Feds Relent, Give Benefits To Programmers Who Lose Jobs To Offshoring

The Labor Department had ruled that downloaded software wasn't a product, so workers didn't qualify for the program.

May 1, 2006

3 Min Read
Network Computing logo

The U.S. government has finally--grudgingly--conceded that software programmers make something real.

For years, many computer programmers who lost jobs to a foreign outsourcer couldn't collect the same unemployment benefits extended to factory workers who lost their jobs amid a flood of cheap imports. The Department of Labor said programmers didn't make an article unless it involved software packaged on a disk or a CD. So U.S. IT pros couldn't claim so-called trade adjustment benefits for losing their jobs to offshore development shops because they typically transmit code into the United States through telecom links.

In a turnabout, the department-- in a note published this month in the Federal Register--said four employees of IT services vendor Computer Sciences Corp. who were laid off in 2003 are eligible to apply for benefits under the Trade Adjustment Act. That act, designed to help people who lose jobs to foreign competition, includes extended unemployment payments, and retraining and relocation allowances.

Rep. Smith is trying, at least.

The Labor Department initially said that although CSC moved production of its Vantage-One insurance software from East Hartford, Conn., to CSC India, the software wasn't an imported "article" as defined by the TAA. In January, Judge Nicholas Tsoucalas of the U.S. Court of International Trade ordered the department to revisit the case. "Labor's interpretation of the law, that software code must be embodied on a physical medium to be an article under the Trade Act, is arbitrary and capricious," he wrote. Earlier this month, the Labor Department conceded the point and ruled the CSC workers eligible to apply for TAA assistance.

Along with the CSC decision, Labor made similar rulings for programmers formerly employed at EDS and online retailer Lands' End. A case by former IBM programmer James Fusco, who developed billing software for IBM customer AT&T before the work was sent to India, is pending. "We expect we'll get the same outcome," says Fusco's attorney, Jean-Claude Andre. Andre is seeking class-action status to get all programmers who lose jobs to offshoring eligible for TAA benefits.Together with the Lands' End and EDS decisions, the CSC one looks like a precedent-setting case. The Labor Department says it will look on software as a physical product whether it's shipped into the United States on a disk or transmitted over a network. Andre believes that techies who test and maintain software also will be covered as long as they work in a facility that, "somewhere in the chain, creates end-user products."

The ruling could affect thousands of U.S. IT workers who say they're out of work because of the outsourcing of high-tech jobs to China, India, and other emerging markets where programmers are paid as much as 80% less than their U.S. counterparts.

Limited Impact

TAA likely won't help people in other white-collar jobs, such as accounting and legal research, that are being moved abroad, since Labor still regards their output mostly as a service, not a product. "The wording of this ruling is very narrow," says Daniel Drezner, a University of Chicago political science professor and conservative blogger. Drezner also doubts it will hit taxpayers hard, since most programmers, given their education, won't stay unemployed long.

Rep. Adam Smith, D-Wash., last year introduced a bill to extend TAA benefits to all service workers, but like similar federal and state proposals, it has gone nowhere.Could an election year raise the profile of IT workers? U.S. tech services companies are hiring by the thousands in India and at times quietly shrinking U.S. staffs. IBM and EDS plan to add tens of thousands of positions in India over the next several years. CSC is cutting 5,000 jobs in North America and Western Europe in the next two years, and it's adding 5,000 to 7,000 workers in India. Still, U.S. IT unemployment is below 3%, according to the Bureau of Labor Statistics. So don't expect IT workers to have the loudest voice on the national political stage.

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like

More Insights