Article 43


Monday, July 18, 2005

Cash Balance Pension Plans Revisited

Once again, Congress is working to legalize cash balance plan conversions.

It is VERY EASY to sign the petition below.  Click on the link.  It takes 20

Boehner has sponsored an extremely egregious bill in the house, HR 2830. Members of the Senate Finance committee are now working to introduce similar legislation in the Senate. The Senate version has one additional insult; it is currently RETROACTIVE!!!

This is outrageous, and needs to be stopped…

My friend, Janice Winston, one of the retirees pictured in the article on pension theft in the last AARP bulletin, has just sponsored an on-line petition at:

We’ve checked out the site to ensure it fully protects privacy, but also provides us with a list of names we can take to Washington.  One problem with the survey site is that it does NOT ask you for your address. Because people in Washington listen hardest to their own constituents, please either put your state and congressional district in the comment field, or print off the petition after you have signed it and send a copy to your Representative and Senators with a note saying they should NOT legalize cash balance plans - they need to be increasing the protections on
pensions, NOT reducing or elminating them!

Janet Krueger
Rochester, MN

01 A Stop to Cash Balance Plans


I, Janice Winston, the author of this petition do hereby ask that all Americans who are concerned about the status of pension plans in the America electronically sign this petition to stop Congress from passing language in HR2830 relating to Cash Balance Plans.

We the undersigned, who cannot leave our homes to visit your offices in person, need protection against the corporate lobbyists who roam the halls of Congress preying on our inability to protect ourselves and your willingness to go along with the lobbyists’ sinister plans to deny us our hard earned pension benefit.

It is simply immoral that companies can make promises that lure employees to spend a career working for a specific pension benefit, only to be told near the end of their career that the company is taking advantage of loopholes in the laws to escape pension obligations.

It is without conscience or consequence that corporations are significantly reducing pensions over 50% or canceling pension benefits employees worked many years to earn.

Employees and their families expect Congress to protect the reasonable retirement expectations of older workers.

. Congress must NOT support broken promises by corporations

. Congress must protect employees and remember that workers are the constituents, not big business

. Congress must understand that retirement certainty must be maintained

. Congress must understand that Cash Balance Plans are harmful to older workers

. Congress must protect early retirement subsidies

. Congress must protect employees from the predatory practices of Cash Balance Plan “wearaway” and “conversion”.


We, the undersigned, are asking Congress NOT to pass any pension legislation that supports pension wearaway, age discriminatory practices, or pension conversions that harm older workers.

We, the undersigned, are asking Congress to reject all language relating to Cash Balance Plans in HR2830 and stop passage of any legislation that specifically relates to Cash Balance Plans until all possible protections are included for older workers.

We, the undersigned, are asking Congress to appoint an independent Advocate to protect and ensure the rights of employees and retirees.


The Undersigned

Pension Partisan “Cash balance pensions suck”
Credit: pension_watchdog

Posted by Elvis on 07/18/05 •
Section Pension Ripoff
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Glimmer Of Hope

Tech job cuts show Q2 dip, study says. But compared to last year, job cuts are still up by 16%.

JULY 15, 2005 (COMPUTERWORLD) - With cautious optimism, outplacement services vendor Challenger, Gray & Christmas Inc. announced yesterday that second-quarter tech job cuts in the U.S. were down 33% from the previous quarter. But it said the cuts were still running 16% higher than in the same quarter one year ago.

In its latest quarterly job-cut survey of the telecommunications, computer, electronics and e-commerce sectors, the New York-based company reported 39,720 lost jobs for the quarter that ended June 30. That’s down 33% from the 59,537 jobs lost in the first quarter, which ended March 31.

The job cuts for the second quarter, however, were still 16% more than the 34,213 cuts announced in the same quarter a year ago, the company said. For the first six months of the year, Challenger, Gray & Christmas reported 99,257 tech job cuts; That’s up 56% over the 63,726 cuts recorded in the first half of 2004.

Cuts in the technology field accounted for 18.4% of all of those announced in the first six months of 2005, the company said. One year ago, tech job cuts represented 13% of the six-month total.

The most recent job losses took place largely at computer firms, which have seen weak demand for semiconductors as well as an apparent reluctance to invest in new technology on the part of corporate customers, according to the survey. Job cuts in the computer sector totaled 20,470, or 51.5% of all technology-related job cuts in the second quarter.

The biggest improvement appeared to be in the telecommunications sector, which saw the number of job cuts fall 76% from 35,079 in the first quarter to just 8,342 in the latest quarter..

“The economy is growing and many sectors are adding workers at a steady pace, but the technology sector has been conspicuously absent from this job creation,” Rick Cobb, executive vice president of Challenger, Gray & Christmas, said in a statement. “Some blame high oil prices—as one industry insider recently told USA Today, ‘Every dollar that goes into the fuel tank is a dollar that is not going to Best Buy.’”

“The other problem affecting the computer and electronics industries is that corporate customers have accumulated a large reserve of cash, but instead of investing it in new technology, they seem content to just hold on to it,” Cobb said. “The good news is that we had a significant drop in tech-sector job cuts last quarter, which could signal a return of better times.”


Posted by Elvis on 07/18/05 •
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The Costco Challenge

An Alternative to Wal-Martization?

by Moira Herbst
Labor Research Association
July 5, 2005

Critics believe that Wal-Mart should play the role General Motors played after World War II [and] establish the post-world-war middle class that the country is so proud of. The facts are that retailing doesn’t perform that role in the economy. Retailing doesn’t perform that role in any country.
-- Wal-Mart CEO Lee Scott, April 2005

To workers and union leaders, it is a familiar refrain. These days, the story goes, consumers demand low prices, meaning goods must be produced and sold cheaply and retail wages must be kept as low as possible. Companies like Wal-Mart insist they’ feeling the squeeze and must pay workers poverty wages even while netting $10.5 billion in annual profits and awarding millions to top executives.

But there’s another company that is breaking the Wal-Mart mold: Costco Wholesale Corp., now the fifth-largest retailer in the U.S. While Wal-Mart pays an average of $9.68 an hour, the average hourly wage of employees of the Issaquah, Wash.-based warehouse club operator is $16. After three years a typical full-time Costco worker makes about $42,000, and the company foots 92% of its workers health insurance tab.

How does Costco pull it off? How can a discount retail chain pay middle-class wages and still bring in over $880 million in net revenues? And, a cynic may ask, with Wal-Mart wages becoming the norm, why does it bother?

A number of factors explain Costcos success at building a retail chain both profitable and fair to its workers. But the basic formula is one the labor movement has been advocating for decades: a loyal, well-compensated workforce means a more efficient and productive one.

The Union Difference

Though only about 18% of Costcos total workforce is unionized, union representation creates a ripple effect and helps determine labor standards in all stores. The Teamsters represent about 15,000 workers at 56 Costco stores in California, New York, New Jersey, Maryland and Virginia. Workers are covered by West coast and East coast contracts, negotiated in February and April of last year.

The agreements lock in wage and benefits packages that are the highest in the grocery and [discount] retail industries,” said Rome Aloise, chief IBT negotiator for Costco and Secretary-Treasurer of Local 853 in San Leandro, Calif.

Costco passes on similar compensation packages to its non-union workers; the contracts act as templates for other stores’ employee handbooks.

“The union contracts raise the bar and set the standard for all employees,” explained Aloise. “Still, while the company extends wage and pay raises to non-union employees, only union members enjoy benefits like seniority-based promotions, a grievance procedure and minimum hours for part-time workers,Ӕ he added.

The Payoff of Better Pay

Strong union representation isnt the only reason Costco jobs are so well compensated; the company itself has an unusually forward-looking corporate philosophy.

Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. Thats not altruism. Its good business.”

Chief Financial Officer Richard Galanti explained: “From day one, weve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, theyll stay longer and be more efficient.”

A 2004 Business Week study ran the numbers to test Costcos business model against that of Wal-Mart. The study confirmed that Costcos well-compensated employees are more productive.

The study shows that Costcos employees sell more: $795 of sales per square foot, versus only $516 at SamӔs Club, a division of Wal-Mart (which, like Costco, operates as a members-only warehouse club). Consequently Costco pulls in more revenue per employee; U.S. operating profit per hourly employee was $13,647 at Costco versus $11,039 at Sams Club.

The study also revealed that Costcos labor costs are actually lower than Wal-Marts as a percentage of sales. It’s labor and overhead costs (classed as SG&A, or selling, general and administrative expenses) are 9.8% of revenues, compared to Wal-Marts 17%.

By compensating its workers well, Costco also enjoys rates of turnover far below industry norms. Costcos rate of turnover is one-third the industry average of 65% as estimated by the National Retail Foundation. Wal-Mart reports a turnover rate of about 50%.

With such rates of employee retention, Costcos savings are significant. “It costs $2,500 to $3,000 per worker to recruit, interview, test and train a new hire, even in retail,” said Eileen Appelbaum, Professor at Rutgers Universitys School of Management and Labor Relations. With Wal-Marts turnover rate that comes to an extra $1.5 to $2 million in costs each year.

Other analysts of the retail industry agree that happier, well-compensated workers help generate bigger profits. George Whalin, president of Retail Management Consultants in San Marcos, Calif., disagrees with many of Wal-Marts critics, but said: “Theres no doubt Wal-Mart and many other retailers could do a better job taking care of their employees. The best retailers do take care of their employees. Nordstroms, Costco, The Container store with fair pay, good benefits and managers who care about people. You have fewer employee issues, less turnover and more productivity. It lessens costs to the company.”

Still, Wall Street analysts intent on cutting up-front labor costs tend to frown upon Costco’s model. Costco’s corporate philosophy is to put its customers first, then its employees, then its vendors and finally its shareholders. Shareholders get the short end of stick, said Deutsche Bank analyst Bill Dreher.

But Costco’s stock has quadrupled in the past ten years, and has in the past year inched closer to Wal-Marts per-share-price. In fiscal year 2004, Costco recorded record sales and earnings. While Wal-Mart continues to profit and expand, its stock has lost value in recent months it is 16% off its 52-week high as sales have been more sluggish as gas prices cause customers to cut back on driving to and from the store. The negative publicity around the company has also caused some damage.

Of course, other factors besides low turnover and employee productivity are responsible for Costcos efficiency. The company has a wealthier customer base than Wal-Marts; these customers buy higher-margin goods, purchase in bulk and have steadier spending habits. Costco also saves millions because it does not advertise.

More Than Hot Air

Besides the efficiency of its workforce, another reason Costco can afford to pay more is that it cuts the fat from executive paychecks. The overall corporate philosophy is that workers deserve a fair share of the profits they help generate not just a pat on the back or a new job title like associate.

For example, while CEOs at other major corporations average 531 times the pay of their lowest-paid employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary is $350,000, compared to about $5.3 million awarded to Wal-Marts Lee Scott.

After California Costco workers ratified their Teamster contract last March, CEO Jim Sinegal said Costco workers are entitled to buy homes and live in reasonably nice neighborhoods and send their children to school.

That the company’s stated ideals match up with workers paychecks helps explain employee loyalty at Costco.

Originally from El Salvador, 28-year-old Cesar Martinez has worked at a Redwood City, Calif. Costco for 10 years, serving as a Teamster shop steward for seven years. His pay is now up to $19.42 an hour, which he estimates brings him $43,000 per year.

“Theres a feeling here that the company takes care of its employees and wants to share the profits. We feel compensated fairly,” Martinez said.

“I’ve stuck with it so long because I like the job. And the salary is solid and we have a pension that gives me security into the future. Thats important to me,” he added.

By contrast, some Wal-Mart employees experience the supposed care for associates’ as empty rhetoric. Forty-two-year-old Rosetta Brown, a Sams Club employee in Chicago, Ill., for example, stands back each morning when managers and associates gather for the Sams Club cheer.

“I refuse to do it, I don’t believe the company lives up to what they’re cheering for,” she said.

Rosetta, mother to five children ranging in age from three to 25, does not feel well compensated at $11.34 per hour after five years. She is also suing Wal-Mart, parent company to Sams Club, for costs associated with a herniated disc she suffered when she said she was locked in while working the night shift.

Twenty-seven-year-old Jason Mrkwa, who works as a frozen foods stocker in Independence, Kansas, also stands back when its cheer time at his store. But he insists he doesnt hate Wal-Mart: “I’m not another disgruntled employee. I like my job. I just feel cheated with the pay I get.” He started at $7 per hour five years ago, and now makes just $8.53 per hour.

Julie Molina, 38, has worked at Costco’s South San Francisco store for 19 years. “People stick around most people in my store have been there ten years more. No one in retail makes as much as we do. Plus it’s a good working environment.”

Molina attributes the positive working environment in large part to the Teamsters presence. It works really well now. When problems arise management comes to the union for advice. But without the union I’m not sure what would take place. Would they treat us like Wal-Mart treats its workers? You hear horror stories, she said.

Of course Costco is not paradise On a local level, some managers don’t play fair, they might harass workers, fire them unreasonably or pattern bonuses unfairly. That’s where union representation is the real advantage, explained Rome Aloise.

Into the future, the question will be which model of employee compensation predominates in retail - the high road of Costco or the low road of Wal-Mart.

When companies like Wal-Mart are setting the standard, we have to ask: “Do we want to live in a country where the largest employer pays below poverty-level wages, whose workers cannot afford health care?” says Paul Blank, chief spokesperson of Wake Up Wal-Mart, the United Food and Commercial Workers new campaign to change the companys practices. “Or do we want Americans to enjoy a decent income and a sense of security in return for their work?”

Costco v. Wal-Mart: How They Stack Up

Global Workforce
Wal-Mart: 1.6 million associates
Costco: 113,000 employees

U.S. Workforce
Wal-Mart: 1.2 million
Costco: 83,600

U.S. Union Members
Wal-Mart: 0
Costco: 15,000

U.S. Stores
Wal-Mart: 3,600
Costco: 336

Net Profits (2004)
Wal-Mart: $10.5 billion
Costco: $882 million

CEO Salary + Bonus (2004)
Wal-Mart: $5.3 million
Costco: $350,000

Average Pay
Wal-Mart: $9.68/hour
Costco: $16/hour

Health Plan Costs
Wal-Mart: Associates pay 34% of premiums + deductible ($350-$1,000)
Costco: Comprehensive; employees pay 5-8% of premiums

Employees Covered By Company Health Insurance
Wal-Mart: 48%
Costco: 82%

Employee Turnover (estimate)
Wal-Mart: 50%
Costco: 24%



Commentary: The Costco Way

Business Week
April 11, 2004

Costco Wholesale Corp. handily beat Wall Street expectations on Mar. 3, posting a 25% profit gain in its most recent quarter on top of a 14% sales hike. The warehouse club even nudged up its profit forecast for the rest of 2004. So how did the market respond? By driving the Issaquah (Wash.) company’s stock down by 4%. One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc.  does and analysts worry that Costco’s operating expenses could get out of hand. “At Costco, it’s better to be an employee or a customer than a shareholder,” says Deutsche Bank analyst Bill Dreher.

The market’s view of Costco speaks volumes about the so-called Wal-Martization of the U.S. economy. True, the Bentonville (Ark.) retailer has taken a public-relations pounding recently for paying poverty-level wages and shouldering health insurance for fewer than half of its 1.2 million U.S. workers. Still, it remains the darling of the Street, which, like Wal-Mart and many other companies, believes that shareholders are best served if employers do all they can to hold down costs, including the cost of labor.

Surprisingly, however, Costco’s high-wage approach actually beats Wal-Mart at its own game on many measures. BusinessWeek ran through the numbers from each company to compare Costco and Sam’s Club, the Wal-Mart warehouse unit that competes directly with Costco. We found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity. Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart’s as a percentage of sales, and its 68,000 hourly workers in the U.S. sell more per square foot. Put another way, the 102,000 Sam’s employees in the U.S. generated some $35 billion in sales last year, while Costco did $34 billion with one-third fewer employees.

Bottom line: Costco pulled in $13,647 in U.S. operating profit per hourly employee last year, vs. $11,039 at Sam’s. Over the past five years, Costco’s operating income grew at an average of 10.1% annually, slightly besting Sam’s 9.8%. Most of Wall Street doesn’t see the broader picture, though, and only focuses on the up-front savings Costco would gain if it paid workers less. But a few analysts concede that Costco suffers from the Street’s bias toward the low-wage model. “Costco deserves a little more credit than it has been getting lately, [since] it’s one of the most productive companies in the industry,” says Citigroup/Smith Barney retail analyst Deborah Weinswig. Wal-Mart spokeswoman Mona Williams says that Sam’s pays competitively with Costco when all factors are considered, such as promotion opportunities.PASSING THE BUCK. The larger question here is which model of competition will predominate in the U.S. Costco isn’t alone; some companies, even ones like New Balance Athletic Shoe Inc. that face cheap imports from China, have been able to compete by finding ways to lift productivity instead of cutting pay. But most executives find it easier to go the Wal-Mart route, even if shareholders fare just as well either way over the long run.

Yet the cheap-labor model turns out to be costly in many ways. It can fuel poverty and related social ills and dump costs on other companies and taxpayers, who indirectly pick up the health-care tab for all the workers not insured by their parsimonious employers. What’s more, the low-wage approach cuts into consumer spending and, potentially, economic growth. “You can’t have every company adopt a Wal-Mart strategy. It isn’t sustainable,” says Rutgers University management professor Eileen Appelbaum, who in 2003 edited a vast study by 38 academics that found employers taking the high road in dozens of industries.

Given Costco’s performance, the question for Wall Street shouldn’t be why Costco isn’t more like Wal-Mart. Rather, why can’t Wal-Mart deliver high shareholder returns and high living standards for its workforce? Says Costco CEO James D. Sinegal: “Paying your employees well is not only the right thing to do but it makes for good business.”

Look at how Costco pulls it off. Although Sam’s $11.52 hourly average wage for full-timers tops the $9.64 earned by a typical Wal-Mart worker, it’s still nearly 40% less than Costco’s $15.97. Costco also shells out thousands more a year for workers’ health and retirement and includes more of them in its health care, 401(k), and profit-sharing plans. “They take a very pro-employee attitude,” says Rome Aloise, chief Costco negotiator for the Teamsters, which represents 14,000 Costco workers.

In return for all this generosity, Costco gets one of the most productive and loyal workforces in all of retailing. Only 6% of employees leave after the first year, compared with 21% at Sam’s. That saves tons, since Wal-Mart says it costs $2,500 per worker just to test, interview, and train a new hire. Costco’s motivated employees also sell more: $795 of sales per square foot, vs. only $516 at Sam’s and $411 at BJ’s Wholesale Club Inc., its other primary club rival. “Employees are willing to do whatever it takes to get the job done,” says Julie Molina, a 17-year Costco worker in South San Francisco, Calif., who makes $17.82 an hour, plus bonuses.MANAGEMENT SAVVY. Costco’s productive workforce more than offsets the higher expense. Its labor and overhead tab, also called its selling, general, and administrative costs, total just 9.8% of revenue. While Wal-Mart declines to break out Sam’s SG&A, it’s likely higher than Costco’s but lower than Wal-Mart’s 17%. At Target, it’s 24%. “Paying higher wages translates into more efficiency,” says Costco Chief Financial Officer Richard Galanti.

Of course, it’s by no means as simple as that sounds, and management has to hustle to make the high-wage strategy work. It’s constantly looking for ways to repackage goods into bulk items, which reduces labor, speeds up Costco’s just-in-time inventory and distribution system, and boosts sales per square foot. Costco is also savvier than Sam’s and BJ’s about catering to small shop owners and more affluent customers, who are more likely to buy in bulk and purchase higher-margin goods. Neither rival has been able to match Costco’s innovative packaging or merchandising mix, either. Costco was the first wholesale club to offer fresh meat, pharmacies, and photo labs.

Wal-Mart defenders often focus on the undeniable benefits its low prices bring consumers, while ignoring the damage it does to U.S. wages. Costco shows that with enough smarts, companies can help consumers and workers alike. By Stanley Holmes and Wendy Zellner.


Posted by Elvis on 07/18/05 •
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AT&T Inhuman Business Practice

The new bottom line ethics of AT&T managers has created a workforce of stress, tension, and apathy. July 15, 2005

Our members show up each day to professionally perform and maintain AT&Ts network. They contribute their experience and expertise to a company on the brink of human collapse. The workplace of AT&T managers is now ruled on the premise of the bottom line. All human contact between managers and our members is now based on how and what you can do to improve a managers numbers or perceived performance relating to the bottom line.

Gone is the interaction between managers and employees that spawned working relationships that fostered loyalty, sacrifice, and commitment to team efforts that once created a workforce of unequal dedication. The new bottom line ethics of AT&T managers has created a workforce of stress, tension, and apathy.

Combine this with AT&Ts policy of no training, understaffing, rebalancing, and constant quarterly lay-offs and anyone can see that the company is becoming a hollow shell. How does the company respond to our demoralized and understaffed workforce? They first try surveys to give the impression that they care about our input and will seriously consider our suggestions. When was the last time you can remember the company responding seriously or implementing any of your suggestions? Now, if they cant motivate the rank and file with smoke and mirror surveys, they can always drive us, its much easier than leading.

This is done by piling on work with unreasonable expectations and then denying you vacation, manipulating overtime, canceling tours, and violating seniority, while you answer to eight different bosses who all ask you the same question, is it done yet. If this doesnt improve your morale and stress level, then they can just declare another lay-off, so in the morning they can pretend that they are concerned when they ask you “How are you doing?”

Then the circle starts up again as your managers look at their numbers and see how we can improve their bottom line. When they call you a body or a resource, they only reinforce that they no longer regard us as human, we’re just another piece of equipment as part of the network. When it breaks, throw it out, and replace it with another, perhaps a contractor will do. Look around you, there they are, searching for the next body or resource that can improve their bottom line or manipulate their numbers. Can they remember our name or that we are people with families, dreams, and feelings? Probably not.


Posted by Elvis on 07/18/05 •
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