IBM Workers Could Lose Outsourcing Protection

As IBM shifts more of its production offshore, an increasing number of its former employees have turned to a federal program that provides benefits to workers displaced by foreign competition for job training support and income assistance. But their eligibility for such help could be short lived.

IT and other services workers were added to the Department of Labor's Trade Adjustment Assistance program under the 2009 stimulus bill, which is set to expire Dec. 31. With Congress pre-occupied with the Bush tax cuts and other issues, many fear the program will lapse.

Under TAA, workers who've lost their jobs due to offshoring can get government subsidized training for new occupations, income supplements, healthcare tax credits, and other benefits.

Workers laid off from IBM facilities in Plano, Texas, and Oklahoma City filed for TAA assistance last month, according to a notice published Wednesday in the Federal Register. That follows a notice on Monday that said former workers on IBM's Hartford Financial Services contract have been declared eligible for TAA help. An IBM spokesman declined to provide details on the job cuts at those locations.

IBM workers and contractors laid off from operations in Armonk, NY, Cambridge, Mass., Columbia, S.C., Research Triangle Park, NC, Cambridge, Mass, Piscataway, NJ, and other locations have also have been deemed eligible for TAA assistance in the past year, according to federal records. IBM reduced its U.S. workforce from 115,000 to 105,000 between 2008 and 2009, according to the IBM employee group Alliance@IBM. IBM employed 134,000 U.S. workers as recently as 2005.

Many IT vendors, from HP to Microsoft, have moved some work to foreign locations, but IBM clearly has made offshoring part of its corporate DNA. At one point, it even tried to patent the process.

In recent years, IBM has shifted numerous functions, from programming to help desk support, to countries where costs are lower and the company can gain access to high-growth emerging markets. The strategy has allowed IBM to grow its share price and maintain strong profit margins even during the tight economy, and it gives it the chance to bid on domestic IT work in developing markets on a relatively even footing with local players.

For instance, India's Bharti Airtel, one of the world's fastest growing telecommunications providers, this week handed IBM an $80 million contract to manage its Bangladesh operations. IBM's overall relationship with Airtel is now worth more than $2 billion, and the company has won numerous other contracts in foreign markets where it conducts offshore operations.

But while Big Blue's offshoring strategy is good for the company, its shareholders, and customers who enjoy lower prices, it's hard on individual U.S. workers who've lost their jobs during the recession. For many of those workers, times will surely get tougher if Congress does not reauthorize the part of the TAA program that applies to services workers.