Posted on 08/15/2003 4:56:57 AM PDT by SJackson
My corporation—I’m president and CEO of K-Bob’s Steakhouses, a 26-restaurant chain headquartered near Albuquerque—operates in four southwestern states and employs around 1,000 people. Recently, a new business I planned to open in Santa Fe became one the latest victims of the “living wage” campaign that is crippling firms and hurting local economies across the U.S. The campaign is the work of union-funded labor activists, whose success so far has been nearly 100 percent. Earlier this year, Santa Fe passed a law imposing an $8.50 minimum wage on all businesses in the city with 25 or more workers. The hike takes effect in 2004, with the wage rising to $10.50—more than double the national minimum—by 2008. Not only is this the highest living wage in the U.S.; it is also unrivaled in its impact on private industry, since most of the 90 or so living-wage laws nationwide apply only to firms that do business with local government.
State and local lawmakers are working to help firms stay afloat during the current economic slump, but Santa Fe’s bill will drive businesses to friendlier climes. While I truly wanted to open a K-Bob’s in Santa Fe, the huge labor-cost hikes would force me to jack up prices to such unreasonable levels that I decided to stay out of town.
The new bill is scaring off other new investment, too. Plunkett Research, a national market analysis firm, had planned to open a Santa Fe office—until the living-wage bill passed. Citing a “poor business environment,” Plunkett’s management found that the new wage minimums made it hard to attract the investors and partners they had hoped to attract, and they decided against coming to Santa Fe. Local realtors have seen other firms’ plans to move to Santa Fe put off or canceled because of the bill, including several big restaurant chains.
Even as the living wage scares away prospective Santa Fe employers, it is driving existing businesses out of town. Take Robert Powell, who owns a Santa Fe staffing agency with 200 or so workers. With his labor costs rocketing up to 65 percent higher than his smaller, exempt competitors, he says that the new rules will force him out of business—or out of the city. He expects to move. Nambe Mills, a metal manufacturer that provides Santa Fe with hundreds of good jobs and has been in the city for 50 years, may follow suit. In a letter to the Santa Fe City Council while the bill was being debated, Nambe CEO Jim Weyhrauch warned: “What do we do if you were to pass this measure? We are not likely to sit around and watch our business decline.”
Tom Allin, who operates an Asian restaurant in Santa Fe with 52 workers and a $450,000 payroll, anticipates that a “compression effect” will push all salaries up the pay scale when the new minimum kicks in. Currently, Allin’s assistant managers make $9 per hour—75 percent more than his new busboys, who receive a $5.15-per-hour training wage. When the busboys are making $8.50 per hour, Allin explains, his assistant managers will likely insist on keeping their 75 percent differential, pushing them up to $14.85 per hour. Such increases, he says, will make it impossible to keep up with competitors exempt from the new minimum because they employ fewer than 25 workers. A business like his that stepped up from 24 to 25 employees might find its labor costs rising $180,000 a year.
To compound the injury, labor activists made sure that the new law punishes violations with criminal penalties. The owner of a 24-employee firm who hires a one-hour-per-day temp for 30 days without boosting everyone’s pay will now be facing—unbelievably—up to 180 years in prison and $360,000 in fines.
Wiser New Mexico communities are now taking advantage of Santa Fe’s folly. Albuquerque and Lincoln County, for example, have basically hung out “open for business” signs. Officials in these municipalities are working to pass bills stating that they will not pass living-wage laws, signaling that firms considering fleeing Santa Fe are welcome in their towns.
Fleeing firms, lost jobs, and jail for company owners: this is no formula for economic recovery. Nonetheless, living-wage activists, emboldened by their win, are trying to push the Santa Fe model on the rest of the nation. Watch out, America.
Yes, but they are making more/hour. It's just that their # of hours has been reduced to zero.
The minimum wage in Santa Fe in zero.That's what the pay you there if they don't hire you.
Oh yeah...and the big boys lead:
http://www.cnn.com/2003/TECH/biztech/08/11/training.replacements.ap/index.html
U.S. tech workers training their replacements
SAN JOSE, California (AP) --Scott Kirwin clung to his job at a large investment bank through several rounds of layoffs last year. Friends marveled at the computer programmer's ability to dodge pink slips during the worst technology downturn in a decade.
But it was tough for Kirwin, 36, to relish his final assignment: training a group of programmers from India who would replace him within a year.
"They called it 'knowledge acquisition,"' the Wilmington, Delaware, resident said. "We got paid our normal salaries to train people to do our jobs. The market was so bad we couldn't really do anything about it, so we taught our replacements."
Finally laid off in April, Kirwin sent out 225 resumes before landing a temporary position without benefits at a smaller bank -- and swallowing a 20 percent pay cut.
Kirwin is among what appears to be a growing number of American technology workers training their foreign replacements -- a humiliating assignment many say they assume unwittingly or reluctantly, simply to stay on the job longer or secure a meager severance package.
Their plight can be seen as an unintended consequence of the nation's non-immigrant visa program -- particularly the L-1 classification. The L-1 allows companies to transfer workers from overseas offices to the United States for up to seven years -- ostensibly to familiarize them with corporate culture or to import workers with "specialized knowledge." It also lets companies continue paying workers their home country wage. Indian workers receive roughly one-sixth the hourly wage of the average American programmer, who makes about $60 per hour in wages and benefits.
Large technology companies say the L-1 helps them staff offices in less-developed companies with workers who understand the needs of a global corporation. And some labor experts say out-of-work programmers should stop complaining, and focus on their own re-training, just like the Rust Belt assembly line workers whose factory jobs migrated to Mexico and Asia in the 1980s.
But unemployed tech workers contend that so many good jobs are going to places like Bombay, Bangalore and Beijing that honing their technical skills is futile. According to the research firm Gartner Inc., one out of 10 technology jobs in the United States will move overseas by the end of next year.
L-1 classification
"Once I figured out what was going on, I was disgusted," said Kevin Sherman, a 47-year-old programmer and technical author from Worthington, Ohio, who was working for Manifest Corp., an information systems consulting firm in Upper Arlington, Ohio.
Sherman held onto his $62,000-per-year contract job while he taught several dozen Indian workers how to build and maintain computer databases in 1999 and 2000. He quit rather than take on his next assignment: fixing the newly trained foreigners' broken PCs. He's been unemployed for two years.
Nancy Matijasich, Manifest president and CEO, said she no longer employs L-1 workers like those Sherman trained, because the Y2K threat has passed and the company has less need for programmers.
"There was a shortage of skills in the '90s," Matijasich said. "But we haven't processed visas in a long time." The State Department issued 28,098 L-1 visas from October to March, the first half of fiscal 2003. That's an increase of nearly 7 percent from the same period in 2002. But the number of L-1 workers in the United States is likely much higher, said Charlie Oppenheim, the State Department's chief of immigrant visa control. Each L-1 lets a worker enter the United States multiple times over several years.
There is no limit on the number of L-1 workers companies may import each year. Legislation introduced last month by Rep. Rosa DeLauro, D-Connecticut, seeks an annual limit of 35,000 L-1 workers nationwide.
By contrast, tight controls govern the H-1B visa, which requires companies to pay workers the prevailing American wage. The H-1B cap is scheduled to be reduced from 195,000 workers to 65,000 per year on October 1.
Imported workers
Tech bellwethers including IBM, Hewlett-Packard, Cisco Systems, Oracle and Microsoft use L-1 workers but won't disclose how many they import. Many bring in workers through consulting firms, usually Indian companies such as Tata Consultancy Services, Infosys Technologies and Wipro Technologies.
Intel spokeswoman Gail Dundas acknowledged that the world's largest chipmaker relies on Americans to train L-1 workers who staff the company's offices in Russia, India, China and other high-growth markets. But she says the Intel training program does not result in American layoffs.
"If someone does something really well, we want the person who's going to perform a similar function abroad to learn from the master. Then the person in the United States will continue to do their job just as before," Dundas said. Intel provides L-1 workers a cost-of-living adjustment if they work at the Santa Clara, California, headquarters or elsewhere in the United States. Intel pays for housing, cars, return trips to the workers' home countries and full medical benefits -- a package that ends up costing significantly more than hiring an American, she said.
Dallas-based Texas Instruments also imports L-1 electrical engineers. With U.S. colleges graduating fewer U.S.-born engineers and the population of foreign-born science graduates mushrooming, TI has to look overseas for talent, spokesman Dan Larson said.
"You have a declining pool from which to draw, and more of those people are foreign nationals," Larson said. "If you're a company looking to hire electrical engineers, you're obliged to hire the best and brightest from wherever." Sunil Mehta, vice president of NASSCOM, a New Delhi-based trade association for Indian software companies, claims the L-1 program has created about 1.5 million jobs in the United States since it began in 1970.
Still, NASSCOM and a U.S. counterpart, the Information Technology Association of America, acknowledge that some companies exploit loopholes. ITAA published guidelines for members on July 29, suggesting that companies pay the prevailing U.S. wage and import only those foreigners who have skills lacking in America.
"Similar visas exist in 20 to 25 other countries, including India," Mehta said. "I don't think we should throw the baby out with the bath water because of a few loopholes." Michael Emmons says he's already become an L-1 casualty. The 41-year-old software developer moved from California to Florida in 2001 after Siemens, his contract employer, merged with another company. He was supposed to help migrate disparate software into a single system, but he and a dozen co-workers ended up training Indian replacements to connect systems using IBM software.
Emmons, who quit the Siemens job after being told his position would be terminated, is now lobbying politicians to abolish the L-1. He's also considering a career in politics -- running on an "American Workers First" campaign.
"I'm not saying offshoring can be stopped, but it does not have to be like this," he said.
Yes but those 6 workers would be paid a lot more if they were working. It's real compassion.
IMO, that's usually the result of union activity anyway, a few guys get high paying jobs while many more are put out of work. Price and wage fixing is classic socialism, I guess history shows how well it has worked.
I'm sure Santa Fe politicians will quickly determine the next logical step: just prevent employers from firing their employees to get under the cap. Problem solved.
See how easy it is when you've never produced a damn thing in your life?
The biggest block against unions conscripting minimum wage workers is that those workers can't afford to pay extortionate union dues (how else would the unions be able to hire politicians). The SOLE reasons unions encourage living wage increases is so that the minimum wage workers can afford the union dues.
In Santa Fe, if the minimum wage goes from $5.15 per hour to $8.50, the low end workers could "afford" $1.00 an hour in dues and still have a healthy increase. No matter how many jobs the community loses, every new member the union gains is pure profit and that's ALL the unions are concerned with. They need cash to fund the democrats and the only way to get cash is to increase dues or generate more dues paying members.
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