A view of the pay cut
by a Poughkeepsie IBM employee

Some blame “organized labor”, more specifically the Alliance@IBM, for pushing the overtime lawsuit and therefore causing management to cut pay. The Alliance@IBM didn’t start the lawsuit. IBM workers along with former employees decided on their own to pursue a class action suit with the help of a law firm that solicited others to join.
The lawsuit payout was the most money many have received from IBM in the last several years as pay raises have been nearly zero. IBM then punished its employees with a pay-cut for exercising their Constitutional right to take their employer to court because they believed IBM illegally withheld overtime pay from them. IBM settled for pennies on the dollar, and then slammed the victors with a pay cut. It’s OK for the boss man to use his legal right to cut pay (even in retaliation) but not ok for employees to use their legal rights.
Executives shamelessly claim “we feel your pain” when cutting pay but the company can’t afford to pay overtime because we won’t be able to compete. We’re only talking about 7600 people out of 125,000, or 6% of its U.S. workforce. Boy, that’ll scare away the shareholders – we’re paying the help too much! Speaking of pandering to Wall St. – IBM just announced another $15 Billion in stock buybacks ($94 Billion since 1995) – more for the executives! In fact CEO Palmisano received an 11% raise in compensation for 2007 of $20 million.
Consider, too IBM made $10 Billion profit last year, the 7th straight year of profits greater than $5 Billion - which you’ve helped earn. So IBM can easily afford to pay OT. The pay-cut is about revenge.
Now management is forcing you to work extra hours to make-up the pay-cut. But it’s questionable you’ll be able to. Remember OT is dependent on their approval and can be taken away any time, so there will be periods of no OT, especially when profits are not meeting expectation. Sometimes you may not be able to work OT because of personal commitments or illness. Work-life balance will be shot – my kid’s ball game or OT? Stress and bad morale follow. You’ll be on the treadmill – constantly pedaling to keep up but falling short.
Have you thought about how the pay-cut affects your vacation? The more vacation you have means more work hours to make-up the lost overtime you could’ve worked those weeks. But the more hours you work to do this effectively means you’re working those hours for free for IBM. So let’s calculate. You need to work 5 hours per week to make up the cut. So for example if you have 5 weeks vacation plus 6 optional holidays you now need to work :
(5 hours/week x 5 weeks) + (6 days x 1 hour/day) = 25 + 6 = 30 hours. (Compared to 4 weeks vacation, which translates to 26 hours needed to work). So that’s the better part of a week you’ve worked for nothing to avoid a loss. Maybe now you won’t even take a vacation! Funny there was no “transition” given to offset vacation loss. Multiply this by 7500 employees - a not so small oversight going into the executives’ wallet!
The pay-cut has hidden implications. Yearly GDP (bonus); severance package and unemployment insurance if you’re fired are calculated on your base pay, not gross earnings. Loans and credit ratings are based on your salary, not your gross pay. A lower salary means a smaller home, car and education loan for your kids you can qualify for, along with higher interest rates. A bigger percentage of your salary will now be needed to pay for ever-rising health care benefits. And even though OT pay counts towards your 401K plan, IBM will contribute less as part of your match if you fail to work the hours you need to. The same applies to Social Security – if you and your employer contribute less, your retirement payout will be less, which is based on your 35 highest earning years. If you have the traditional defined benefit pension plan, your payout is based on your last 5 years of earnings. So lower 401K and SS contributions along with a smaller pension mean less retirement income. The pay-cut will have a ripple effect, some of which you cannot make up with more OT hours.
To be scared away from the Alliance@IBM at this point though would be a mistake. Executive management will continue to take more and more away from us because it can – we have no legally binding contract to protect us. Like an abusive spouse, IBM blames the victim for its monstrous behavior. The abused have only 2 choices – continue to take it or fight back. If we don’t fight the pay-cuts, more abuse is ahead. Another pay-cut could happen.
Here’s a good example of where fighting back works. We the workers joined together to oppose IBM's decision in 1999 to abolish (i.e. steal) the traditional pension plan and convert everyone to a lower-paying cash-balance plan. Because we showed outrage – before the Alliance@IBM even existed - many of us won back MILLIONs of dollars. If nothing had been done, management would have gone on a rampage to take-away more. Imagine if the majority of employees hadn't accepted IBM's "compromise" and had gone all the way and won a union contract - there's a good chance everyone would have their pension back!
Unions brought you the weekend, the 40-hour work week, pensions, overtime pay, unemployment and disability compensation, health benefits and job-security. Union workers on average have better pay and benefits than non-union. Even non-union employees benefited as their employers bolstered pay and benefits in order to keep unions out. But corporations and their political allies have battered union membership into decline over the last few decades, with pay and benefits sliding as a result. We need to reverse this decline by building back union strength.
Bullies seek easy prey when they sense there’s no opposition. We need to stop complaining about the bullies and get busy building the Alliance@IBM. History shows we can win if we work together.