Legislation - 107th Congress
POSITION: CESO petitions our lawmakers and the administration to raise the top-line of the defense budget for procurement and R&D.
Post Cold-War reductions in spending have resulted in aging weapons systems, with high maintenance costs, as well as threatened the capability and capacity of the defense industrial base. CESO's member organizations represent the backbone of the U.S. defense industrial base ' its engineers, scientists and technicians. Increasing the defense budget for procurement and research and development will maintain the health of U.S. technology industries. Congress needs to fully fund the modernization of our defense forces.
The defense industry provides approximately 800,000 highly-skilled jobs and contributes in excess of $145 billion annually to the nation's GDP. It has the largest balance of trade of any sector in the U.S. economy. Industry cannot finance basic defense technology alone, however. Therefore, the U.S. government has funded most major advances in defense products. Because of its importance to the economy and its role in national defense, CESO has fostered a productive relationship with government.
Currently, 3% of the federal budget is allocated to simply maintaining our nation's defense capability. This is not enough. The current defense budget has not kept pace with current and future needs, or provided sufficient R&D funds for the next generation of defense-related vehicles. Both R&D and procurement are essential to maintaining our readiness and technological advantage on the front line.
Defense procurement for Fiscal Year 2001 (as reflected in the OMB and congressional defense budgets) amounts to $59 billion. Defense R&D spending is $38 billion. The Congressional Budget Office recently performed a study estimating the annual defense procurement requirement of $90 billion and an R&D requirement of $40 billion, in order to maintain our current national security strategy. Over a 5-year period, the CBO estimated amounts of $450 billion for procurement and $200 billion for R&D. Early reports show the Pentagon plans to spend $300 billion over the next few decades on three air-superiority fighters that critics insist it cannot afford ' the Air Force's F-22, the Navy's Boeing F/A-18 E and F, and the Joint Strike Fighter (JSF), intended for the Navy, Air Force and the Marine Corps, for which Boeing and Lockheed Martin are proposing competing designs.
The President has stated that he foresees only modest increases in the defense budget until his strategic review is completed later this year. Bush has made it clear that he wants to consider radically reshaping U.S. defense strategy in ways that might eliminate or sharply cut back multi-billion dollar programs for traditional weapons, such as fighter jets and tanks. Instead, Bush plans to underwrite new high-tech weapons and those that extend the nation's global reach, such as the B-2 stealth bombers. Bush's administration has stated that traditional tanks, aircraft carriers and combat jets are becoming obsolete because they are too vulnerable to missiles.
Until
Bush's final budget recommendation is unveiled, many Democrats on the Senate
Armed Services Committee contend that any defense build-up would be squeezed
out of the budget by Bush's proposed $1.6 trillion tax cut, and that if this
tax cut were to be passed, there would be no money left to modernize America's
defense industry.
Protection of FLSA Overtime Provisions
POSITION: Rather than expanding FLSA exempt positions, Congress should repeal the 'computer professional' overtime exemption.
The Fair Labor Standards Act (FLSA) of 1938 sets the wage and hour rules for all private-sector workers. It requires covered non-exempt employees to be paid time and a half for all hours worked in excess of a 40 hours in a week. The regulations require that to qualify for a 'professional' exemption, employees must meet a 'duties test' (e.g. management, administrative, or professional) and a "salary basis test' (e.g. a predetermined amount of salary not subject to reduction because of variations in the quantity or quality of the work performed).
While there are no current bills before Congress, look for this to materialize in May 2001 during minimum wage discussions. Senate Republican and Democratic leaders have agreed to a floor debate in May on rival proposals to raise the minimum wage. GOP leaders have already negotiated the ground rules of the debate. According to the tentative agreement between Democratic and GOP leaders, senators will only be able to vote up or down on two competing measures, with no amendments allowed.
Any minimum wage proposals will generally go through the panel of the Senate Finance Committee (Chaired by Senator Charles Grassley [R-Iowa]). Therefore, GOP leadership must convince Grassley that any minimum wage proposals not go through his panel first; however, Senate aids say that Grassley wants to have a say in the GOP proposal that comes to the floor. GOP lawmakers are likely to insist on adding a large package of business tax breaks. While labor representatives would prefer to hold down the size of any business tax breaks, they are determined to protect existing FLSA wage and hour provisions.
ISSUE #1: Expansion of FLSA Exemptions to exclude more technical/computer workers from the law"s overtime requirement.
The erosion of overtime protections for computing jobs began in 1990, and worsened in 1996. In 1990, the exemption applied to both hourly and salaried paid workers in specific computer-related jobs that met certain criteria. For instance, those hourly workers that earned greater than or equal to 6½ times the federal minimum wage (then $3.80). When the minimum wage was increased in 1996, Congress froze the rate at $27.63. Since the hourly rate is frozen, however, an ever-growing number of hourly paid workers in the specified computer-related jobs will be exempt from overtime in the future, as their nominal wages rise.
In 2000, the GOP attempted to further erode FLSA overtime protections for computing workers with HR 3081, which expanded the so-called "computer professional' overtime exemption to workers in additional computer-related jobs, such as network and database analysts, workers who manage or train certain workers in computer-related occupations, computer software/network designers, testers, and consultants.The high-tech industry asserts that an increase in overtime exemptions is necessary to allow high-tech companies to keep up with the rapid changes in their industry. Employers claim the nature of their software industry often requires employees to work long hours to complete a project, but that this is generally counterbalanced by slow periods between product deadlines. Many employers say that being obligated to pay overtime forces them to limit the number of hours they make available to workers, and thereby hampers the growth of their companies, as well as the overall economy.
Labor"s position is that rather than expanding the so-called 'computer professional" exemption, Congress should repeal it. Labor cites that there is no need for an industry-specific exemption, as true "professionals" in all occupations are already exempted from the FLSA.
Targeting the computer worker is targeting employees with an hourly rate or skill level comparable to other occupations that will continue to be entitled to overtime protections. For instance, a number of hourly-paid employees working as auto workers, electricians, plumbers, operating engineers, and painters and paperhangers earn in excess of the $27.63 threshold of the current exemption, and continue to be covered by the Act. However, some computer-related workers earn as little as $13,000/yr.
In 1999, a total of $2.2 million persons were employed in computer professional occupations. Most computer professionals were employed as computer programmers (564,000), system analysts (553,000) and computer support specialists (456,000). Other computer professions include data base administrators, computer programmer aides, numerical tool and process control programmers, and computer scientists.
The Department of Labor estimates that at least 164,000 hourly-paid workers and an unknown number of salaried workers in computer-related occupations could be affected by such a proposed expansion of the computer professional exemption. According to the Bureau of Labor Statistics (BLS) Occupational Outlook Handbook, computer-related occupations are some of the fastest growing, and are projected to double between 1998 to 2008. As the high-tech industry thrives, and its executives enjoy huge salaries and stock options, computing workers also deserve the basic rights to decent wages and working conditions, including overtime pay. As it is, the high-tech industry already relies far too heavily on temporary and contract labor, as well as independent consultants, rather than investing in training and retaining a permanent workforce. And employer cost savings will grow even more if Congress expands this exemption.
Computer-related jobs are a workforce known for being required to work long hours during the evenings and weekends. Because of these demands, the FLSA overtime pay requirement is one of the most powerful tools workers and lawmakers have to discourage employers from forcing excessive hours of work out of these employees. Expanding FLSA would make demanding overtime far less costly for these employers, thus increasing their incentive to make them work even more exorbitant hours.
Not only does it deprive these workers of the overtime pay, but it takes even more money out of their pockets that are needed to pay their own benefits, as well as compensate for times of unemployment they do not receive from their employers. According to the Economic Policy Institute, only 8.5% of temporary workers have health insurance through their agency, and are paid 15 to18% less than regular full-time workers. And while many workers in permanent, salaried computer-related positions have high incomes and stock options, most hourly paid temporary workers have lower incomes with fewer benefits. And since women are generally more likely than men to work in such contingent work arrangements, expanding the exemption is likely to have a disproportionate effect on women. Expanding the overtime exemption also ignores the high costs of living in areas where many workers in computer-related occupations live. According to data by the Bureau of the Census, the cost of living in Oakland, California is 63% higher and Boston is 44% higher (two centers of high-tech employment) than the national level.
Finally, workers in the computer industry are unfortunately in an area where few workers enjoy the benefits of a union contract. Consequently, the time-and-a-half overtime policy is one of the few benefits these workers enjoy, and therefore one of the strongest tools policy makers have to discourage the high-tech industry from overworking these employees and demanding excessive hours of work.
ISSUE #2: Compensatory time in lieu of overtime.
POSITION:
CESO should support allowing non-exempt employees to choose between accepting
overtime pay or compensatory time-off with pay. Employees should
be afforded the opportunity to voluntarily choose between overtime or comp
time, as well as be given ample opportunities to exercise their comp time.
PRIVATIZATION of Public-Sector Jobs
(Transportation & Infrastructure)
POSITION: Any proposals by Congress or the Administration to privatize public-sector jobs would leave this country with an enormous investment gap at the expense of programs vital to our economy and future generations of workers.
CESO member organizations represent many workers in the public sector, such as environmental and transportation engineers, transportation planners, air traffic controllers, air and environmental quality personnel, architects, accountants, auditors, computer programmers, chemists, building, housing and fire inspectors and advisors, and health-related professionals.
The public has a stake in well-run government, infrastructure, and prosperity in our communities. As professionals already established in our careers, we know how to perform efficiently and economically. Our skills are a vital contribution to the smooth planning and implementation of local government services, whether it is orchestrating large-scale bond programs for infrastructure and maintenance, ensuring well-run transit systems, or monitoring quality control over the public water supply.
The operation of transportation systems such as roads, bridges, and airports is inherently a responsibility of government. Any proposals to privatize public sector jobs would leave this country with an enormous investment gap at the expense of programs vital to our economy and future generations of workers. In response to the administration's proposed $1.6 trillion tax cut, the AFL-CIO Transportation Trades Department has stated "The American people will support sensible budget reforms and tax fairness, but they did not vote in November to gut transportation investments, workers' rights and job safety enforcement to pay for unnecessary tax cuts for the privileged."
We've seen a recent trend to privatize prisons, hospitals, and fire and safety. Yet many state and local governments have failed to govern the operation of privatized industries, and many contracting jurisdictions do not have adequate systems of oversight to ensure public safety and proper accountability.
Our interests are the public's interest. Private companies promise economic revitalization to communities through increased jobs and tax revenues; however, the expected benefits of more jobs are not worth the risk to public safety. The only way for private firms to make money from traditional public-sector jobs is to use non-union labor, under-staff projects and facilities, pay employees inferior wages, and fewer benefits, provide inadequate staff training, and therefore provide inadequate services for the public. These practices and high staff turnover endanger communities and workers, erode local economies, and increase liability for contracting jurisdictions.In addition,
the federal budget for transportation and infrastructure initiatives needs
to be watched, as President Bush's tax cuts will inevitably create proposed
budget cuts that could decimate transportation investments, kill jobs and
violate workers' rights. Although the President's budget calls for a
6% increase in transportation spending, it is 11.4% less than the Department
of Transportation requested for programs in which it has discretion.
Therefore, the President's proposed tax cut is an indication that there will
be less money to spend on transportation and consequently, less money spent
on jobs. Fortunately, Transportation Secretary, Norman Mineta, has stated
that he is not going to be spending time on the issue of privatization.
Secretary Mineta's position could, however, be in direct opposition of what
the administration will expect of his agency.
H-1B Visa Maintenance and
America Re-training and Education
POSITION: Rather than increasing the number of H-1B Visas, lawmakers should focus on re-training and educating the U.S. workforce to fulfill America's need for high-tech skilled workers.
Background: During October of 2000, Congress and the President passed the 'American Competitiveness in the 21st Century Act' (the Act), and on October 17th of 2000 it was enacted. The major elements provided for in the Act include:
- The H-1B cap was increased to 195,000 six-year temporary visas for FY 2001, 2002 and 2003.
- H-1B non-immigrants may change jobs upon filing a new petition by the new employer as long as the individual is in lawful status at the time of filing and has not engaged in any unauthorized employment since his or her last lawful admission.
- H-1B non-immigrants for whom an I-140 (INS petition for permanent visa) has been filed and whose labor certification or I-140 was filed at least 365 days prior, may obtain extensions of their H-1B status beyond this six-year maximum, in one-year increments, until their adjustment of status or immigration visa has been adjudicated.
- The protections for U.S. and foreign workers passed under the 1998 'American Competitiveness and Workforce Improvement Act' have been extended through fiscal 2003.
Issue #1: Maintenance
CESO encourages Congress to keep a close eye on the standards that the high-tech industry needs to adhere to in order to fulfill its claim that there is 'a lack of qualified workers'. Over the next three years, the Act will provide 600,000 new H-1B visas to the high-tech industry. However, the Act is full of many pitfalls. H-1B visas bind foreign employees to companies that pay them low salaries in exchange for the prospect of permanent U.S. residency. The program also discourages companies from recruiting and training U.S. workers from minority groups and the ranks of women and older workers. The short and long-term effects of this law will adversely impact the U.S. job market for college students as well as for incumbent workers, minorities and women. This legislation fails to include any reforms to the H-1B visa program to specifically improve protections for America's high-tech workers, and does not address the issues of fraud and abuse within the program.
The massive influx of 600,000 foreign workers will have the perilous effect of lowering the wages of American workers holding the same jobs. In 1998, when the number of H-1B visas was nearly doubled to 115,000, Congress confronted the fact that it has no reliable independent labor market data to justify the increase. It then directed the National Research Council (which advises the federal government on scientific issues) to conduct a study to determine the employment needs of the high-tech sector. The former Administration received the days after President Clinton signed the Act into law ' stating 'foreign nationals working in the United States keep the wages of Americans in the technology industry from rising as quickly as they otherwise might'. National Research Council's analysis in late October ' just
Industry figures show that H-1B workers are often paid about $35,000 annually, whereas the national average for new computer science graduates is $45,000. The gap in wages for H-1B visa holders is usually 20% (or worse) lower than the equivalent U.S. citizen holding the same position, even though current laws require that H-1B's be paid a 'prevailing wage'. A study at UCLA found that foreigners working in the U.S. on H-1B visas made as much as 33% less than their American counterparts. A similar study by Cornell University found a 20 to 30 percent disparity. We would argue that the high-tech industry is simply looking overseas to hold down American workers' wages, including the incomes of CESO's member organization's workers.
The Act for the first time made it possible for foreign workers to switch jobs once in the United States. This provision consequently allows technology companies to charm employees away from other firms, and could make it harder for the government to keep track of the allowable visas.
In addition, under the new Act's provisions, some of the additional visas are not even targeted at those high-tech jobs where there is allegedly a lack of qualified workers (for instance: accountants, teachers, managers, writers, and physical therapists). This could open the door to a flood of workers seeking employment in almost any professional or technical field, even though these other industries have never claimed a shortage of workers or need for H-1B's.
Finally, H-1B visa's could become even more attractive to employers in an economic downturn. If there is a downturn in the economy, the influx of 600,000 H-1B holders could create problems for American workers, and Congress has yet to see how many H-1B visas will be issued this year. In March of 2001, major players in the high-tech industry, such as Cisco, Dell and Intel announced cuts of up to 5,000 employees each. These employers have stated that these cuts will likely include H-1B workers; however, they will continue to look for workers from overseas. The question remains to be answered whether the high-tech industry will continue to hold onto to lower paid H-1B visa holders and let go of their more expensive domestic counterparts in order to save the payroll.
Issue #2: Re-training and Education
The first and primary focus of Congress and the Department of Labor should be to mitigate the adverse affects that increasing the H-1B visa limit will have on the U.S. labor force.
Tech education should be a subject of close congressional review. American workers can, and should be retrained and educated to fill these positions. When Congress passed the Act, it did so with the understanding that the information-technology sector would work with U.S. students to help produce a technology-savvy workforce in the near future, while Congress made its own efforts in that direction. Even though Congress spent time in March assessing whether the high-tech industry was making good on its promise, it determined it's too early to reach any final conclusions about the success or failure of these corporate-sponsored programs.
On a more positive note, in a companion bill to the American Competitiveness in the 21st Century Act, the fee for submitting an H-1B visa petition to the INS was increased from $500 to $1,000 beginning late December 2000. The Department of Labor estimates that the increase in fees will generate an additional $101 million in FY 2001. The National Science Foundation will have an additional $69 million under the new legislation in FY 2001 for scholarships for low-income college students studying math, engineering and computer science, as well as for math, science and technology in primary and secondary schools. The additional funds raised by this increase should be used to train U.S. workers, and to reduce the need to import foreign workers to fill high-skill jobs.
American worker
retraining funds are said to be one of the Department of Labor's top priorities.
Secretary of Labor Elaine Chao has said that she will focus on the needs of
the emerging high-tech marketplace, and that the department's highest priority
for discretionary spending will be to help develop a new workforce 'that is
ready for the future.' Further, she's said that the government must
'ensure that job training funds are targeted to bridge the gap between high-skilled
positions that need qualified workers and the millions of Americans who need
additional training to be able to fill them.' However, under Bush's
budget proposal for labor, the budget would provide $6.8 billion for employment
and training programs, $474 million less than in fiscal 2001 (although Chao
has said that the reduction in budget is due to budget carryovers from last
year).
The Department
of Labor's Employment and Training Administration's Division of Foreign Labor
Certification office is responsible for administering the foreign labor certification
programs. Luckily, after the American Competitiveness in the 21st
Century Act was passed in October, the DoL announced it would be investing
$54 million to help train American workers for jobs in information technology
and other high-tech industries. This was part of the DoL's and President
Clinton's strategy to ensure that all Americans have the skills necessary
to win high-wage jobs in the new economy. The funds will enable American
workers to receive training in such targeted occupations as computer engineering,
internet technology, web design, data communications and networking and e-commerce
in general, to name a few. The skills training should focus on assisting
incumbent workers and dislocated workers as well as those new to the labor
force. In 2000, $95 million (received from the formerly $500 H-1B visa
application fees paid for by the industries seeking these workers) was allocated
for retraining.
RETIREMENT
HR 10: Comprehensive Retirement Security and Pension Reform Act of 2001
(New version of 106th Congress's HR 1102)
POSITION: Support HR 10 in its current form, but be careful of any changes that include the words 'cash balance' (see Section 504) or 'early retirement subsidies'.
Sponsor: Introduced on 3/14/01 by Representative Rob Portman (R-OH-2nd District)
Latest Major Action: 3/14/2001 -- Referred to House Education and the Workforce Committee (Subcommittee on Employer-Employee Relations)
Title: To provide for pension reform, and for other purposes.
- Amends the Internal Revenue Code with respect to pensions.
- Increases: (1) annual dollar Individual Retirement Account (IRA) contribution limits; (2) benefit and contribution limits, with indexes for inflation.
- Revises requirements relating to: (1) plan loans for subchapter S owners, partners, and sole proprietors; and (2) specified top-heavy rules. Provides that elective deferrals shall not be taken into account for purposes of limits on certain plan contributions. Repeals specified coordination requirements for deferred compensation plans of State and local governments and tax-exempt organizations. Revises certain deduction limits for stock bonus and profit sharing trusts and for defined contribution plans. Provides for optional treatment of elective deferrals as after-tax contributions.
Sections 201(b) and 301 of the bill increase the amount individuals can shelter from taxes in retirement savings plans like 401(k) s and IRAs.
This would increase the current maximum of $10,500 for 401(k) contributions to $15,000, and those age 50 and older would be allowed an additional $5000 a year 'catch-up' contribution (which would permit them to more than double that amount, for a total of $45,000 a year). Employers would then be free to match employee contributions, up to a total of $40,000, plus the additional age 50 catch-up contribution.
However, statistically only about 5% of America's workforce (higher-earning employees and employers) are contributing the current maximum $10,500 a year to 401(k)-type plans.
The troubling effect of increasing employee contribution limits is that it encourages more and more employers to abandon more traditional pension or profit-sharing plans. By switching from traditional employer-paid pension plans to 401(k)s, companies can cut costs, and also receive tax incentives. In the past decade, the number of traditional pension-like plans has dropped 66%!
Section 504 relates to cash balance pension plans.
This provision acknowledges, but does not adequately address, the extremely unfair practice of reducing the expected pension benefits of older employees by converting their fully funded traditional defined benefit plans to 'cash balance'or other hybrid plans. For tens of thousand's of employees in hundreds of pension plans (many very well known ' IBM, AT&T), the conversion of traditional pension plans to cash balance plans can cost employees more than half of the benefits they had counted on getting ' in some cases hundreds of thousands of dollars!
Section 504 effectively gives employers a green light to continue the practice of converting traditional pension plans to cash balance plans. It calls for the Treasury Department to conduct a study of the impact of conversions on older employees. Such a study would unnecessarily duplicate a 70-page report conducted by the General Accounting Office (entitled 'Private Pensions: Implications of Conversions to Cash Balance Pension Plans'). It also calls for the Treasury Department to issue regulations that would require employers to give employees in companies with more than 100 employees 'sufficient information to understand the effect of the plan amendment.' These provisions might sound good, but they are, in effect, little more than a delaying tactic large companies will use to defuse the outrage of the many employee groups who are looking at Congress to fairly address a balance of employee and employer interests.
In addition, the 'imminent conversion' disclosure provisions of Section 504 do not mean much to the average employee who will not be able to make an educated decision about whether they would fare better under the new or old plan, as these calculations are extremely complicated for the average person to compute. Therefore, disclosure provisions without substantive language that would help the employees make these calculations (i.e.: a company provided comparison, or help of actuarial services provided by the company) are relatively useless.
Note: Kodak, Motorola and 3M are among the first companies to 'do the right thing' and give employees a choice of whether to retire under their old defined benefit plan or the new cash balance plan.
Note: Congress also needs to be careful that it does not take any action to interfere with lawsuits and age discrimination cases currently in litigation to investigate whether cash balance conversions of specific pensions plans are legal.
Section 612 would allow the electronic dissemination of the Summary Annual Report (SAR).
The purpose of a SAR is to tell employees whether their plans have had gains or losses during the year, and how much they are paying in administrative expenses. It also tells them that they have the right to request a detailed financial reporting form that their plans file with the government and how to get it.
While most of the people CESO represents are relatively savvy with the technological advances of electronic dissemination of information, if electronic dissemination is to be permitted, then participants should first be given a chance to consent to a particular form of electronic transmission that is specifically calculated to reach them. Merely sending emails to employees telling them that they can use a company computer to access a web site to view (and then print out) the SAR is not adequate dissemination.
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2) S 742 Retirement Security and Savings Act of 2001
(Senate version of HR 10)
POSITION: Like HR 10, support S 742 in its current form, but be careful of any changes that include the words 'cash balance' or 'early retirement subsidies'.
Sponsored by: Senator Charles E. Grassley (R-IA).
Introduced: 4/6/2001 ' referred to the Senate Finance Committee.
Titled: A bill to provide for pension reform, and for other purposes.
Has reinstated the 411(d)(6)(b) waiver. Leaves a lot of room for plans to amend away retirement subsidies for any funded plan that allows for early retirement (before the age of 65).
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3) HR 1322 Emergency Retiree Health Benefits Protection Act of 2001
(New version of 106th Congress HR 5405)
POSITION: Support this bill as it would prohibit companies from curtailing or eliminating benefits under their retiree health plans after a worker retires.
Sponsored by: Rep. John F. Tierney (D-Mass-5th District) ' with 58 co-sponsors (whereas HR 5405 only had 4)!
Introduced: 3/29/2001 ' Referred to the Committee on Education and the Workforce as well as the Committee on the Budget.
Titled: A bill to amend Title I of the Employee Retirement Income Security Act of 1974 to provide emergency protection for retiree health benefits.