Strategic CIO // IT Strategy
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4/25/2006
01:06 PM
Paul McDougall
Paul McDougall
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'Outsourced' Programmers Finally Get Same Benefits As Laid-Off Factory Workers--A Fair, But Costly, Development

Companies lay off workers for many reasons--they're employed in a unit that isn't profitable, they worked on a discontinued product, the employer is downsizing, etc. Or they work in an industry that's losing ground to foreign competitors with lower costs. Given the myriad ways in which one could suddenly find himself or herself out of a job, is there any justification for the government singling out the latter category for special benefits--like an extra year's worth of unemployment payments?

Companies lay off workers for many reasons--they're employed in a unit that isn't profitable, they worked on a discontinued product, the employer is downsizing, etc. Or they work in an industry that's losing ground to foreign competitors with lower costs. Given the myriad ways in which one could suddenly find himself or herself out of a job, is there any justification for the government singling out the latter category for special benefits--like an extra year's worth of unemployment payments?Not really, but as long as the feds practice this kind of economic discrimination through the Trade Adjustment Act, it's only fair that IT workers who have been "offshored" get the same treatment as factory workers. It's a wrong the government has finally righted, with a little nudge from the courts. Here's how it went down, and why the feds' decision--right or wrong--may end up costing taxpayers a lot of money.

In a ruling that got astonishingly little attention given its political sensitivity, the Department of Labor this month effectively reversed its longstanding position that software developers aren't eligible for assistance under the TAA, which was written with rust belt factory workers and Southern textile shops in mind. Labor held that coders didn't qualify because they weren't manufacturing a physical product, or, in the department's narrow legalese, an "article."

That distinction never made any sense and just about everyone except the bureaucrats seemed to know it. Just because a product doesn't arrive on our shores in a crate doesn't mean it's not subject to the same economic laws of production, supply, and demand as, say, a box of ball bearings.

Labor came to this fairly obvious conclusion only grudgingly. Four CSC workers who were laid off because production of the app they worked on was moved to India applied for, and were denied, TAA benefits. They sued, and their case was heard by the U.S. Court of International Trade. The court ruled that Labor's position on software not being an "article" deserving of TAA status was "arbitrary and capricious." The department was forced to reverse itself, opening the door for thousands of IT professionals who feel that their jobs have been "offshored" to claim TAA benefits.

(If you're an IT worker whose job got outsourced, you really should buy each of those former CSC employees a couple of cold ones!)

So why was Labor so stubborn on this issue? Here's one theory: This country has already gone through the restructuring of its manufacturing sector. You'd be hard-pressed to find a factory of any size still pumping out commodities in the United States. What's left are a lot of smaller, leading-edge shops that employ workers with highly specialized engineering skills. For manufacturing workers, TAA benefits are a bill that's mostly been paid.

Not so with the technology and professional services sectors. The rationalization of these industries on global lines is just beginning. Outsourcing has been a hot-button issue for years, but to date only a small percentage of IT and services work has actually gone abroad. But that's changing--fast. Evolving technology is making offshoring progressively easier to manage and less expensive, and managers are becoming increasingly comfortable with the practice as they gain experience with it. As a result, big IT services vendors like EDS, IBM, and CSC are set to double or even triple their Indian head count over the next couple of years.

They wouldn't be doing that unless they were set to send lots more work to that country. All this means that tens of thousands of U.S. IT workers currently employed could soon have to go through a career transition--either to a higher-level IT job (yes, there will be lots of them...see manufacturing above) or to a different profession. Labor's new ruling requires the government to help pay their "transition costs." The department is surely aware of this and may have resisted granting TAA eligibility to programmers for as long as possible. After all, who's going to pay the bill? Yeah, you guessed it.

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