IBM never makes a public announcement when it moves American jobs to other countries. But it offshores aggressively all the same—even though its CEO, Virginia Rometty, is now advising incoming President Donald Trump on how to keep more jobs in the United States.
Filings with the Labor Department show at least two dozen instances during the last two years in which former IBM (IBM) employees applied for federal aid because the tech giant moved their jobs to other countries. There’s only one such filing during that time for United Technologies (UTX), the firm Trump attacked recently for a plan to move 700 jobs from Indiana to Mexico. There are none for Ford Motor Co., another company Trump has criticized—most likely because Ford plans to open new factories in Mexico, but hasn’t actually moved any US work there.
Trump seems to base his sporadic attacks on companies moving jobs overseas on anecdotal information gleaned from news headlines. But a lot of companies offshore jobs without ever making the news, as a look at federal records reveals. American workers who lose their jobs because of offshoring are entitled to a federal benefit called trade-adjustment assistance, or TAA. To get the benefit, the workers or somebody acting on their behalf—usually state government officials—must file a petition with the Labor Department. The forms are supposed to include the number of workers affected and a basic explanation for why the workers lost their jobs. The Labor Department certifies the petitions before granting benefits.
Such filings indicate that at least 450 IBM workers have lost their jobs since the beginning of 2015 because the company moved the work overseas. But the real number is most likely higher, since one-third of the filings either don’t say how many workers were affected or contain redactions that obscure the information. One filing, on behalf of laid-off workers in Connecticut, said “IBM refuses to provide this information.”
IBM moved American jobs to India, China, Bulgaria, Egypt, Brazil and Costa Rica, according to the filings. On some of the forms, workers indicated they were required to train their foreign replacements in order to receive severance pay. “We were managers who laid off our staff (and then were let go too),” one petition reads. “My staff was, at its peak, a couple hundred people. We were only part of the large scale movement of production from IBM’s GTS [Global Technology Services] organization in the US to India.”
IBM did not respond to questions for this story, but Trump could get the details straight from the company’s CEO, since Rometty has joined a panel of business leaders meant to advise Trump on jobs and the economy. Trump, of course, has been focusing on manufacturing jobs leaving the United States, which often disappear in big lumps when an entire factory closes. Technical jobs, such as those at IBM, often disappear in smaller numbers that don’t generate a lot of attention, but add up all the same.
‘Strategically outsourcing’
Yahoo Finance looked for clues about unannounced offshoring by first asking outplacement firm Challenger, Gray & Christmas, which tracks layoffs, for data involving companies that have announced job cuts during the last 18 months. We then looked for TAA petitions involving those companies and tallied the number of workers who seem to have been affected by offshoring since the beginning of 2015.
A handful of companies stood out. The 24 TAA petitions relating to IBM were far more than any other company we looked into, but 9 petitions filed on behalf of Intel (INTC) workers listed more than 1,600 jobs lost to offshoring during the last two years, mostly in Oregon, Washington, Arizona and New Mexico. One petition filed by Washington’s Employment Security Department involving the loss of 77 jobs in Olympia this month says, “Intel Corporation has been strategically outsourcing and shrinking its US footprint for years. This closure in Washington state is one of many across the country. As US jobs are lost, Intel is expanding global operations.”
Eight petitions filed on behalf of Verizon (VZ) workers list about 470 jobs offshored during the past two years. One filed in Texas in 2015, for instance, says “Verizon conducted a workforce layoff … and moved our positions to the Manila, Philippines offshore location.” (Disclosure: Verizon is in the process of purchasing Yahoo, Yahoo Finance’s parent company.) Intel and Verizon both declined to comment for this story.
The biggest offshorer of recent years is probably Hewlett Packard Enterprises (HPE), one of the two companies spun off last year from the old Hewlett-Packard. This, however, was no secret. CEO Meg Whitman said during the split that a key unit of HPE, its consulting division, would need to increase the portion of employees based in low-cost countries from 36% to 60%. A TAA filing from last year put the total tally at 10,000 US jobs being sent offshore. The stated reason: “Services are being outsourced to a foreign country.” Like the other companies, HPE declined to comment.
Expanding global workforce, shrinking US workforce
Big companies move jobs offshore because they operate in many parts of the world and need to keep costs down in order to compete with other companies doing the same thing. Plus, shareholders and Wall Street analysts demand peak profitability, which often means cutting labor costs. IBM has responded to that sort of pressure by shrinking its work force by about 13% since 2010, to about 378,000 people at the end of 2015; it doesn’t break out the portion based in the United States. At Intel, a larger portion of the jobs are based overseas, but since the overall labor force has grown, there’s been a net gain of about 9,000 US workers from 2010 to 2015. That may be changing, however, on account of a big restructuring plan announced earlier this year.
Verizon has shrunk by about 17% since 2010, to about 162,000 workers—with most of them in the United States, where the company’s business is. HPE has 195,000 employees worldwide but expects that to fall by 30,000 through 2018. Like IBM, it doesn’t publish the portion of its workforce based in the United States.
Trump has already claimed one success in his crusade to boost US employment. United Technologies modified its offshoring plan, at Trump’s insistence, and decided to keep some jobs in Indiana, in exchange for new tax breaks. But that may turn out to be a Pyrrhic victory for Trump and the workers whose jobs he saved: The company’s CEO said some of the jobs now remaining in Indiana were likely to be replaced by automation in coming years. Meanwhile, another Indiana manufacturer, Rexnord, is going ahead with plans to move 300 jobs to Mexico–despite Trump’s protestations.
Trump is late to the game, anyway. American companies have been offshoring jobs for more than two decades, with multinationals such as IBM and Intel surviving many bouts of bad publicity due to offshoring and other controversial employment practices. One important study found that China alone accounted for the loss of 985,000 US manufacturing jobs between 1999 and 2011, and 2 million jobs overall. The overall number of jobs offshored is presumably higher, since India, Vietnam, Taiwan, Mexico and other low-cost countries have all gained work that was once done in the United States.
Overall US employment has grown since then–new jobs are created as old ones disappear. And millions of consumers have benefited from the lower prices that come with cheaper imports. But it’s undeniable by now that some American workers have been hurt by free trade and globalization, with programs such as TAA doing little to offset the damage. Trump’s appeal to such workers carried him to a stunning election in November. But the scale of the problem he has identified will require more than the opportunistic reaction to a few headlines.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.
