings plans. As part of that switch, it has been well understood that workers need to put more of their income into retirement accounts. What is less understood is that even the money that employers contribute to those accounts is really coming from workers as well.
Toder and Smith looked at a Census database on pay and pension plans, and how much employers contribute. They looked at workers who had 401(k) plans in which their employers contributed to retirement savings automatically or by matching employee contributions and compared them with workers who had either a 401(k) with no employer contribution or no 401(k) at all. All else being equal, they found that workers at companies that contributed to their employees’ 401(k) accounts tended to have lower salaries than those at companies that gave no retirement contribution. In fact, for many employees, the salary dip was roughly equal to the size of their employer’s potential contribution.
The closely watched case has deep implications for whether companies can set their own retirement ages for staff and is likely to prompt the government to give clearer guidance about retirement policies since its abolition of the default retirement age last October. From last year, employers have been unable to make workers turning 65 leave the organisation purely because of age.
We can look forward to that famously deceptive graph showing how the cost of Social Security, Medicare and Medicaid are projected to soar as a share of the economy over the next two or three decades. Those with good eyes will notice that it is the cost of Medicare and Medicaid that are soaring, not Social Security.
This is primarily due to the projected explosion of private sector health care costs, not the impact of aging on the cost of the programs. That would lead honest people to focus on the need to get U.S. health care costs in line with costs in every other country in the world, but no one ever said that the Washington elites were honest. ...
President Clinton was all set to go along with a plan that would have reduced the annual cost of living adjustment for Social Security by as much as 1.1 percentage points. Had he gotten his way back in 1997, many seniors would be getting checks that are more than 10 percent smaller today. This sort of cut could have been devastating for people struggling to survive in the wreckage created by the incredible economic mismanagement of the last 15 years.
More recently, President Obama indicated his willingness to support an increase in the age of eligibility for Medicare and a cut of 0.3 percentage points in the annual cost of living adjustment for Social Security. These cuts would be a great hardship to tens of millions of near retirees who have seen much or all of their wealth destroyed by the collapse of the housing bubble.
The reality, though, is more complicated. The financial crisis caused more workers to want to delay retirement, but the labor market limited their ability to do it. The net effect of these opposing supply and demand forces has, if anything, been to reduce the employment rate among older workers. ...
To offset the adverse effects of the downturn, more older workers planned to defer retirement. But the world didn’t conform to all of these plans. A 2011 survey by the Employee Benefit Research Institute found that almost half (45 percent) of retirees left the workforce earlier than they planned, almost always for negative reasons such as health problems or losing a job. In the midst of a very weak labor market, work may not be available for all the older workers who want to keep working. ...
The bottom line is that people’s retirement decisions aren’t always entirely voluntary. In the current debate over the retirement age, that’s worth remembering. Just last week, the Congressional Budget Office estimated that raising the age at which Social Security retirement benefits can first be claimed from 62 to 64 would ultimately increase the size of the labor force and the economy by a bit more than 1 percent. That sounds pretty attractive.
But many people claimed early retirement benefits in 2009 and 2010 out of desperation. Even under more normal conditions, some of the people who want to work longer won’t be able to.
We commend Governor Cuomo's call to give all New Yorkers an equally important voice in the political process. Like the Governor, we believe that public financing of New York elections will help level the playing field for all candidates and ensure our members' votes matter and their voices are heard. Enacting reform this year will be a enormous step towards removing the many blocks keeping average citizens from participating fully in our Democracy.
Over the coming weeks and months, CWA Members in New York and nationwide will be fighting back against the money in politics that is destroying our democracy; contacting their legislators and demanding reform at the federal and state levels. Corporations are not people, and should not be afforded the opportunity to manipulate the political process in their favor against the interests of middle-class Americans. We hope other leaders will follow Governor Cuomo's bold example and propose similar measures.
Before filing the appeal you need to read all the info IBM has on appraisals and ratings on their web sites. Then try to use IBM own words, systems (email, labor claiming, change and problem management, etc) and documentation to refute the 3 appraisal. Request a five member panel review. You will get three employees and two managers on your panel chosen at random. Most employees in IBM are aware of how management treats its employees and that the PBC process has been compromised and is now used as a way to suppress wages and reduce/outsource employees. So if you can make a sound case you may have a better chance than you think. -Jake-
Can you NOT learn anything from these replies? Can you NOT deduce what to do after reading these replies? Can you NOT read at all? Sorry to be so harsh; but it is apparent that the Alliance has been telling you the the ways in which you can bring a union into IBM. They've spelled it out many times, and they've provided links to other sections of their web site to give you MORE information and help so that you can make an informed decision. WTF else do you need? Join the alliance and get busy growing the numbers of US IBMers that join and start standing up to US IBM management. Get busy organizing or get busy losing your job and your livelihood. -Read Much?-
A newly released study by the Employee Benefit Research Institute determined that nearly a quarter of individuals above age 50 were trimming costs by making changes to their prescription medication, including switching to generic drugs, obtaining free samples or going as far as to stop taking their medication entirely. About one in five of those surveyed also said they either skipped or postponed doctor's appointments. ...
Skipping the doctor's office may not be particularly calamitous for individuals who are in good health. EBRI's study, however, found that individuals who said their heath was "poor" are most likely to avoid health care services or reduce their meds to cut expenses. Of the participants who said they'd cut health care spending—and also claimed to be in ill health—about 30 percent adjusted their medications. More than one in three said they skipped medical appointments.
Future Spending Lower Than Expected. A major point that has been overlooked in the analysis is that CMS is projecting lower health spending over the rest of the decade. While it is almost certainly the case that the poor economy is having an effect on current spending, the recession doesn’t plausibly explain why projected health spending in 2020 is substantially below estimates made just two years ago. Either the original estimates were too high, or the tectonic plates underlying the health system are beginning to shift in anticipation of new incentives under health reform or in response to health care leaders’ efforts to transform care over the last decade. ...
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Mr. Johnson, a consultant who speaks with a light twang from his native Alabama, has never worked for a bank. Nor will his company, Johnson Associates, pay million-dollar bonuses to any of its 12 employees this year. But as one of the nation’s foremost financial compensation specialists, Mr. Johnson is among a small group of behind-the-scenes information brokers who help determine how Wall Street firms distribute billions of dollars to their workers. ...
In his annual compensation survey, a closely watched report that was sent to roughly 800 of the company’s clients in November, Mr. Johnson estimated that bonuses in the industry would fall 20 to 30 percent from last year’s levels.
That would still leave employees at firms like Goldman Sachs, where the average worker took home $430,700 in total compensation in 2010, much better off than workers in other industries. But it would represent further slippage from the sector’s highs before the crisis.
Bonus math in a financial downturn is a delicate art. Because the payments typically make up at least half of an employee’s yearly pay, erring on the low side can mean losing a star performer to a rival firm. “Someone on Wall Street might go apoplectic when he heard he got $3 million and another guy got $3.5 million,” Mr. Johnson said. ...
Mr. Johnson, whose business does not do executive search, relies on public filings, analysts’ reports and information from industry insiders to compile his compensation data. He says that although he has been responsible for helping firms devise extravagant pay packages — in one case, a single package worth about $100 million — he does so only because the competitive market requires it. “From my personal political standpoint, I wish people got paid less,” Mr. Johnson said of his Wall Street clients. “But my guiding star is not my political belief.”
That's lower than the tax rate most of America's middle class face and far lower than the 35 percent top rate after the Bush tax cut. (To put this in perspective, recall that the top income tax rate under Dwight Eisenhower was 91 percent.)
Newt Gingrich immediately pounced on Mitt's admission as evidence that Newt's proposed flat 15 percent tax is ideal, and wants to call it the "Romney tax." Newt's flat tax is a fraud. It would dramatically lower the taxes of most of the top 1 percenters and increase the taxes of most of the rest of us.
The real smoking gun is how Romney manages to pay only 15 percent on what's been his money-gusher of compensation from Bain Capital. Romney hasn't released his tax returns yet, but the most obvious answer is he treats his Bain income as capital gains -- subject to the current capital gains rate of only 15 percent. A loophole in the tax laws allows private-equity managers like Romney to treat their compensation as capital gains. It's legal but it's a scandal. Income from employment is employment income, period. ...
Congress has vowed for years to close this loophole. But somehow it persists. Even when Democrats have been in charge, they haven't been able to close it. Guess why. The managers and executives of private-equity funds are big donors to Republicans and Democrats alike.
How much does Romney make? We won't know until we get a chance to see his tax returns -- if we do -- but Romney described his $374,328 income from speaking fees last year as "not very much." If $374K is "not very much" of his income ... well ... at least we can understand why he feels he can casually make $10,000 bets as if he was just pulling a dime from his pocket.
Mitt Romney's admission that he probably pays a 15% tax rate shows us what is going on. For you or me, when our taxable income passes about $35,000, we start paying a 25% rate, much higher than Mitt pays on his millions on income. (That doesn't mean we pay 25% on money up to $35K, which is what most people think. It means any additional money we make after the $35K is taxed at that higher rate rate. If we make $35,001 we only pay an increase of ten cents. That's how tax brackets work.) ...
The justification for a special tax rate for gains from investing capital is supposed to be to provide an incentive to invest. But there is already a really good incentive to invest: to make a bundle of cash. Piling a special "incentive" on top of making a bundle of cash creates market distortions - moving investors away from deciding where to put their money based on the value and merits of the investment and toward tax-reduction schemes.
Experts on estate planning said it is highly unusual to accumulate such a considerable sum in an IRA, an investment vehicle restricted by annual contribution limits. It appears that Mr. Romney's grew so large mostly because it holds investments in Bain Capital, the private-equity firm he helped start.
Under federal law, Mr. Romney isn't required to pay annual taxes on the account's investment gains, and the bulk of his contributions to the fund are likely to have been pretax dollars, IRA experts say. As such, the Romney IRA has enabled the current Republican front-runner to defer paying taxes on a sizable portion of his wealth—although he could face high tax bills when he eventually withdraws the money. ...
Tax experts say that might explain why Mr. Romney's IRA includes holdings in Bain entities based in offshore locations, including one Cayman Islands entity that Mr. Romney listed as having a value between $5 million and $25 million. Michael Knoll, a University of Pennsylvania law professor, said using offshore blocker corporations to avoid UBIT "is a form of tax planning that happens all the time." Asked about the offshore investments in Mr. Romney's IRA, his aide said they were "in compliance with rules created to keep it tax deferred, just like it was intended to be."
Private equity executives such as Romney, who spent 15 years running Bain Capital, arrange to receive much of their compensation in the form of “carried interest.” This enables them to treat what would be work income for most people, taxed at rates up to 35 percent, as capital gains, taxed at just 15 percent. “It’s a method of converting one’s labor into capital gains in a way that’s unusual outside the investment management industry,” says Victor Fleischer, an associate law professor at the University of Colorado at Boulder whose 2007 paper on the topic helped spur calls in Congress to change the law. “Ordinary people wouldn’t be able to do this.” ...
Though he retired from Bain in February 1999, Romney negotiated a settlement that has allowed him to continue benefiting from the firm’s lucrative private equity funds and to invest alongside them in so-called co-investment vehicles, both of which generate income taxed at the 15 percent rate. The tax code’s treatment of income from partnerships in private equity, hedge funds, and real estate development means that some of the richest people in the country are taxed as if they made the wages of a bus driver or health aide. Last year three founders of the Washington-based Carlyle Group each earned $275,000 in salary. But they took home $134 million apiece in distributions from their funds, according to a Securities and Exchange Commission filing, making them eligible to pay low rates on much of their compensation. ...
Private equity firms gather large sums from pension funds, universities, and wealthy individuals, and typically use the money to acquire privately held companies or subpar units of public companies. After improving the companies’ performance, often while working in hands-on management roles or serving on the board of directors, they sell their acquisitions to other investors or take them public. The tax code treats those gains as if the private equity partners were risking their own money—like average Americans who invest in mutual funds—instead of counting it as salary for running or advising the companies they acquire. In most cases, the private equity firms put up only a sliver of the fund’s capital.
To say the obvious: to look at a photo of President Obama with his cabinet is to see a degree of racial openness — and openness to women, too — that would have seemed almost inconceivable in 1963. When we observe Martin Luther King’s Birthday, we have something very real to celebrate: the civil rights movement was one of America’s finest hours, and it made us a nation truer to its own ideals.
Yet if King could see America now, I believe that he would be disappointed, and feel that his work was nowhere near done. He dreamed of a nation in which his children “will not be judged by the color of their skin but by the content of their character.” But what we actually became is a nation that judges people not by the color of their skin — or at least not as much as in the past — but by the size of their paychecks. And in America, more than in most other wealthy nations, the size of your paycheck is strongly correlated with the size of your father’s paycheck. Goodbye Jim Crow, hello class system. ...
The Times recently reported on a well-established finding that still surprises many Americans when they hear about it: although we still see ourselves as the land of opportunity, we actually have less intergenerational economic mobility than other advanced nations. That is, the chances that someone born into a low-income family will end up with high income, or vice versa, are significantly lower here than in Canada or Europe. ...
Last week Alan Krueger, chairman of the president’s Council of Economic Advisers, gave an important speech about income inequality, presenting a relationship he dubbed the “Great Gatsby Curve.” Highly unequal countries, he showed, have low mobility: the more unequal a society is, the greater the extent to which an individual’s economic status is determined by his or her parents’ status. And as Mr. Krueger pointed out, this relationship suggests that America in the year 2035 will have even less mobility than it has now, that it will be a place in which the economic prospects of children largely reflect the class into which they were born. ...
Mitt Romney says that we should discuss income inequality, if at all, only in “quiet rooms.” There was a time when people said the same thing about racial inequality. Luckily, however, there were people like Martin Luther King who refused to stay quiet. And we should follow their example today. For the fact is that rising inequality threatens to make America a different and worse place — and we need to reverse that trend to preserve both our values and our dreams.
The new owner, American Pad & Paper, owned in turn by Bain Capital, told all 258 union workers they were fired, in a cost-cutting move. Security guards hustled them out of the building. They would be able to reapply for their jobs, at lesser wages and benefits, but not all would be rehired.
“We were told they bought the assets, not the union or the [labor] contract,” recalls Randy Johnson, who at the time worked as a machine operator and was a union shop steward. The workers – some the third generation in their families to have jobs there – eventually went on strike, and Bain closed the factory 5-1/2 months after acquiring it. ...
Bain Capital’s activities while Mr. Romney ran it from its founding in 1984 until he left in 1999 are being scrutinized now that he is front-runner in the Republican presidential race. Romney says that he knows business and that his work at Boston-based Bain led to the creation of 100,000 jobs. His business record and management prowess could be deciding factors if he’s the GOP nominee, because credibility on the issue of jobs is likely to determine who resides at 1600 Pennsylvania Avenue next January. ...
In an analysis of Bain Capital under Romney, the Journal estimated that Bain made $2.5 billion in profits on $1.1 billion invested in 77 separate deals. Of those 77 transactions, 22 percent ended with the firms in bankruptcy after the eighth year of the Bain investment. Bain disputes the Journal’s account as inaccurate. ...
The jobs track record for private-equity firms in general appears to be a wash. In an analysis issued in September, five economists, using US Census Bureau data from 1980 to 2003, examined what effect private-equity firms had on job creation two years after they had acquired a company. They found that employment at an acquired firm was down 2 percent. ...
That may be one reason some union leaders do not oppose private-equity takeovers. “To be honest with you, we have good relationships and bad relationships” with private-equity firms, says Leo Gerard, president of the United Steelworkers in Washington, D.C. His union has worked with private investors such as billionaire Wilbur Ross, who bought Bethlehem Steel after it went into bankruptcy. “He did the restructuring in a way that brought efficiency and helped firms survive,” says Mr. Gerard.
He is less positive about Romney and Bain, his union having dealt with them at least three times. “They take out ... fees [for themselves], flip the company, and away the company goes,” he says. They also fire the senior workers, says Mr. Gerard. “There is a reason the vulture capitalists do that: If they keep the older workers, they have higher pension obligations, obviously, with more years of service, and their health-care costs are probably higher because as you get older you need more medical care.”
He would get no argument from Loris Huffman. She had worked 40 years at the AmPad factory in Marion and was 59 when the plant closed.
“I was on the negotiating committee for the union, and we had to give up and give up until we could give no more,” Ms. Huffman recalls. “They tried to make the working conditions not very good.” AmPad began moving automated machinery out of the factory soon after acquiring it. “I think they were planning on shutting the plant down,” she says. “We were union, and they did not want that.”
Bain Capital bought AmPad in 1992 for $5.1 million. It borrowed heavily, boosting AmPad’s debt from $19.8 million in 1994 to $443.7 million in 1995, and Bain charged it tens of millions in fees. Bain took the firm public in 1996, making tens of millions more. AmPad, still saddled with debt, filed for bankruptcy in 2000. It has since reemerged as a private firm, based in Dallas.
The moves are familiar to anyone who's watched the auto industry struggle with its workers and union over the past several decades. But Caterpillar, unlike the automakers, hasn't suffered much economically. Indeed the company has long stood out for its profitability, in the last five years hovering above the top 13th percentile on the Fortune 500 list. In the last three months of 2011, as Caterpillar was pressing Canadian workers to give in to its requests, the company reported a 44 percent surge in profits from the previous year. Now, if workers continue to resist, Caterpillar appears to be threatening to take their jobs out of the country. Not to China or Mexico, but just over the border to Muncie, Ind., where desperate Americans are eager to take any job -- no matter how low the pay. ...
The situation at Caterpillar illustrates an emerging problem with the nascent economic recovery: While corporations are rebounding from the depths of the recession, working Americans aren't. Corporate profits are at their highest level in decades while worker compensation is at a relative 50-year low. Much hope has been placed in the rebound of North American manufacturing, but while the industry has added some 334,000 positions in the past two years, many of the new jobs don't pay the old middle class wages. ...
This is a major issue, experts say, and not just for those workers facing a lower paycheck. "It's a fundamental problem: Now we have a situation where there's not enough purchasing power in the American economy to feed this recovery," said Thomas Kochan, a management expert at the Massachusetts Institute of Technology.
But that changed, he said, when “five courageous justices” on the Supreme Court ruled in the 2010 Citizens United decision that “corporations are people,” that people are entitled to free speech, that free speech equals money and that corporations should thus be entitled to dump as much money as they like into the political water table, provided they don’t coordinate with the campaigns they’re funding.
It’s the super PACs that are funding the flood of negative ads that the candidates all say they hate, even though the Citizens United decision was widely praised by Republicans. ...
Near the end of the event, Colbert said that “pundits keep asking me if this is a joke,” but if that’s the case, of course, “then they are saying our entire campaign finance system is a joke!” (Nah, couldn’t be.) As Abraham Lincoln said at Gettysburg, Colbert added, “Give me some money!” We must stand for corporations, he said, mock solemnly, “because they have no legs.”
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