An article about unannounced layoffs reveals the larger truth

The WARN Act requires companies to give 60 days notice to employees that a layoff is coming. This isn't 60 days notice to those being laid off, but a blanket warning so that EVERYONE can live in utter, abject terror for the next 60 days. Still, that's better than being blindsided, which is what companies can do under circumstances not covered by the WARN Act.

In a New York Times article today, the deeper truth about American corporations is buried in an article focusing specifically on IBM, whose CEO, Samuel Polisano, announced strong January quarterly profits and told employees in a newsletter at the time, “Most importantly, we will invest in our people.” Of course he didn't say which people, because he then turned around and laid off 1400 of his company's employees. (For the record, Polisano made a cool $24.35 million in 2008. No, he's not running IBM into the ground the way other highly-paid executives are doing to the companies they run, but it's somewhat disingenuous for an executive to talk about investing in his employees and then axing over a thousand of them.)

But IBM IS hiring -- just not for well-paid jobs and not entirely in the US:

In January, for example, it said it would open a call center in Dubuque, Iowa, for corporate customers. It is to employ up to 1,300 people. And Mr. MacDonald, the human resources executive, said I.B.M. was hiring analysts and engineers to work on Internet software, health technology and smart electrical grids.

But I.B.M.’s American employment has declined steadily, down to 29 percent of its worldwide payroll of 398,445 at the end of 2008. The cuts have also come sooner and deeper in North America this year than in recent years.

As part of a government filing last week, I.B.M. said its work force in Brazil, Russia, India and China had climbed to 113,000. These are markets with faster growth than the United States, and less expensive skilled labor.

In interviews, I.B.M. workers whose jobs are being eliminated were mainly chagrined that the undisclosed cuts, and the timing, seemed to contradict the company’s public statements.

Rick Clark, 50, an engineer in East Fishkill, N.Y., had worked for I.B.M. for 11 years. He said he was disappointed in I.B.M. this time because the job cuts were deep and spread across so many businesses and came at a time when I.B.M. has been proclaiming its success. “I do think I.B.M., like other companies, has used this recession as an excuse to lay people off,” he said.

But the important fact to keep in mind is this, as Ross Eisenbrey of the Economic Policy Institute says at the end of the article:

“All our multinational companies are increasingly less American, except when they are asking for tax breaks and increased government spending in their industries,”

Norma Desmond would sympathize

Ah, the plight of yesterday's hot ticket.

Those who are longtime readers know that I have a weakness for Teh Cute, and for a while, nothing was cuter than Knut, the polar bear cub rejected by its mother at the Berlin Zoo and raised by one of his human handlers. Well, like many child stars not named "Neil Patrick Harris", Knut hasn't had a very graceful transition to adult stardom, though he still has his regular fans. But there isn't enough room to keep Knut at home, with his father, Lars, being the Big Kahuna at the Berlin Zoo, so like the other unemployed, Knut has to find another home:

Knut lives in a small section of the current enclosure, home to Knut's parents, Tosca and Lars, and two older females. Bear keeper Heiner Kloes said Knut, who will reach sexual maturity around the age of six, urgently needs enough space for him and a fertile mate.

The zoo's two eligible female bears will be too old to have cubs by the time Knut is ready to reproduce. Scientists estimate that there are between 20,000 and 25,000 polar bears in the wild, according to the International Union for Conservation of Nature, and the species is listed as a threatened species under the U.S. Endangered Species Act. Canada and Russia have listed polar bears as a species of concern, citing shrinking habitats.

"The survival of the species is more important than any individual," Kloes said. "I won't hang on to Knut if it means keeping him with an old lady," Kloes said, noting the zoo is already filled with enclosures for other animals.

There's a certaiin tone of Schadenfreude in the news coverage of the fact that there's no room for the former child star who so richly fattened the coffers of the zoo -- as if Knut somehow bears the blame for having the temerity to become an adult polar bear (which is far as I'm concerned does not mean he isn't cute). But with Knut having almost singlehandedly focused attention on the plight of polar bears, he deserves a bit more respect.

UPDATE: As if Knut being laughed at for having the temerity to grow up wasn't bad enough, Mona in the comments alluded to this. How the hell did I miss this? So sad....

The Indian Press: A Valuable Career Resource for US Tech Workers

One of the issues in the recently collapsed Doha Round of the WTO talks was India's insistence that the US grant unlimited numbers of visas to "service workers" (including IT professionals and engineers) from India and other developing countries. This topic was virtually ignored in the US media.

Shamefully, U.S. Trade representative Susan Schwab was agreeable to the idea. According to Rob Sanchez in one of his Job Destruction Newsletters,

"When it comes to temporary entry of business professionals we signalled that we are ready to have that conversation in the context of the Doha round," U.S. Trade Representative Susan Schwab told reporters.

Susan Schwab is eager to use our technology jobs as a bargaining chip, but surprisingly India isn't buying the deal. As proposed by the U.S. we will give away our technology jobs if India will allow our agri-businesses to export rice, wheat, and other farm products duty free. Indian farmers refuse to go along with the deal because they argue that our agri-businesses are government subsidized. They are worried about their jobs!

Luckily for American tech workers, the trade talks collapsed last week.

One thing I find amazing about this whole IT worker controversy is the fact that the interests of U.S. corporations, the U.S. government, the Indian tech industry, and Indian tech workers are so closely aligned. The only ones shunted out of the entire process are U.S. tech workers, whose sole purpose in life these days is to be used as bargaining chips on trade talk tables.

Praveena Sharma wrote a very good article for the Mumbai-based Daily News & Analysis entitled "IT Fears Protectionist Hiccups in the US". I've noted before how I'm not sure where the Indian public gets the idea that a new regime, or any regime in the US, will "...go in for sweeping reform on outsourcing." (Sweeping reform, as in, barring Indian tech workers from entering the country.) I'm certainly not seeing this happening based on reports in the US press.

Getting back to Sharma's article, the Indians are always very upfront about the raison d'etre for their IT industry. American companies rely on cheap Indian labor to lower their IT costs, and Indian companies rely on the US as a market for their commodity of human labor. Onerous filing requirements and numerical limits on the H-1B guest workers infringe on the ability of Indian IT companies to sell their "services" to the US market.

Nasscom chairman Ganesh Natarajan explains:

“Professional visas would have allowed free movement of people. Today, if you have to send someone from India to the US to understand a client’s need or any other work, you have to wait for months,” he said.

snip

“Last year, out of every three (H1B) visas applied for by a company, only one was issued. This year also the ratio was the same. The professional visa would have taken care of this irritant,” said Natarajan. This visa restriction has forced IT firms to hire more American workers for onsite jobs. This pushes up their labour cost. [Emphasis mine.]

And the result of this distasteful turn of events?

Usually, companies depute close to 25-30% of their total employees for onsite jobs. Earlier, most of the onsite jobs were carried out largely by workers from India. That is changing. Today, the proportion of US employees (including of Indian origin) in the onsite team has shot up. [Emphasis mine.]

N. Ganapathy Subramaniam, from Tata Consultancy Services, seems to admit that you can make a valid business case for hiring American workers.

"That is because the locals bring with them knowledge on local market, domain and technology. Customers are looking for value of both low-cost and high-cost locations.” Subramaniam felt the globally distributed work paradigm is a reality that the companies would have to come to terms with. [Note from Carrie: A paradigm shift that requires a complete change in mindset. American companies hiring local workers!]

The article goes on to state that top Indian body shop Wipro felt it was politically expedient to start hiring American workers at their U.S. offices. As I've noted before, Wipro believes American workers are fine as long as they are recent community college graduates with zero experience.

“Toyota has localised to such an extent that it is not affected by the protectionist policy of the US,” said Nandy. [Note from Carrie: This is probably Wipro's Sudip Nandy, their Chief Executive of the Telecom and Product Engineering Solutions Business Unit.]

It's worth noting that Toyota started opening up plants in the U.S. only to diffuse threats of American trade sanctions.

Thank goodness for the Indian press! It would otherwise be quite difficult for American tech workers to figure out their future job prospects in their chosen career field.

(Cross-posted to Carrie's Nation.)

Proposed Adjustment Assistance Program

The Financial Services Forum has once again commissioned economists Grant Aldonas, Robert Lawrence and Matthew Slaughter to produce a report based on their "Succeeding in the Global Economy" series. The new report, "An Adjustment Assistance Program for American Workers", appears to be an expansion of ideas they first presented in last year's report, "A New Policy Agenda for the American Worker".

To give a bit of background, the Financial Services Forum is a trade association consisting of CEO's from 20 of the top financial institutions in our country. Members include Kenneth Lewis from Bank of America, Vikram Pandit from Citi, Lloyd Blankfein from Goldman Sachs, and Richard Fuld, Jr. from Lehman Brothers. As CEO's, they are profiting quite nicely from the globalization of the world economy. Unfortunately, factory workers whose jobs are being shipped to China don't have the same warm fuzzy thoughts about free trade.

Until announcements like these start to outnumber announcements like these, it behooves our chief executives to stave off calls for tariffs and other protectionist policies by offering more generous unemployment benefits. The Adjustment Assistance Program (AAP), as described in the white paper, would help out workers by offering wage-loss insurance, continued health insurance coverage, penalty-free withdrawals from 401(k) and IRA plans, expanded access to worker training programs, and a more progressive approach to funding these programs through various payroll taxes. The expansion of unemployment benefits is one of the few programs we'll be seeing that will align the interests of both the working classes and the business community.

Although the authors take great pains to explain that globalization is not the cause of most of our job losses, they choose to model these proposed expanded unemployment benefits along the lines of the Trade Adjustment Assistance and Alternative Trade Adjustment Assistance programs, which are programs for production workers who become unemployed due to "...increased imports or shifts in production out of the United States."

I am not shy about admitting that I'm not all that good at taking a 30-page report and condensing it down to a single blog post review. I'll let you read the report if you're so inclined. It's well-written and easy to follow. I do want to comment on what I think are certain eye-opening highlights.

Wage-Loss Insurance
Like last year's report, this current report makes no pretense that the economic fortunes of average Americans are improving. Among the findings (on page 6 of the current report)

In 2007, for example, private-sector employment expanded by about 900,000 jobs. But this net increase masked the far more dramatic shifts below the surface – the economy created about 30 million jobs, while losing roughly 29 million. What that means is that, based on an average of four 40-hour work weeks a month, about 25,000 jobs are destroyed and created every hour that America is open for business.

Also on page 6:

Economic change and adjustment is essential to the health of the U.S. economy. Without all of this reallocation, average living standards would be harmed not helped. That said, adjustment presents very real costs to American workers, communities, and firms. There is considerable evidence that involuntary job loss can be costly. About two-thirds of displaced workers find new full-time jobs—but at an average wage loss of 13-17%. And this average disguises a wide range of experiences: 36% gained re-employment at or above previous earnings, whereas 25% suffered earnings losses of 30% or more.

The authors, and indeed, probably a lot of corporate executives, seem sensitive to one set of statistics from last year's report (page 37:)

....the share of national income accounted for by the top 1 percent of earners reached 21.8 percent in 2005—a level not seen since 1928. From 2004 to 2005, the mean income change reported by the bottom 90 percent of tax filers was a decline of about 1 percent; in contrast, the mean change for the top 1 percent of filers was a rise of 14 percent.

The AAP would set up a wage-loss insurance program that would replace 50% of a worker's lost wages for up to two years following the date of the job loss. On page 12 of the .pdf file, the authors reiterate that the program would be limited to workers age 45 and over, which is an obvious nod to the widespread impression that age discrimination against older workers is thriving. This program would obviously take the sting out having to take a lower paying job after losing your prior job.

I'm puzzled by this part of the current report (page 11 of the .PDF file);

Some have voiced concerns about possible moral-hazard implications of wage-loss insurance. One is that it would encourage the unemployed to take low wage jobs rather than continue searching for higher wage jobs, and would thereby result in fewer high-wage jobs in the overall economy.

On the one hand, it is certainly true that workers would have an incentive to take a job more quickly because remaining unemployed would now be more costly. This could lead them to take lower paying jobs than they might otherwise take. On the other hand, however, a high-wage job would now be more valuable and less risky. This might actually create an incentive to search longer when unemployed. [Emphasis mine.] We believe that the magnitude of these implications of wage-loss insurance are likely to be small, and are unlikely to offset the benefits of such insurance.

When I think of moral hazard, I think in terms of disapproving of programs that lead people to stay on the public dole for longer periods of time. The authors obviously want people to be more selective and hold out for higher paying jobs.

To me, the job market is a lot like selling a house. You may get a not-so-good offer now, but you may receive even worse offers in the future. We don't have crystal balls, so we have no way of knowing whether we are making the correct decision until it's too late to act. A lot of people would jump at the first semi-reasonable offer tossed their way because they simply cannot afford a longer period of unemployment. If people are pessimistic about their chances at re-employment, I'm not sure this 50% wage replacement incentive would keep people out of the job market for longer periods of time.

The authors also hint on page 12 that this program might only cover workers who have been employed at the same job for two or more years. This would obviously not work for people who have been forced into a career of short-term contract work, where two years of employment with the same company is an almost unheard of luxury.

Finally, I'm scratching my head at this statement on page 8:

Moreover, it [wage-loss insurance] can also benefit society by allowing workers to take riskier but higher-output jobs that pay higher wages.

Are they implying that too many workers are turning down a lot of risky but higher paying jobs? What are these risky high pay jobs? Are these start-up jobs? For example, an employee may opt to earn $80,000 at Pfizer rather than $120,000 at some frat boy's start-up company? Is there some sort of national crisis because too many people are turning down high paying jobs?

I figured out 15 years ago that we have no way of predicting job security. I worked for a company that was definitely on the downward slope, but managed to hang on for another three years. Several employees bolted for a new branch office being opened by an old and prestigious New York firm. The new branch office closed down just before Christmas that year. It might just be me, but I tend to go for the money unless I knew for certain the management is populated by idiots and I'd be miserable at the job.

Regardless, I'm sure many workers would consider themselves lucky to be faced with such a dilemma.

Health Insurance (Beyond COBRA)
It's amazing how the cost of health care continues to rise and the scope of health care coverage continues to fall no matter what policies are enacted. I think we all know COBRA used to be affordable but is now prohibitively expensive. We also know that COBRA does nothing for you if your employer never offered health care to begin with.

I actually like the AAP solution, of having unemployment insurance pick up all of the COBRA payments for workers while they are still receiving unemployment payments. If a worker can demonstrate that he or she is receiving medical coverage through a spouse, the worker could then collect an additional 10% bonus in their weekly unemployment check.

In a way, a worker could be better off with their medical coverage while unemployed. For example, a worker could be paying most or all of their medical premiums while employed. I assume that under the AAP, 100% of the COBRA costs would be picked up regardless of how much the worker was paying previously.

THE CATCH is, if your employer did not provide medical coverage, you would still lack medical coverage during unemployment. This fact sheet from the National Coalition on Health Care has all sorts of interesting tidbits. However, I'll zero in on one in particular.

The percentage of people (workers and dependents) with employment-based health insurance has dropped from 70 percent in 1987 to 59 percent in 2006. This is the lowest level of employment-based insurance coverage in more than a decade.

So, obviously, the trend is that the percentage of people with employment-based health insurance will decline in the next decade rather than rise.

Penalty-Free 401(k) and IRA Withdrawals
Penalties are already waived for certain situations, like for purchase of a first home, education costs, etc. The AAP would allow penalty-free withdrawals if you lose your job. Taxes on the withdrawals could be waived for payment of health insurance premiums.

I suppose this is a nice proposed benefit. However, it sucks that we don't have pensions anymore, and we need to tap into our retirement savings to get through economic downturns. For many people, like tech workers stuck in the short-term contract trap, raids on 401(k) accounts are common even when the economy is firing on all cylinders.

Retraining and Continued Education
We most often think of factory workers being retrained for skilled jobs when the factories shut down. As a matter of fact, that was the entire rationale for shutting down our factories over here and shifting production overseas. Thanks to retraining benefits, factory workers are supposed to better off after the factories close. I did a post at a site called Central Sanity, where I found that the Department of Labor determined that workers under the Trade Adjustment Assistance programs made 77% of their previous wage upon re-entering the work force. A Heritage Foundation report (one of the few times you'll ever find me quoting the Heritage Foundation) and a Government Accounting Office report both state that it's almost impossible to determine the outcomes of these retraining efforts.

Besides retraining factory workers, all workers need continuous education just to keep up with advances in their career fields. The AAP would offer expanded retraining opportunities for the unemployed as well as tax incentives to enable the currently employed to get additional training. One good point the authors come up with is the necessity of:

.....ending the absurdity of allowing the deductibility of training expense against income taxes only when those expenses are related to a worker’s current job. This is, in effect, a non-adjustment policy – one that provides an incentive to stay put, rather than build skills that would allow a worker to adjust with his or her employer and with the economy as a whole.

We would, as a consequence, recommend expanding the definition of training that qualifies for a deduction from current income taxes. All such expenses should be deductible, whether related to a current job or some prospective future job.

One gripe I've had with employer-paid training is that employers are increasingly reluctant (with good reason, I suppose) to provide training for any activities that might help you advance in your career field. This is one of my favorite proposals in the entire paper. If I foresee my job and/or employer disappearing, I have a good incentive to train for a new career field ahead of time when the pink slip hits my pay envelope.

Another recommendation is to set up 401(k)-like Worker Adjustment Accounts. Great. Just one more account to drain my paycheck, like my 401(k), HSA, Dependent Care, etc. accounts.

Unemployment Insurance
The final part of the paper deals with how funding for unemployment insurance benefits could be more progressive, which would allow funding of the wage-insurance, health insurance and educational programs through the AAP plan. Although the authors bring up how unemployment insurance does not cover part-time workers, and does not cover workers who have not worked the minimum amount of time, the AAP does not appear to offer any coverage for these categories. (Unless I'm really missing something.)

Final Thoughts
I laud the authors for offering serious proposals to address worker anxieties. Although the Financial Services Forum is a very prestigious trade group, I'm not sure when or if any of these proposals will be passed into law. Unless our corporate handlers adopt a completely different mindset, the recommendations offered by the authors will probably be the best we can hope for. The proposed AAP program repairs a few of holes in our safety nets, but does nothing to get rid of the underlying job volatility we suffer through.

(Cross-posted at Carrie's Nation.)

The Message Behind the Message

Media outlets can no longer ignore our souring economy when even official government statistics are now reflecting the bad news. It's safe to say that we now have inflation, declining home prices, stagnating wages (see chart on page 36 of the link), and rising unemployment rates. As soon as the statisticians run out of seasonal adjustments to tinker with, we might even be able to declare that we are entering a recession.

The reporting of our economic woes does not sit well with the financial elites. Pity those who can only maintain their lavish lifestyles by shipping our jobs overseas, devising even more complex and exotic financial instruments, and lobbying politicians for favorable treatment, while all the time relying on an endless supply of easy money courtesy of Ben Bernanke, Chinese investment, and the Japanese carry trade.

We've wised up to the fact that there's not a lot of good news to report in the economy. Financial publications are running out of creative ways to gloss over the bad news and emphasize the positive. Luckily, through the techniques of codespeak, subliminal messages and subterfuge, they might be able to keep the American public off the scent for a little while longer. Although London-based, The Economist's recent article, "Workingman's Blues", is a perfect example of one of those condescending "so simple even a [pick your favorite target: factory worker, Midwesterner, retiree, or soccer mom] can understand it" types of posts.

For those of you who are too busy to read the article, it basically says, yes, some economic indicators are heading downward, but these factors only affect people who don't really matter, like poor people, blue-collar workers and baby-boomers. The rest of us are just getting hysterical over negative media headlines and really ought to get a grip on ourselves.

For those of you with time to read the article, I offer you this simple translation guide to all of the double-talk.

Codespeak #1: "American voters are in a horrible mood this year. Democrats are sick of George Bush. Republicans are sick of the Democrats running Congress. Everyone worries about Iraq, either because they think the war should never have been fought, or because of the long, costly and thankless slog it has turned into. The latest violence in Afghanistan is depressing. The culture war grinds on: America is slouching towards Gomorrah or theocracy, depending on your viewpoint. The earth is either cooking or being overrun by eco-fanatics. And the American economy is tottering."

Translation #1: The general public is uneasy, for the good reasons listed above. Americans are getting feisty and combative. In these dangerous times, all we need is a normally innocuous event, like, oh, for the sake of argument, the economy taking a nosedive, to set this simmering dissatisfaction on fire.

Codespeak #2: "The polls tell a dismal tale. Only 29% of Americans approve of the president. Only 14% approve of Congress. And just 6% view the economy positively. Yet many Americans combine despondency about the big picture with personal contentment. More than 80% say they are satisfied with their own circumstances. Even more are satisfied with their jobs. And although nearly everyone despises Congress, most Americans like their own representatives."

Translation #2: Since more than 80% of us are satisfied with our lives, our concern for other people who may be suffering is clearly displaced. The article even goes on to describe the recent Phil Gramm debacle over our "nation of whiners", and how we are being profoundly influenced by the negativity in our nation's headlines, and the even gloomier predictions from overseas news outlets.

What exactly does "More than 80% say they are satisfied with their own circumstances. Even more are satisfied with their jobs." mean? There is a huge difference between "I love my house. I love my retirement fund. I have no reason to believe that I'll ever lose my job." and "I love my job, but I'm terrified I'll lose it next week, then lose my house because I won't be able to make my mortgage payments. My 401(k) goes up and down like a yo-yo since Wall Street insiders handle my money as if they were playing in a sandbox, and I've already had to tap into my retirement account the last time I lost my job. But yes, I have a roof over my head, I'm not starving, and I have the love and support of my family. I can't complain."

Codespeak #3: "Amity Shlaes, the author of a history of the Great Depression, thinks the comparison [to the Great Depression] is absurd. During the 1930s, she notes, 'people lost their homes even though they had borrowed only 10% of the purchase price." People losing their homes today often borrowed more than 90%. And today’s unemployment rate, though rising, is 5.5%. In the Great Depression, it peaked at 25%."

Translation #3: You know an article is in trouble when it quotes Amity Shlaes as an authority. As the author of the book, The Forgotten Man: A New History of the Great Depression, she is regularly paraded out in public to let us all know that we are not nearly as bad off as our ancestors in the 1930's. If I understand this correctly, we should all go back to our homes and re-emerge with our pitchforks only after our official unemployment rate hits 25%.

Subliminal Message #1: After devoting several inches of copy about the rise in gas prices, the decline in housing values, and the loss of employment opportunities (in an attempt to seem like the authors aren't totally oblivious to our pain), the article comes up with this seemingly harmless item. "John plans to quit construction, move to Texas and get into publishing. He is a college dropout, but reckons that “if you do some research, you can make a lot out of nothing” in America."

Subliminal Message #1 Brought into Consciousness: Hmmh. John is having problems because he does not have a college degree. We all know that a college education is the key to guaranteed success. Right? Also, John lives in Dale City, Virginia, an area that is experiencing an economic downturn. If we could all get our diplomas, pile into our rusting SUV's and move to Houston, all of our problems would be solved. Once we get to Houston, we should probably plan on continuing to live in our SUV's to make it that much easier to move to the epicenter of the next economic bubble when the opportunity arises.

Codespeak #4: "Meanwhile, others see an opportunity in Dale City’s collapse." Housing is all of sudden much more affordable.

Translation #4: Smart people avoid getting involved with any activity associated with an economic bubble. When the bubble collapses, smart people swoop in and feed off of the carrion.

Subliminal Message #2: "But some shocks are hard to adjust to. The American suburban idyll of big homes and big gardens relied on cheap petrol. With gas prices high, many suburbanites yearn for a shorter commute. But they cannot quickly or easily sell their homes and start living in denser clusters with better public transport. Nor is it clear that they want to. So they suffer, and pray for petrol prices to fall. Sometimes literally: Rocky Twyman, a community organiser from Maryland, leads group prayers at petrol stations to beg for divine intervention. "

Subliminal Message#2 Brought into Consciousness: Americans are a bunch of idiots who wouldn't recognize an easy solution if it came up and bit them in their faces.

Subliminal Message #3: "But the earnings gap between the most-skilled workers and everyone else has been widening since the early 1980s."

Subliminal Message #3 Brought into Consciousness: Go to college and major in something besides art history.

Subterfuge#1: "Figures collated by Emmanuel Saez, an economist at Berkeley, make the point starkly. In the 1990s, the incomes of the richest 1% of taxpayers went up 10% a year in real terms (see chart), while those of the other 99% grew at an average annual rate of 2.4%. Between 2002 and 2006 the richest 1% saw 11% annual real income growth: everyone else got less than 1%. Three-quarters of the gains from the Bush expansion went to 1% of taxpayers, who now receive a larger share of overall income than at any time since the 1920s.

Technology is probably the main culprit, but Americans prefer to blame trade. The latest Pew Research Centre survey of global attitudes found that only 53% of Americans think trade is good for their country, down from 78% in 2002 and lower than in any of the other 23 countries included in the survey. "

Remedy of Subterfuge #1: Did an editor accidentally delete some verbiage between the two paragraph listed above? How did we jump from the richest 1% getting 11% annual income growth to us blaming trade because the remaining 99% of us plebeians are getting less than 1% income growth? Could The Economist have forgotten the part about how, in the search for the lowest costs possible, whole industries are being shipped overseas along with the associated blue collar and manufacturing engineering jobs? Did the authors think of how many seemingly safe information technology, engineering, legal, accounting, financing, journalistic etc. jobs are also heading overseas? And employees for the jobs that are remaining here in the U.S. are facing competition from both illegal and legal guest workers and immigrants who are imported to do the jobs Americans supposedly won't do? And many of the high-skilled jobs performed by H-1B guest-workers are exported out of the country for good after the guest-workers have been sufficiently trained? And the consequence of all of these events is to bring down our wages?

Technology is the culprit, and the free trade that allows this movement of jobs and workers is just one big red herring? Could someone please sit down with their pretty charts just one more time and again explain to us all of the benefits of globalization?

Subliminal Message #4: "The baby-boom generation (people aged 43-62) are glummer than the young or the elderly, according to Pew. Some 55% of boomers think it unlikely that their income will keep pace with the cost of living in the next year, compared with 44% of 18-42-year-olds and 43% of those aged 63 or more."

Subliminal Message #4 Brought into Consciousness: Those self-centered baby boomers deserve all of the bad luck heading their way. That's no problem, since most baby boomers are no longer in any key marketing demographic group, and businesses don't really care if they spend their money or not.

Wait a minute! Since when has being realistic about our income prospects meant that we are being gloomy? Wasn't this irrational exuberance about our economic prospects the root of all of our overspending to begin with?

I'll end right here, since the last paragraph is worth it's own post.

As we can see from "Workingman's Blues", our economy and financial system is clearly in shambles. However, trying to make reforms to make everyone's lives better is just too much work, and may cause the unintended consequence of the richest 1% having to put even more of their money in offshore tax shelters in order to maintain their current lifestyles. If we can take a few simple steps, we should be able to fool ourselves into thinking our lives are getting better for at least the next five years or so. If this can help stave off criticism of the financial markets in Britain, so much the better.

By all means, do everything you can to improve yourself. Pay off your debts. Conserve on gasoline and heating oil. Take classes and upgrade your skills. Move to parts of the country that are actually hiring people. But once you get settled in, don't forget about all of the political and financial abuses that caused this mess. Vote intelligently, send letters to the editors, boycott products, and do what you can to make a lot of noise. The people ruining our country right now know what they're doing. Help them rediscover their guilty consciences.

(Cross-posted at Carrie's Nation.)

Kissy Noises From Washington

Emily Stover DeRocco has been cozying up to the National Association of Manufacturers (NAM) and other business interests for the last several years. So it should come as no surprise to anyone that she recently left her post as Assistant Secretary of Labor, Employment and Training Administration (ETA) to become president of NAM's Manufacturing Institute's National Center for the American Workforce.

As Patrick Buchanan wrote on page 230 in his book, Day of Reckoning,

The National Association of Manufacturers converted to free trade - to be free of its American workers, free to move its factories abroad, free to export back to the United States, free of charge.

Could things change with the addition of DeRocco to the staff?

The AFL-CIO weblog has a nice tidy little article about how DeRocco helped deliver the entire Department of Labor to the hands of business interests. Indeed, look at this damning little tidbit from NAM's 2002 CWS Workforce Development Conference, where it was reported "Assistant Labor Secretary Emily Stover De Rocco informed conference attendees of the Bush Administration’s desire to refocus the Department of Labor toward valuing the voice of business." It's too bad that the link purportedly giving us the text of her speech is now defunct.

John Engler, the President of NAM, gushed in the press release,

"Emily provided exemplary leadership as Assistant Secretary of Labor for Employment and Training and is widely regarded as a leading authority on workforce development,” Engler said. “Finding qualified employees is a daunting challenge for the great majority of manufacturers and the skills gap will become an ever greater problem as older manufacturing workers retire. Emily comes to us at a pivotal moment when her leadership is greatly needed.”

Based on past performance, I don't think we should get ready to usher in a new era of prosperity for the American manufacturing industry workforce. By looking at one of the quarterly DOL/ETA's 2004 Workforce System Results, you'll see how she helped throw an awful lot of money towards programs that only affected a few hundred people here and a few thousand people there. (Honestly, does anyone know anyone who's ever participated in or benefited from any of these workforce training programs?)

On page 8 of the .PDF file, notice how the results to goal ratio for Foreign Labor Certification functions were about the best of any category. The report proudly displays how the Department of Labor reached their highest grade by processing 99% of employer labor condition applications for the foreign H-1B professional/specialty temporary worker program within 7 days of receipt!

Pages 12 and 13 of the file describes the old H-1B Technical Skills Training Program, first authorized in 1998, which had the ".....long term goal of raising the skill levels of domestic workers in order to fill specialty occupations presently being filled by temporary workers admitted to the United States under the provisions of the H-1B visa." Notice how quickly this program was dropped, as it seemed to have completely disappeared from the Quarterly Workforce System Results by the end of 2005. The IEEE-USA reported in February 2005 that many people were disappointed with the performance outcomes of the program. However, the program was doomed much earlier than that, as witnessed by this statement issued by Emily Stover DeRocco on February 27, 2002:

We will propose to redirect fees previously used to fund the H-1B training grants to reduce the growing backlog of permanent foreign labor certification applications. Over 300,000 employer applications are pending processing, 78% of which were received between January and April 30,2001, when Congress extended section 245(i) of the Immigration and Nationality Act. An estimated $137.5 million will be available for this purpose. The H-1B grants were authorized to increase training for American workers for jobs in which labor shortages have caused employers to hire high skilled foreign workers. We have no evidence that spending $100 million to $200 million annually will have any measurable impact on reducing the reliance of American employers on workers with H-1B visas.

Does anyone think the program failed to reduce "..the reliance of American employers on workers with H-1B visas" because it's cheaper to pay H-1B visa holders than to pay American workers?

A direct outgrowth of the redirected fees "previously used to fund the H-1B training grants" was the establishment of backlog elimination centers for the processing of applications under the DOL's Permanent Foreign Labor Certification (PERM) program. See my "Pearl Street Scam" post for additional information.

The Department of Labor couldn't seem to make a go of the H-1B Technical Skills Training Program in order to train American workers for American jobs. However, they seemed to do a stellar job of reducing the PERM applications backlogs and bringing in as many foreign workers as they could, as quickly as possible. The Department issued a proud announcement on October 1, 2007 that:

.......the permanent foreign labor certification program’s backlog has been eliminated, with nearly 99 percent of cases completed and the remainder awaiting responses from employers. For almost three years, more than 300 workers in two processing centers reviewed approximately 363,000 pending labor applications, a backlog created as a result of legislative changes in 1997 and 2000.

Even more proudly:

"We applaud the accomplishments of the dedicated individuals whose critical role allowed the ongoing operation of employment-based immigration programs,” said Assistant Secretary for Employment and Training Emily Stover DeRocco. “Their resolve to the mission of seeing the task through to its successful completion is an inspiration to all who serve and do the public’s business.”

Based on what we know about Ms. DeRocco, forgive me if I have my doubts as to whether the numbers of Americans employed in the manufacturing sector will rise at any time in the near future.

(Cross-posted to Carrie's Nation.)

My Indian Call Center Adventure

Don't get all up my ass about being xenophobic. It's no secret that I have major problems with the parade of IT jobs being sent overseas, and I have even more problems with the way call centers are being run. You don't work in IT as long as I have without recognizing the idiosyncracies in speech that are characteristic of India, no matter how many Shilpas identify themselves as Sharon and Sanjeevs identify themselves as Steve. Frankly, I'd rather deal with Shilpa and Sanjeev, because at least then I know with whom I'm speaking. I've worked with people from India, I've had friends from India, and I have no problem understanding people from India.

My beef isn't with people in India who take these jobs. I can't object to someone who just wants to earn a living, and often these call center employees are as exploited as any other worker dependent on a giant multinational corporation. I really try to separate out the individual person at the other end of the phone from the policies to put him there and the companies that make their jobs well-nigh impossible to do properly, but sometimes it's difficult.

My place of employment is a Dell shop. We deal with Dell for all desktop machines. And usually Dell's business customers are routed to American customer service reps. We had a particular line of desktops with heat problems, and as the motherboards went, our tech support guys would call Dell and get new motherboards. One time the call was routed incorrectly, and our guy ended up having to deal with no fewer than three different people reading the same script about the tests that had to be done "in order to identify the problem." He ended up calling again and again until his call was routed to someone in the U.S.

Mr. Brilliant and I have succumbed to the siren song of high-definition television. We don't go out all that much and don't spend much on entertainment, so the prospect of spending $130/month for pay TV doesn't seem as horrifying as it would otherwise, particularly when it gets you almost 300 channels of nothing you'd want to watch. Right now we have about 147 pieces of this lovely Craftsman TV stand strewn all over the living room floor, waiting for one or both of us to find the Rosetta Stone that will decipher the assembly instructions, but if you want to schedule installation of the HD line, you have to get on the phone. So yesterday, with almost no voice in the seventh day of being down with the Winter in New Jersey Crud, I called Dish Network to arrange for the HD receiver and the installation.

The call center rep identified himself as "Maxwell", and I almost immediately realized that I had reached a call center in India. After I had admonished "Maxwell" twice to please speak into the microphone, he started by asking me for my account password. Not my account number, but my account password. There IS no account password, other than the one you use to log into your account online, which apparently was NOT the "password" to which he was referring. When I said I didn't know what he was talking about because there is no account password other than the one used for the online account, he told me to ask my husband for the password.

That's when I let him have it. I told him that assuming a woman didn't know the password because her husband had it was insulting (especially when it's my name on the account), and asked if he was in the U.S. When he said no, I said "If you were in the U.S., you would know how insulting it is to tell a woman to ask her husband for information just because she doesn't know what the hell you're talking about because you're asking for something that doesn't exist." He then asked me AGAIN to ask my husband for the password. I also said I hoped that the call was "being monitored for quality assurance" because the quality assurance on this call was God-awful.

I asked to be transferred to someone in the U.S., and he said he couldn't, that calls were routed to the next available operator. I told him I was hanging up and that I would keep calling till I get someone in the U.S. I tried again and this time I got "Tanesha". I had a pretty good idea that Tanesha wasn't a name that someone in an Indian call center would identify as American, and when I asked if she was in the U.S., she said yes, she was in Philadelphia.

I nearly wept with joy and gratitude. Tanesha didn't ask me about a password. I explained that I had some questions about the best way to set up my HD setup, what the various costs were, the differences between the two receivers that were my options, what the installation rebate was, and what the commitment was. Then she set up the appointment. Not one question about a password. And she was even politically correct by asking if I celebrate Christmas before wishing me a merry one. I thanked her profusely for her assistance abd said I hoped this call was being monitored because I wanted her boss to see what a good job she's doing.

In retrospect, it occurred to me that "Maxwell" was probably asking about my account number, not my password. But once there was that breakdown in communication, the fact that these call centers tend to work by written script in an attempt to avoid some of the issues of national idiosyncracies in the language cited in the article linked above became an insurmountable obstacle to completing the call. It showed me that "Maxwell" wasn't equipped to do more than take orders for installation.

I'm the kind of customer that a company like Dish Network should embrace tightly. We've had the service for eight years, despite the relentless sales pitches for Optimum services (offered by Cablevision, one of the most odious and crappy cable providers in the known universe) and the creepy and obviously unscreened door-to-door salesmen that Verizon is hiring to aggressively push its FIOS TV/phone service. We pay more to buy our phone, internet, and TV à la carte just because we like the way Echostar does business. Echostar CEO Charlie Ergen is the kind of cult hero to the company's customers the way Steve Jobs is for Apple's. I like the company so much that I bought some of the stock for my IRA. And I like the service offered so much that I would rather have a lower stock price than see the company sold to AT&T, which was widely expected earlier this month and still may happen given the company's splitting into two entities -- Echostar retaining the set-top box/satellite businesses and Dish Network Corp. offering the subscription service.

Alas, I expect the subscription service to be sold to AT&T sometime next year anyway given this move, which will create a huge moral dilemma for whatever remains of our eighteen-month commitment at that point. Somehow I can't imagine that an AT&T-owned Dish Network is going to keep channels like Free Speech Television, Worldlink, and Veria. But in the world of premium television, it's pick your poison. And eventually, given the FCC's determination to consolidate the media into ever fewer hands, it won't matter anyway. All you'll hear anywhere is what the government wants you to.

The truth about globalization

This article by Roger Bybee on the false promise of globalization and outsourcing is definitely worth your time. It focuses primarily on Wisconsin, but it's applicable to any state that is seeing its industries move overseas.

Excerpt:

Standing resolutely against any consideration of "human capital" in trade agreements is an extremely influential group of American pundits, led by New York Times columnist Thomas Friedman, author of the best-selling book The World Is Flat. Friedman strongly opposes the notion that the workers of the world possess any economic "entitlements," arguing that prosperity will be generated through governmental deregulation, higher levels of education, and the free flow of technological advances in the hands of unrestricted corporations.

Friedman reserves special venom for "The Coalition to Keep Poor People Poor." This is the term he uses for labor and environmental activists who claim to seek higher wages and better conditions for Third World workers, but whose real agenda, he divulges, is actually protecting unionized jobs in the U.S. None of Friedman's anger is directed at the corporations responsible for miserable wages and living conditions.

Instead of Friedman's "flat world," we are witnessing Himalayan levels of inequality. Internationally, the gap between the world's richest and poorest one-fifths has increased from 30-1 in 1960 to 78-1. The world's three richest individuals possess more wealth than the combined Gross Domestic Product of the poorest 48 nations.

In the U.S., inequality is reaching levels not seen since the 1920s. To cite just one striking measure: the richest 1% — about 300,000 people — earn 16.2% of all income, more than the 150 million who make up the bottom 40%, according to various news reports. Those fortunate few earning over $4.5 million — the richest 1/10 of 1% — earn 6.9% of annual income.

[snip]

Perhaps the most chilling aspect of the impact of globalization — a.k.a. outsourcing — on the U.S. economy is the prospect that what we've seen so far is only the beginning.

Princeton economist Alan Blinder, a self-described "free trader down to his toes," has estimated that up to 42 million highly technical U.S. jobs — ranging from computer programmers to accountants to economists — are "highly off-shorable" (Wall Street Journal, 3/28/07).

Blinder bases his projections on a detailed analysis of 817 job classifications. He predicts this next wave of job shifts will go far beyond relatively low-skill jobs like those in "call centers" used by insurance and credit-card companies, and reach even people with Ph.Ds.

Favored sites will likely be low-wage nations with large numbers of well-educated people, like China, India and countries in Eastern Europe. U.S.-based corporations that relocate professional jobs overseas will thus be able to rely on the public expenditures for higher education made by other nations, even as they fight to lower their taxes in the U.S. and thus undermine higher education here.

That the U.S. government is in service not to its citizens, but rather to the corporations that shovel campaign cash into the pockets of incumbents, should be no secret to anyone. That Jay Rockefeller, a recipient of a goodly sum of telecom cash, should march 100% in lockstep to the industry's tune that it should receive immunity from prosecution for its role in wiretapping American citizens is just one example.

John Edwards has been out on the campaign trail decrying the imfluence of big money on politics. Whether he is successful against the juggernaut of corporate cash being thrown at Hillary Clinton and Barack Obama remains to be seen. But corporatism is no longer a function of party, with Republicans in the pocket of multinational corporations and Democrats being the good stewards of the public trust. Right now NO ONE, save a few mavericks like Bernie Sanders, is representing the interests of American citizens. Those who think that Hillary Clinton is somehow going to represent a break from the stranglehold that the monied classes have on our system need only remember her statement at the Yearly Kos debate last summer -- that lobbyists are Americans too.

What a Relief!

While hunting and pecking around Google News today, I found that,

On May 21, 2007, Kimball Electronics Group announced 214 workers will lose their jobs during the future closure of their Gaylord, Michigan plant. On July 31, 2007, The Department of Labor certified that the employees are eligible for benefits under the Trade Adjustment Assistance program, which covers workers who lose their jobs due to increased imports or shifting of production to offshore locations.

On August 17, 2007, Maine's Governor John Balducci received word from the U.S. Department of Labor that about 150 workers who lost their jobs after the closure of the Domtar paper mill in Baileyville will be eligible for benefits under the Trade Adjustment Assistance Program.

On August 23, 2007, "Union and labor representatives at Fraser Papers Inc. told a U.S. senator, a workforce representative and local town managers Friday afternoon that the company needs assistance to retrain its remaining labor force and laid-off workers." At the Madawaska, Maine paper mill, "Thirty-six workers at the mill are finishing their final shifts this weekend, another 45 employees have accepted early retirement buyouts, and the possibility remains that as many as 24 more could be accepting packages in the coming months. Another 45 employees face losing their jobs in the next few months. At the end of the latest cost-cutting measures announced by the company, the Madawaska papermaking mill will employ 680 people. Just 10 years ago the company had 1,245 workers at the Madawaska plant."

On August 31, 2007 the Department of Labor certified that 100 plant workers at Wellstone Investors LLC in Eulala, Alabama "might have become unemployed as a result of increased imports."

On September 2, 2007, the Winston-Salem Journal reported that over 1,000 jobs have been lost in Mt. Airy, North Carolina as five plants closed down over the summer. Although many workers will be eligible for benefits under the Trade Adjustment Assistance program, I wish them good luck in finding new jobs. "The next wave of layoffs [in North Carolina] is well under way, this one among white-collar urban workers, with call-center workers, X-ray technicians and software programmers losing jobs to workers in such distant places as India and the Philippines." Finally, "Several major area employers in the region have decided that they can save money by contracting with companies overseas for information-technology services. A short list includes Aon Corp., BB&T Corp., Dell Inc., GMAC Insurance and Wachovia Corp."

On September 10, 2007, a meeting was scheduled to discuss the plans to close the Intec Groups Newton County, Indiana auto parts plant by the end of the year. Intec plans to "....lay off 99 workers by Oct. 1 and eliminate 170 total positions by December. "

On September 13, 2007, the Department of Labor approved Micron Technology's "...request for federal aid to help the more than 1,000 workers the company has laid off in the Boise area since June."

On September 14, 2007, the Republican-American News out of Waterbury, Connecticut reported that "A total of 33 employees laid off recently by Risdon International Inc. can apply for extra help while looking for work under a federal program that aids workers who lose their jobs because of foreign competition, state labor officials said."

On September 19, 2007, "....Carhartt Inc. officials told workers that 33 employees will be laid off, effective Dec. 31." The layoffs are necessary as the company converts the Galesburg, Illinois sewing plant to a distribution plant. "....although Carhartt manufactures more workwear in the U.S. than any company; 96 percent of the product produced domestically by the entire industry is made outside the U.S., making adjustments necessary."

On September 20, 2007, the Kansas City Star reported that (former Michigan governor) John Engler, the current president of the National Association of Manufacturers, seems to think that the American manufacturing industry is in pretty good shape right now. "...we think some of the fundamentals in the U.S. economy are still pretty strong as far as manufacturing is concerned." Engler said. He continued “Exports are up, and productivity is increasing for U.S. manufacturers. We just want to see steady progress being made.”

Whew!! Thank heavens for the reassuring words of John Engler! I was starting to get worried for a moment.

(Cross-posted at Carrie's Nation.)

Goodbye, USA?

According to London's Guardian/Observer newspaper, Ford and GM are threatening to pull the plug on all remaining US factories unless the UAW agrees to what would essentially be a 30% pay cut. Reportedly, the automakers are looking to reduce the hourly cost per vehicle from $71.00 per hour to $50.00 per hour. From looking at the article, I'm under the vague impression that hourly pay rates may remain roughly unchanged while employee benefits may be pared considerably. Or, I could be wrong. Regardless, any cuts of this magnitude would be enormous.

I'm also unsure what would be involved as far as "....[the auto companies planning to] move their North American operations to countries in Latin America and Asia where manufacturing costs are cheaper." I can't imagine the triumvirate of Wagoner, Nardelli and Mulally moving their executive offices to China, but nothing surprises me at this point. About a year ago I predicted (I admit somewhat sarcastically) that there would be nothing left of GM in the US except Rick Wagoner, his administrative assistant and a receptionist. Not too many weeks ago I was predicting that some of our country's most iconic companies would move completely overseas. I was somewhat predicting that first company to be Microsoft, but any of the Big 3 could make the move instead. Far-fetched? I sure hope so. I'm hoping someone emails me this blog post 10 years from now and tells me what I an absolute idiot I was for even coming up with the idea.

I know you are all intelligent readers, but I'll point out the obvious anyway. Don't think in any way that the auto company ailments are limited to the city of Detroit. Already, Japanese auto plants here in the US are reviewing their pay structures to bring wages in alignment with lower local prevailing wages rather than with UAW rates. (I unfortunately could not find the February 8, 2007 Detroit Free Press articles or the Toyota memo .PDF file online that describes this situation. Please contact me at carriesnation at that certain hotmail address if you would like more information.)

Lower wages for UAW members will mean lower wages for the rest of us. If the Big 3 decide to up and leave the country, Detroit autoworkers (including finance and IT professionals in addition to the blue collar workers) will be flooding the country looking for employment, further driving down wages. Already, "The median price of homes in the US is expected to fall for the first time since federal housing agencies began keeping statistics in 1950." I have no doubt that Detroit's dubious distinction of having the "...metro-area with the highest metro foreclosure rate" contributed to that forecast.

(This article is cross-posted at http://carriesnation.blogspot.com)