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Corporate Rot U.S.A.   (April 5, 2007)

New correspondent David, an Information Technology (IT) professional with 25 years in the field, recently sent in this intriguing account of a physician who couldn't find fulltime employment:
I constantly hear people like Bill Gates (most recently in Mexico) stating that America doesn't have any trained people and we need to increase 'migration' and visas etc...I guess my 25 years in IT doesn't qualify! What is sad is that the general population thinks it is true because it is in the media.

Well I have a friend of a friend whose wife graduated from medical school several years ago and she was never able to find a full time position?! Seems that every hospital wants to hire her part time, no benefits, and on an as-needed basis. She has had to work at 2 to 3 hospitals at the same time to actually get 40 hours a week. She doesn't have the funds to start her own practice.

The same experience I have fought in IT for decades!
I asked David to elaborate, asking questions such as, when did he last have a job which paid full benefits, and the like. His response contains what I believe is a deep critique of Corporate America and its relentless drive to increase profits next quarter at the expense of employees, the company's long-term prospects, and indeed the nation's.

David covers a lot of ground and so this is a long post. I recommend reading the entire piece before making up your mind as to whether it is a rant or not. In my view it is an informal description of the rot at the core of the U.S. economy. The U.S. economy is a large beast ($13 trillion or so in GDP) and of course it depends on which part of the beast you're touching. Some of you may work for well-managed companies which value true productivity and not the ersatz variety, in which case you may be tempted to dismiss this as one disgruntled person's sour reflections.The key question is: is this experience of short-sightedness now common? Take it away, David: (emphasis is mine--CHS)

It is always difficult to hire an employee regardless of position or skillset. I have had to directly find and hire people for probably 15 years. There was a book published back in the mid 1990's that was based on the premise that because of the way Human Resource departments at American corporations are set up, American corporations will fail and completely collapse. HR practices will destroy America. I can't find the title and the book as it in deep storage 1000 miles away so I can't get the title.

Everything in the book has come to pass...

Microsoft can not find enough skilled employees - at the salary they wish to pay!

Microsoft hires Visa/outsourced employees because they pay them less in actual salary and benefits when compared to hiring Americans. If I am an American living in Redmond I must make $100k a year to live a decent lifestyle in America (buy inflated house, car, etc). Temporary workers make a better salary than they would in their home country and they don't need to make as much because they will not have to stay in the inflated economic area. They bank cash, put their lives on hold, and leave in 5 years.

Lack of experience and training is an old, tired excuse. If those visa holders had to buy a home and have their spouse come over and pay for schooling and pay for all the stuff a permanent resident must pay for they wouldn't come here --- and accept the same low pay!

Healthcare is part of it but you are not the 'real problem' as related to healthcare - it is your wife and kids. Men, even older men, do not get sick. They just die. Woman and kids are like 80% of the costs to the healthcare plans at companies. Most men do not get pregnant or have breast cancer or have kids. I think if you could find the stats, most young men (20-55 years old) don't have medical conditions (that probably is changing due to obesity). How many women aged 20-45 have you known that had uterine or breast cancer? It is frightening. Also kids are a black hole today for medical costs!

There are skilled American IT workers out there but I do feel that there are fewer today than say 10 years ago. Almost all of my friends have moved from technical areas to non-tech areas. They had enough of the 'work for a year then get laid off' lifestyle, spending your life in a hotel, and constant re-training and certification merry-go-round. We have lost a huge number of really experienced workers in this country.

I have worked as a COBOL programmer, Siebel programmer, and Visual Basic programmer. I actually sat and coded all day. If you know programming those are about as different mindsets as you can get! My budgets usually ran from $25,000,000 to $400,000,000 (yes 400 million dollars).

In the 1990's companies quite training employees. As soon as they trained the employee, the guy promptly left for more money. Headhunters would swoop in and steal all the trained employees. Then we started outsourcing with visas and later overseas. I wasn't allowed to code but was 'moved into management' where my job was to find workers recently laid off and give them just the minimum training needed to do a job and then we used these 'just in time employees' for contract gigs (I worked at different consulting firms).

Companies just gave up on their employees I think. Corporations don't have a soul to save or an ass to kick. It is a company's purpose to maximize profits and I can't hold that against them.

Remember back in the 1980's the articles about how in the future companies would hire employees literally by the hour to complete a job. There would be no permanent employment. For myself and a lot of my friends that is the reality today and it is working its way to other areas outside of IT. Many professional health care workers are going thru this because their salaries are so high.

It does make financial sense for companies to only pay for work when they need it. Why hire a programmer to work on a project for 6 months then sit for 3 months till the next project starts. The company could use that 3 months of salary on another project.

The problem is that there isn't a mechanism to manage this process. Yes we have human resource departments but they are still operating on the old 'hire them for life' methodologies. HR is broken. My friends who aren't entrepreneurial are just lost! They are not equipped to market themselves 24 hours a day and work 35 jobs a year. It is killing them. Being self-employed can be terrifying.

My first real job after school was 5 brutal years working on COBOL programs for billing, a/r, sales, provisioning, call center, and marketing. Today how do recent graduates get this kind of experience when companies only want to hire people for 3 month contracts? Also the HR dept is responsible for screening applicants. Back in 1932 a manager need to hire a welder. Well this guy was 50 years old and has been a welder for 30 years. He now manages welders but he knows everything about welding so he can tell in 10 minutes the qualifications of an applicant.

Today not even the hiring manager is experienced. I worked at a Fortune 10 company. Major, huge company with 175,000 employees. I was in a review with my manager who had zero technical experience. I told him he didn't have a clue how to manage my job, well his reply was he didn't have to understand my job - he was a manager and he managed people! How true but how stupid!

For a couple of decades we have 'pushed' non-technical people into technical management positions because of affirmative action. My own mother was pushed into management because of a class action lawsuit based on the low number of females in management. How can these people find qualified employees. I can tell in 10 minutes if you really programmed VB or if you have actually used software Quark or Indesign on a daily basis. I have decades of technical experience, my mother doesn't.

The career path that created a stream of skilled employees broke down in the 1990's. I can find kids that are great at ASP or PHP because they are the nerdy kids that sat in their room programming with their friends for 10 years. IT is special in that regard. You can learn many IT skills on your own. Try finding a petroleum geologist that has 10 years experience. We laid these people off after the slowdown in the 1980's and we killed the path creating a steady stream of experienced employees. Same for medical professions and mechanical engineers etc etc etc.

My geologist friend is now a pilates instructor! My engineering friend is a secretary!

I get 5 emails a week asking if I can work on a 3-month Siebel gig. They usually want 5-7 years experience and certification. The training costs alone per year are easily $10,000. Forget it. I can't pay inflated Siebel training costs and accept de-flated salaries. When I say that HR has broken down, one example is that the salaries companies expect to pay are based on the salaries of the employees they laid off 5 years ago but I am not an employee. I am a business and I can't survive on the old employee hourly salary. I bill just like a business does. That means they may have paid $45 an hour for an employee but you will pay me $45,000 for the 2 week gig.

I am not your employee! I must pay for my own office equipment, accounting, marketing, training, healthcare, etc, etc. Also I pay self employment taxes. Even with write-offs I pay a fortune in taxes. I have watched so many of my friends crash and burn when they started working freelance and not approaching the situation as a business.

HR can't afford me for a 3 month contract so it is true that HR can't find qualified applicants (for the salary they expect to pay!)

I was a Director in a company several years ago and it was a non-stop fight trying to hire people. HR must maintain 100% control to maintain their power in the organization. I would find 10 candidates and they would be screened by HR first. HR would reject all 10! A typical reason was that the kid had very poor communication skills. What! I am trying to hire a ASP programmer. These kids are uber nerds. They just want to go to their cubicles and code and code and code. Sales people must be great listeners / communicators but ASP or PHP programmers just code!

Part of the HR problem related to not being able to find qualified people has to do with the systems they have been using since the mid 1990's. HR software defines job qualifications for HR. When you setup a large HR software system you usually buy the most common 3000 job descriptions. This is useful because the 18-year old HR employee doesn't have to create the job description. OK lets let the hiring manager create the job description for a PHP programmer. Well wait a minute, she was never a programmer. She was an arts major but now she manages 5 technical people. She can't write the description. So the software provides the descriptions, just click the dropdown box and pick the title 'PHP programmer' and the description is provided for them.

The problem is that the descriptions are not realistic. A perfect example is a friend of mine. She handles marketing for companies and started back in 1985. She had just graduated with a journalism and marketing degree. She learned all the manual processes like typesetting, etc. Well the Macintosh and Quark had come out and she felt that was the future and she learned to use a computer and the software. The older workers didn't and eventually had to hire her to do the work or go out of business because document creation became 100% digital. Around 1995 she decided she wanted to work for a company instead of freelancing. Freelancing is a really lonely job as you work by yourself 90% of the time. So she started looking for a job. She found that even though she had 10 years experience, she wasn't qualified!

By 1995 HR had combined website creation with the old marketing skills. That meant that artsy type people now needed to know html and javascript! People who can draw a horse freehand are a completely different mindset from the nerds that program javascript but because the software description listed both as a requirement she couldn't find a job and the companies couldn't 'find qualified applicants'. She never found a position.

So again HR can't find qualified applicants! The system is setup to 'not find qualified applicants'.

I could go on for pages but on to the question about healthcare...

I have not had real benefits since 1990! I have never had a contract job that provided benefits. I worked for Xerox and they provided 100% coverage for anything, anywhere, anytime with no deductible! It was unbelievable and cost that company a fortune! I know of situations that the medical bills came to over 1 million dollars and Xerox paid - no questions asked. (one example was a friends child was born without part of their skull and another was a friend who was in an automobile accident and had a major head injury) They paid for dental and eye care also.

What is even more incredible is that they would give every employee $400 a year in CASH to cover the little things like cold medicine and aspirin from the drug store! I knew people that would go on 'mental disability' for a year and get full pay. How insane was that! The actual reason for the mental problem was 'I hate my job'! No kidding!

Those days are long gone! The employers I have worked for since have had benefits but they are the 'fake' kind meaning I paid for all the coverage. That meant that I had $5000 deductible and coverage up to $10,000. What good is that! Statistically how many times does the insurance company payoff with weird rules like that? No dental. No eye care. By law companies have to provide coverage but they can really just pass most of the expense thru to the employee with huge deductibles. The big hit for the employer is the signup costs. That is why I don't want employees quitting after 3 months. High turnover will cost you.

I think that healthcare is a factor in companies trying to go to outsourcing or visa type employees. It does cost money even if you only provide the bare minimum coverage required by law but companies are very good at beating down those costs. If you stated that an older person could not get a fulltime position with company A but could get a contract position (without benefits) with company A then I would say that healthcare costs are a factor. The problem is that I don't know of to many people getting high paying contract jobs! No one is hiring.

All high paying jobs are few and far between regardless of the jobless stats and the media talking about 100% employment. Companies have laid off a majority of their workers and have been on life support since 2000. Read the financial annual reports on most companies in America and a huge amount of profit is derived from financial transactions/speculation - not from their core business. (example GM and GMAC).

The high paying jobs went to China. Design the mp3 player overseas, manufacture it overseas and sell it marked up 90% to Americans. Every time you try and use your cell phone and it has some weird bug like the time keeps changing that means the code development was cut short, layoff the contract programmers, and never hire people to maintain the code. I see stuff like that everywhere because I know how stuff is made but my Mom just ignores the problems as most American do.

Why hire you when people don't care if the accounting software has a bug and bills you an extra 25 cents! The cash registers at Home Depot crash and everyone has to wait for 30 minutes - Home Depot has 3 network people instead of the 50 needed to maintain the system. My mom just stands there and waits like a sheep. I understand they are pushing the costs off on me - I wait and they only need to hire 3 network employees.

This is all about the 'productivity' numbers that have been so great since 2000. Companies laid everyone off and do not fix or maintain stuff. There isn't a need for all the experienced workers out there if you cut out 80% of the development and maintenance.

I guess my answer is that companies are not hiring because their core business is broken. It isn't you! If we hadn't had the housing bubble we would have had a huge depression. I love tech but I dearly want to quit IT but I can't come up with a 'old school' trade that people will (can?) pay for.

Sorry about the rambling but I wrote this one paragraph at a time while packing to go back home.
This isn't rambling, it's experience. I know there are companies which try to take care of their employees, and people who have worked for the same company for years, and CEOs who aren't crooks trying to rake off as much as they can in 18 months before they're fired--but at least anecdotally it seems the world described by David is one that many Americans live in.

To summarize that world:

Human Resources has been "outsourced" to cut-and-paste software.

Nobody gets trained anymore--too expensive.

Few employees get benefits such as real healthcare insurance--too expensive.

Benefits are shams designed to create the illusion of coverage.

Middle-class wages and benefits are hard to come by even in "hot" industries such as IT and healthcare.

Managers no longer know the field in depth and are therefore unable to manage employees whose jobs and tasks they do not understand.

"Productivity" has meant slashing support to the bone, moving to contract labor and offshoring of design and manufacturing.

As a result, the quality of products, support and service has declined.

If you believe the "productivity" cheerleaders, then everyone's been immensely enriched by the astounding rise in productivity. But what if all that is just smoke and mirrors? Regardless of your faith in the veracity of the numbers, they're declining: Productivity Lull Might Signal Growth Is Easing (WSJ 3/31/07)

When the recession starts (if it hasn't already), where are corporations going to cut to make their "yea, we beat Wall Street earnings estimates again for the 15th time in a row!" quarterly profit? By firing their most experienced salespeople, like Circuit City recently did, to save $2-$3 an hour per employee?

Having gutted their experienced staff, will they "beat their quarterly profit numbers" now with 3,400 green employees? Or will they have sacrificed the long-term health of the company to eke out some dramatic savings for next quarter? What about the company's prospects 8 quarters out? Does anyone really believe management is tasked with caring about that?

If so, please sign up here to buy the Brooklyn Bridge. . . cash only, thank you very much.

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copyright © 2007 Charles Hugh Smith. All rights reserved in all media.

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