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Highlights—December 3, 2005
- New York Times: Age
of Anxiety. By Paul Krugman. Excerpts: Many eulogies were published
following the recent death of Peter Drucker, the great management theorist. I was
surprised, however, that few of these eulogies mentioned his book ''The Age of Discontinuity,''
a prophetic work that speaks directly to today's business headlines and economic
anxieties. Mr. Drucker wrote ''The Age of Discontinuity'' in the late 1960's, a time
when most people assumed that the big corporations of the day, companies like General
Motors and U.S. Steel, would dominate the economy for the foreseeable future. He
argued that this assumption was all wrong. [...]
American workers at big companies used to think they had made a deal. They would be loyal to their employers, and the companies in turn would be loyal to them, guaranteeing job security, health care and a dignified retirement. Such deals were, in a real sense, the basis of America's postwar social order. We like to think of ourselves as rugged individualists, not like those coddled Europeans with their oversized welfare states. But as Jacob Hacker of Yale points out in his book ''The Divided Welfare State,'' if you add in corporate spending on health care and pensions -- spending that is both regulated by the government and subsidized by tax breaks -- we actually have a welfare state that's about as large relative to our economy as those of other advanced countries.The resulting system is imperfect: those who don't work for companies with good benefits are, in effect, second-class citizens. Still, the system more or less worked for several decades after World War II. Now, however, deals are being broken and the system is failing. Remember, Delphi was once part of General Motors, and its workers thought they were totally secure. What went wrong? An important part of the answer is that America's semiprivatized welfare state worked in the first place only because we had a stable corporate order. And that stability -- along with any semblance of economic security for many workers -- is now gone. Regular readers of this column know what I think we should do: instead of trying to provide economic security through the back door, via tax breaks designed to encourage corporations to provide health care and pensions, we should provide it through the front door, starting with national health insurance. You may disagree. But one thing is clear: Mr. Drucker's age of discontinuity is also an age of anxiety, in which workers can no longer count on loyalty from their employers.
- In a Yahoo!
message board post, Janet Krueger answers this question:
Please tell me if I have a valid concern here. I finish my 30 years in
2011 and will be 53 years old. Let us say I retire at 53 with my 30 years of service
completed. Now, let us play the worse case scenario game. If the
US Government Pension Guarantee Corporation ends up with the responsibility
for IBM's pension obligations after I retire, will my pension checks stop
or be reduced until I reach the age of 65?
Ms. Krueger replies: I don't think you are even close to the worst case scenario... In your case, the worst -- and most likely -- scenario, based on what has happened with many of your colleagues who are a little older than you, is that IBM will lay you off in 2009. This will leave you with a much reduced pension, no health care benefits beyond Cobra, and no job.Another bad and not impossible scenario is that IBM will convert all the second choicers to a new, but lower, cash balance plan. It should be noted that they can also convert the no-choicers from a cash balance plan that had 5% salary credits to one that has 3% salary credits -- after all, the cash balance accounts are not real, but just calculated based on the formula 'du jour'. This is especially likely if Congress proceeds with legalizing such conversions without any protections for older workers.Since the IBM pension fund was fully funded as of the last annual report, there is little likelihood that the PBGC would step in, especially since IBM has formed their new practise of laying off new employees before they vest in the pension fund and laying off older employees before they reach full retirement -- the policy isn't much good for individual employees, but it greatly enhances IBM's ability to squeeze more virtual income from the pension fund!
- Washington Post Writers Group: Rescuing
the Fragile Private Pension System. By Marie Cocco. Excerpts: It is, perhaps, to be done in the grand tradition
of burning the village in order to save it. When the House of Representatives returns
from its Thanksgiving break next week, lawmakers are poised to give corporations
legal sanction to cut the pensions promised to millions of older workers in the name
of rescuing the fragile private pension system. Of course, this is not what they
say they are doing. [...]
Among the revisions is a change that makes legal the conversions of traditional pensions to ``cash balance'' plans. This is a corporate cost-cutting endeavor which, for years now, has been stymied by lawsuits and government regulation as a form of illegal age discrimination. In a "cash balance" plan, workers earn pension credits consistently over a lifetime of work. Older workers who were previously covered by plans under which the amount of expected benefit would increase with longevity -- with much of the eventual monthly pension amount determined in the last years of work -- lose out.The Government Accountability Office reported in October that workers of all ages, not just those who are middle-aged, lose money when their plans are converted to cash-balance pensions. Despite corporate claims that the cash-balance pensions are great for young workers, a typical 30-year-old still loses about $59 a month in promised benefits when a traditional pension is converted, the GAO found. [...]The harsh treatment of middle-aged workers is the basis of dozens of age-discrimination suits. IBM pension beneficiaries, in fact, won a $1.7 billion settlement after a successful federal lawsuit. But such an injustice against the corporate bottom line, House Republican leaders believe, must not stand. So they immediately moved to make sure no future group of employees could win an age-discrimination claim. Tucked into the larger pension bill is language that basically pronounces cash-balance plans to be free of such discrimination. [...]The Senate bill represents the sort of trade-off that used to be common practice, but has become nearly extinct in this era of one-party political control and bare-knuckles partisanship. Roughly put, if corporations are entitled to legal protection from age discrimination claims, then older workers who are caught short in cash-balance conversions are entitled to have their benefits protected. This is not what companies want. The point of converting the pension is, after all, to save corporate money. So what if it comes out of the checks of future retirees? The trouble is that a Congress that blithely does the bidding of its corporate donor-masters is a Congress which has abandoned any pretense of representing the public. Surely House Republicans -- already beset by scandals, public disillusionment over Iraq and a pervasive sense among the citizenry that things have gone off track -- don't want to contend with campaign ads next year that charge them with robbing retirees of $238 a month. Or do they?
- ZDNet UK: Record rise in overseas IT workers. By Karen Gomm. Excerpts: As many as 22,000 foreign IT workers were issued with work permits for the UK last year, of whom 85 percent were from India, according to a report by the Association of Technology Staffing Companies (ATSCO), which extracted the figures from the Home Office. Ann Swain, chief executive of ATSCO, said the UK is not only outsourcing low level IT jobs to India but is also receiving high level expertise from the region. "The transfer of jobs between the UK and India is now very much two way traffic. "The irony is that while low-skilled IT jobs continue to be shipped to India, highly skilled Indian IT professionals are coming to the UK to take up managerial roles," she said. [...] PayScale, which claims to be the largest database of employee salary information in the world, said a seasoned software programmer in India is currently paid $11,423 (£6,649) a year, roughly one fifth of a UK equivalent.
- Los Angeles Times: As Profits Surge, Workers Still Wait. By Tom Petruno. Excerpts: This is Wall Street's version of comfort food: Corporate earnings keep rising at a double-digit pace while workers are lucky to get even low-single-digit wage increases. For the last few years, those trends have been dependable and soothing for many stock market bulls — if not for the average worker. It's a world in which share prices are underpinned by healthy earnings while inflation risks are muted because employee pay isn't in danger of an upward spiral. [...] As for the workers whose toil is producing these handsome results, wages and salaries for all private-industry employees rose 2.2% in the 12 months ended Sept. 30, according to the government's employment cost index. That was down from a 2.6% increase in the year ended September 2004. Add in benefits such as healthcare coverage, and total employment costs were up 3% in the most recent 12 months, compared with 3.7% in the previous period, government data show.
- NewsMax: GM CEO Secures $4.6 Million Pension. By Carl Limbacher. Excerpts: As General Motors slashes jobs, closes plants and battles to avoid bankruptcy, the company’s CEO has set up a retirement plan that will pay him at least $4.6 million a year – nearly twice his current salary. G. Richard Wagoner, who the New York Post calls "the greediest, most undeserving CEO since Chainsaw Al Dunlap,” was named GM’s chief financial officer in 1992, when the company had a global payroll of 750,000 employees. Under Wagoner’s command as CFO and, since 2000, CEO, the carmaker has seen its employees dwindle to 324,000. [...] The carmaker’s pension fund is under-funded by more than $45 billion, according to the Post. But Wagoner has nothing to worry about. He has a Supplemental Executive Retirement Plan, which allows a company to use after-tax dollars "that rightly belong to shareholders to shower riches on the CEO instead,” the Post reports.
- New York Times: Sometimes,
a Tax Cut for the Wealthy Can Hurt the Wealthy. By Robert
H. Frank. Excerpts: WHEN market forces cause income inequality to grow, public policy
in most countries tends to push in the opposite direction. In the United States,
however, we enact tax cuts for the wealthy and cut public services for the needy.
Cynics explain this curious inversion by saying that the wealthy have captured the
political process in Washington and are exploiting it to their own advantage. This
explanation makes sense, however, only if those in power have an extremely naïve
understanding of their own interests. A careful reading of the evidence suggests
that even the wealthy have been made worse off, on balance, by recent tax cuts. The
private benefits of these cuts have been much smaller, and their indirect costs much
larger, than many recipients appear to have anticipated. [...]
On the cost side of the ledger, the federal budget deficits created by the recent tax cuts have had serious consequences, even for the wealthy. These deficits will exceed $300 billion for each of the next six years, according to projections by the nonpartisan Congressional Budget Office. The most widely reported consequences of the deficits have been cuts in government programs that serve the nation's poorest families. And since the wealthy are well represented in our political system, their favored programs may seem safe from the budget ax. Wealthy families have further insulated themselves by living in gated communities and sending their children to private schools. Yet such steps go only so far. For example, deficits have led to cuts in federal financing for basic scientific research, even as the United States' share of global patents granted continues to decline. Such cuts threaten the very basis of our long-term economic prosperity. As Senator Pete Domenici, Republican of New Mexico, said: ''We thought we'd keep the high-end jobs, and others would take the low-end jobs. We're now on track to a second-rate economy and a second-rate country.''
- New York Times: Middle Class Gets in Line for Help With Rising Heating Bills. By Paul Vitello. Excerpts: The main government assistance office in Suffolk County sits just off a busy road in an office park surrounded by a neighborhood of deep lawns and two-car garages. Everyone for miles around uses that road every day. But until recently, hardly anyone from the neighborhood -- people whose status in the middle class was thought secured unquestionably by homeownership -- ever turned into the office park to seek help inside the county's nondescript building. This year, they have come in from the fear of the cold. They are retirees, young couples, the temporarily unemployed, the two-income families stretched to the limit of second mortgages and credit cards, a slice of the suburban demographic that social workers call ''mortgage rich and pocket poor.'' The cost of natural gas heat, already high, has risen 50 percent since last year. Home heating oil prices are up 30 percent. What that means for the larger economy will be divined by economists.
- National Public Radio: Health Care Costs and the Future of U.S. Labor (audio). Day to Day, November 23, 2005 · Madeleine Brand discusses the national employment outlook with Andrew Stern, president of the Service Employees International Union, the largest and fastest-growing union in the United States. Stern warns that mass layoffs -- such as those announced earlier this week by GM, which plans to shed 30,000 workers and close North American production facilities -- will continue unless the United States moves away from a health care system that places most of the financial burden on employers.
- New York Times: Gimme an Rx! Cheerleaders Pep Up Drug Sales. By Stephanie Saul. Excerpts: As an ambitious college student, Cassie Napier had all the right moves -- flips, tumbles, an ever-flashing America's sweetheart smile -- to prepare for her job after graduation. She became a drug saleswoman. Ms. Napier, 26, was a star cheerleader on the national-champion University of Kentucky squad, which has been a springboard for many careers in pharmaceutical sales. She now plies doctors' offices selling the antacid Prevacid for TAP Pharmaceutical Products. Ms. Napier says the skills she honed performing for thousands of fans helped land her job. ''I would think, essentially, that cheerleaders make good sales people,'' she said. Anyone who has seen the parade of sales representatives through a doctor's waiting room has probably noticed that they are frequently female and invariably good looking. Less recognized is the fact that a good many are recruited from the cheerleading ranks.
- Computerworld: Firm that underpaid H-1B workers to pay fine, $2.25M in back wages. By Patrick Thibodeau. Excerpt: Computech was founded in 1996, and the settlement covers violations alleged to have occurred between 1998 and 2000. Within two years of its founding, the company had brought on more than 200 foreign workers. The company failed to pay these workers minimum required wage rates and “frequently” benched workers, the DOL said in a statement. Benching refers to the practice of not paying workers in between contracting jobs.
- Computerworld: Analysis: Antioffshoring
legislation heats up.
Some measures seek to end the offshore outsourcing of jobs altogether. By Nancy Weil.
Excerpts: Groups of service and blue-collar workers have mobilized to support laws
restricting offshoring. Rescue American Jobs, for instance, has a legislation tracker
on its Web site and has as its mission the task of “building the largest American
workforce mobilization in history” in response to outsourcing and offshoring.
The group, based in Pittsburgh and supported by the United Steelworkers of America,
contends that offshoring is a consequence of “executive greed” and urges
its members to action.
On the other side of the spectrum is the Technology CEO Council, a group of leading IT companies, including Dell Inc., Intel Corp., IBM and Motorola Inc. The group posts on its Web site “10 common myths about worldwide sourcing,” including a fact that even some in the antioffshoring movement will acknowledge: that the number of U.S. jobs lost to offshoring is a small percentage of the total workforce.
- Washington Post: Pensions Unzipped. By Abigail Trafford. Excerpts: Tis the season for calendars, and the grabber this holiday season is the "Stewardesses Stripped (of their Pension?)" calendar for 2006. It features five gorgeous 50-plus women in the buff, covered with enough feathers to permit display in the kitchen but showing enough skin to get public attention. These current and former flight attendants for United Airlines are protesting the loss of their company-funded pensions and they make Diane Keaton, the menopausal chick icon of the movie "Something's Gotta Give," seem like a Victorian prude.
- Wall Street Journal, courtesy of Factiva: Gray
Is Good: Employers Make Efforts To Retain Older, Experienced Workers. By Sue Shellenbarger. Excerpts:
Traditionally, many employers have viewed older workers as inflexible, less productive
than their younger colleagues, and more expensive because of higher salaries and
health-care costs. When hard times force layoffs, older workers are often the first
to get the ax. But now, many employers are at least giving lip service to retaining
older workers. And a few are taking concrete steps to actually do so -- seeking out
older workers and retirees with needed skills, rooting out age bias, and setting
up complex flexible work arrangements tailored to their needs. [...]
Some companies are recognizing that older workers are repositories of hard-to-replace knowledge critical to their businesses, says Eric Lesser, an associate partner in Cambridge, Mass., with IBM Business Consulting Services. As workers retire, companies worry about losing relationships with suppliers and distributors, as well as the ability to maintain aging equipment, such as plants, machinery or other gear built to past standards, he says.
- W.P. Carey School of Business: Dubious Protection: New Medicare Drug Coverage Could Erode Retiree Perks. Excerpts: If Congress gives it, will employers take it away? That was a question lawmakers considered when debating prescription drug coverage as a new Medicare add-on. In fact, the Medicare Modernization Act of 2003 provides $71 billion over the next 10 years to reward and repay employers who keep "qualified" retiree drug coverage in place. This year, it looks like most employers will take the bait and enjoy the cash subsidy. But what about next year? The shrinking prevalence of employer-sponsored health insurance is a longstanding trend, and many foresee further erosion to retiree benefits ahead.
- Nostalgia from IBM: IBM attire. The way we wore: A century of IBM attire. Excerpt: It wasn't too long ago that some observers said that IBMers wore a uniform of pin-striped suits, white button-down shirts, rep ties and wing-tipped shoes. Who us? While it may have been true there was a time such attire was not uncommon in IBM offices, it is also true that pin-striped suits, white button-down shirts, rep ties and wing-tipped shoes were not unique to IBM -- then or now. In fact, IBM men and women, like people everywhere, have tended to dress pretty much in the fashions prevailing in their own period and place. As the style of business clothing around the world has evolved and varied with the passage of time, so too has the appearance of IBMers changed from year to year and from locale to locale. Here -- in a kind of diversity fashion timeline -- is an album of just some of the many people in many countries who helped to make IBM a 20th century global success. And, aside from a baseball team in 1938, there's not a uniform among them.
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