Cutting here, but hiring over there
By Steve Lohr; June 23, 2005

  Even as it proceeds with layoffs of up to 13,000 workers in Europe and the United States, IBM plans to increase its payroll in India this year by more than 14,000 workers, according to an internal company document.
  Those numbers are telling evidence of the continuing globalization of work and the migration of some skilled jobs to low-wage countries like India. And IBM, the world's largest information technology company, is something of a corporate laboratory that highlights the trend. Its actions inform the worries and policy debate that surround the rise of a global labor force in science, engineering and other fields that require advanced education.
  To critics, IBM is a leading example of the corporate strategy of shopping the globe for the cheapest labor in a single-minded pursuit of profits, to the detriment of wages, benefits and job security here and in other developed countries. The company announced last month that it would cut 10,000 to 13,000 jobs, about a quarter of them in the United States and the bulk of the rest in Western Europe.
  "IBM is really pushing this offshore outsourcing to relentlessly cut costs and to export skilled jobs abroad," said Marcus Courtney, president of the Washington Alliance of Technology Workers, or WashTech, a group that seeks to unionize such workers. "The winners are the richest corporations in the world, and American workers lose."
  WashTech, based in Washington state, gave the IBM document on Indian employment to The New York Times. It is labeled "IBM Confidential" and dated April 2005. An IBM employee concerned about the shifting of jobs abroad provided the document to WashTech.
  IBM declined to comment on the document or the numbers in it, other than to say that there are many documents, charts and projections generated within the company.
  But in an interview, Robert W. Moffat, an IBM senior vice president, explained that the buildup in India was attributable to surging demand for technology services in the thriving Indian economy and the opportunity to tap the many skilled Indian software engineers to work on projects around the world.
  Lower trade barriers and cheaper telecommunications and computing ability help allow a distant labor force to work on technology projects, he said.
  Moffat said IBM was making the shift from a classic multinational corporation with separate businesses in many different countries to a truly worldwide company whose work can be divided and parceled out to the most efficient locations.
  Cost is part of the calculation, Moffat noted, but typically not the most important consideration. "People who say this is simply labor arbitrage don't get it," he said. "It's mostly about skills."
  And Moffat said that IBM was hiring people around the world, including many in the United States, in new businesses that the company has marked for growth, even as it trims elsewhere. The company's overall employment in the United States has held steady for the last few years, at about 130,000.
  To foster growth, IBM is increasingly trying to help its client companies use information technology rather than just selling them the hardware and software. So IBM researchers and programmers are more and more being put to work for customers, redesigning and automating tasks like procurement, accounting and customer service.
  Yet those advanced services projects will be broken into pieces, with different experts in different countries handling a slice. This emerging globalization of operations, Moffat noted, does lead to a global labor market in certain fields. "You are no longer competing just with the guy down the street, but also with people around the world," he said.
  Such competition, however, can become particularly harsh for workers in the West when they are competing against well-educated workers in low-wage countries like India. An experienced software programmer in the United States earning $75,000 a year can often be replaced by an Indian programmer who earns $15,000 or so.
  Most economic studies, including one last week by the McKinsey Global Institute, a research group, have concluded that the offshore outsourcing of work will not have a huge effect on American jobs as a whole.
  But looking at job numbers alone, said Joseph E. Stiglitz, a Nobel Prize-winning economist and a professor at Columbia University, understates the potential problem. "What worries me is that it could have an enormous effect on wages, and that could have a wrenching impact on society," said Professor Stiglitz, a former chief economist of the World Bank.
  The fact that globalization anxiety about jobs and wages does not extend to executive ranks has stirred resentment among workers. "Maybe the shareholders should look offshore for competitive executives who would collect less pay and fewer benefits," said Lee Conrad, national coordinator of the Alliance@IBM, a union-affiliated group that has 6,500 dues-paying members at IBM "In all this talk of global competitiveness, the burden all falls on the workers."
  Education and retraining, most experts agree, is a major part of the answer for helping skilled workers adjust and find new jobs to replace those lost to global competition. For its part, IBM says it spends more than $700 million on training its employees for new jobs within the company, and for those laid off it offers severance packages that include career counseling and reimbursement for retraining.
  Even some champions of globalization say the corporate winners should do more to ease the transition of the losers. "The wealth creation clearly has some fallout, and there is a responsibility for it," said Diana Farrell, director of the McKinsey Global Institute.
  By one calculation, the cost of softening the blow might not be all that high. For every dollar invested offshore, American companies save 58 cents, McKinsey estimates. And 4 or 5 percent of those savings could pay for a theoretical wage insurance program that would cover 70 percent of the income lost between an old job and a new one, as well as subsidized health care coverage, McKinsey said.

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