From today's NY Times:

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June 24, 2005
Cutting Here, but Hiring Over There
By STEVE LOHR

Even as it proceeds with layoffs of up to 13,000 workers in Europe and the
United States, I.B.M. 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
I.B.M., 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, I.B.M. 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.

"I.B.M. 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 I.B.M. document on Indian
employment to The New York Times. It is labeled "I.B.M. Confidential" and dated
April 2005. An I.B.M. employee concerned about the shifting of jobs abroad
provided the document to WashTech.

I.B.M. 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 I.B.M. 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.

Mr. Moffat said I.B.M. 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, Mr. 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 Mr. Moffat said that I.B.M. 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, I.B.M. is increasingly trying to help its client companies
use information technology rather than just selling them the hardware and
software. So I.B.M. 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, Mr. 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 I.B.M. "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, I.B.M. 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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