Tech workers, beware: IBM cuts retirement, Microsoft wants more H-1Bs

Just when we figured that information technology workers were sitting pretty, what with a job boom in cloud and mobile technologies, comes news that the days aren’t quite as happy as we thought.

IT salaries are (surprise!) stagnant, increasing by just under $2 an hour over 10 years, Microsoft is lobbying hard for more H-1B visas, and now IBM, one of the industry’s largest employers, is taking millions of dollars out of the pockets of its employees by manipulating the schedule of 401(k) contributions.

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That’s not to say it’s a bad time to work in IT. It obviously isn’t. But given the still tentative state of the economy and Wall Street’s incessant demands for fatter bottom lines, it’s not surprising that employers are holding the line on wages and looking for other ways to cut costs.

IBM reduces the effective value of 401(k) contributions If you pay any attention at all to politics, you know that so-called entitlement reform, a euphemism for cuts to Medicare and Social Security, is on the agenda. Employees, argues the right wing, should take responsibility for their retirements and health care, rather than relying on government payments. Politics aside, it’s no news to anyone that living solely on Social Security is an invitation to poverty, so it’s all the more concerning that employers, who have already eliminated most defined pension plans, are now reducing and, in many cases, eliminating matching 401(k) contributions.

It’s doubly concerning when IBM, a huge employer whose personnel policies are likely to be seen as trendsetting, starts nibbling away at retirement accounts. IBM has been under fire for several years for unfriendly labor practices, such as shipping jobs overseas and even suggesting U.S. workers move to India to keep their jobs. As a result, IBM’s U.S. workforce has dropped from about 160,000 to about 92,000 in 10 years, says Lee Conrad, national coordinator for Alliance@IBM, a group trying to unionize IBM. The push to move work offshore has been so successful that IBM now employs more workers in India — 112,000 — than it does domestically.

Last week, IBMers received an email from Randy MacDonald, senior vice president for human resources, saying that as of January 2013, the company will no longer make 401(k) matching contributions twice a month. Instead, there will be one annual contribution at the end of the year. In addition, employees who have left the company before Dec. 15 of the year will get nothing, even if they’ve worked for 11 months and 14 days that year.

I was alerted to this by an IBMer named Noah (I won’t use his last name) who says he and his fellow employees are angry, and they fear the move is a precursor to layoffs. “As long as they lay off before Dec 15th, they can save millions in 401(k) matching costs,” he said.

What’s more, when contributions are made biweekly over 12 months, employees have a chance to invest the money as it comes and perhaps make a profit. Instead, IBM will have use of the funds all year, so any investment increases will go to the company, not the employees. The extra earnings for IBM could be very substantial, as employees net less in those retirement accounts they’ll need in their old age.

Alliance@IBM has a petition on its website asking that the company reverse the policy. It says about 500 people have signed the petition, an admittedly small percentage of the IBM workforce. “There is a fear that signing it could get your name on the layoff list,” Conrad told me.

Here’s a link to the petition and the full text of the letter announcing the benefit change. (Disclosure: I’m a member of the Pacific Media Workers Guild, which is affiliated with the Communications Workers of America, the sponsor of the organizing effort.)

IBM reiterates the quality of its benefits “This change reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment. IBM’s 401(k) plans remain among the best in the industry — and the country — including our dollar-for-dollar match at 5 and 6 percent and automatic contributions of 1, 2, and 4 percent depending on the employee’s start date and years of service,” IBM spokesman Doug Shelton told me.

To be fair, I should note that IBM, unlike many other companies, is not reducing the size of its 401(k) contributions. In 2011, those contributions totaled $875 million to employees in the United States and abroad, according to the company’s annual report. It’s also worth noting that IBM’s stock has been essentially flat over the last 12 months, while the tech-heavy Nasdaq index increased about 17 percent, numbers that investors don’t like and that give management an incentive to cut costs.

Labor shortage, what labor shortage? Anecdotally, it appears that companies can’t find the skilled IT employees they need, which is why Microsoft and other companies are pushing to raise caps on H-1B visas and import more foreign workers to the States.

But not so fast, says the nonpartisan Economic Policy Institute (EPI), which has accused Microsoft of fudging the labor numbers to create the illusion of a science, technology, engineering, and math skills shortage. EPI says that, contrary to Microsoft’s view, the numbers of computer science graduates is not a good measure of the size of the workforce. “Less than one-fourth to less than one-half of workers in computing occupations have a computer science degree,” EPI argues, citing data from sources such as the National Science Foundation.

EPI also argues that high-tech employment is still above historical averages. My colleague Ted Samson did a good job presenting the arguments on this issue, and rather than repeating them, I suggest you read his piece.

Sure, things are much better in IT land than they have been in some time. But the pressures of an incomplete economic recovery and the continuing push by employers to cut costs through offshoring and other means make this a good time for a reality check.

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This article, “Tech workers, beware: IBM cuts retirement, Microsoft wants more H-1Bs,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.