Microsoft is not sheltered from the unprecedented crisis battering the global economy. In response to challenges we are confronting in markets around the world, we announced last month that we would cut jobs and reduce our overall employment level for the first time. This was a difficult decision, and it was not one we made lightly.
But the long-term health of the company, like the financial fate of the country as a whole, requires prompt and decisive action to adapt to the changed economic reality. On January 22, Sen. Charles Grassley wrote to us asking for more information, particularly about how our plans would affect US workers and non-US citizens working for Microsoft. Here is the text of our response:
March 3, 2009
The Honorable Charles E. Grassley
United States Senator
135 Hart Senate Office Building
Washington, D.C. 20510-1501
Dear Senator Grassley,
Thank you for your letter of January 22, 2009. Steve Ballmer asked me to respond on the company's behalf.
Your letter expressed concern about Microsoft's recently announced lay-offs and asked us to provide you with information about them. I have included that information below, but first I'd like to provide a bit of context.
Since the company's founding in 1975, Microsoft's consistent growth has enabled us to increase employment every year. In the last three fiscal years, for example, our employment in the United States increased by 40 percent. Today we have more than 90,000 employees worldwide and over half of them are in the United States. The vast majority of these U.S. jobs are filled by American citizens.
Because of our partner-based business model, our impact on employment is even larger than these numbers indicate. For every dollar that Microsoft earns in the United States, our business partners earn $6. This creates many additional jobs. One recent study found that 4.2 million people in the United States are working in jobs that are the result of Microsoft's business model (IDC IT Economic Impact and Microsoft Country Footprint: United States, October 2007. The figure includes individuals who work at IT companies and IT professionals who create, sell, or distribute products that run on Microsoft platforms).
This year, in response to the economic crisis, Microsoft is reducing its employment level for the first time. This was a difficult decision and it was not one we made lightly. We are deeply committed to our employees and we place the highest value on the contributions they make to the company's success. We understand the impact that each layoff can have on an employee and his or her family. Nonetheless, we concluded that the long-term competitiveness of the company, like the country as a whole, requires prompt and decisive action to adapt to the changed economic reality.
We announced in January that the company would eliminate up to 5,000 jobs over 18 months. It's important to note that we also expect to create 2,000 to 3,000 new jobs during this same timeframe, as we continue to invest in innovation. As a result, the total net impact on our employment will be a decline of about 2,000 to 3,000 jobs, not 5,000.
Microsoft employees whose positions are eliminated may apply for the new jobs that are being created. In addition, like any employer, we will continue to see some ongoing voluntary attrition as employees retire, accept jobs elsewhere, or for other reasons end their employment. Often, these positions are filled by current employees, but the company will also need to continue to fill these vacancies by hiring new employees, including both U.S. workers and a smaller number of visa holders.
You asked about the kinds of jobs that will be eliminated and how many employees will be affected in each area.
Because the job reduction decisions will be made over 18 months, we do not yet know all of the specific jobs that will be eliminated. We do know, however, that the 5,000 positions that will be eliminated will include jobs in marketing, sales, finance, Legal and Corporate Affairs, HR, R&D, and IT. In addition to the 5,000 figure, our workforce in support, consulting, operations, billing, and manufacturing will continue to change in direct response to customer needs.
We also know that the 5,000 figure likely will include positions in a large number of countries. Given the distribution of our jobs, however, it is likely that the Puget Sound region in Washington State will see the largest number of job eliminations. Of the roughly 1,400 positions that were eliminated in January, which are part of the 5,000 total, over 800 were in Washington State.
As we add new positions to support key investments, we will prioritize R&D investments that promote long-term innovation. That is why we plan to invest over $9 billion in research and development this year, one of the highest such figures in the world. Over two-thirds of this total will be spent in the United States.
You also asked in your letter how we decide which jobs to eliminate, whether employees with H-1B or other work visas are affected, and how many of the jobs being eliminated are held by Americans.
Because these decisions will be made over 18 months, it's too early to know the precise answers. We do know, however, that the job reductions will impact non-Americans who hold jobs outside the United States, as well as both visa holders and US workers inside the United States. The majority of Microsoft's workforce is made up of U.S. workers, and therefore the majority of jobs eliminated in January were held by U.S. workers. Workers on H-1B visas and other temporary work visas make up only a small percentage of our overall workforce, but they were also among the employees impacted by the reductions announced in January. Employees outside the United States were also impacted.
As I'm sure you'd expect, we take care to make all employment decisions, including the termination of employment for any individual, in a manner that complies with Title VII of the Civil Rights Act of 1964. In addition, we do not base compensation decisions in the US on an employee's citizenship.
Finally, you asked about Microsoft's plans for retaining H-1B or other work visa program workers after the job eliminations.
H1-B employees have always accounted for less than 15 percent of Microsoft's US workforce, the level that is used in immigration law to determine whether a company is "H-1B dependent." Nonetheless, the ability to tap into the world's best minds has long been essential to our success. Although they are a small percentage of our workforce, H-1B workers have long made crucial contributions to Microsoft's innovation successes and to our ability to help create jobs in this country. We are confident this will continue to be true in the future.
We focus our recruiting for core technology jobs at U.S. universities, which continue to be among the best in the world for computer science and engineering graduates. However, as one recent study found, in 2005 temporary residents earned more than 40 percent of the engineering and computer science degrees at U.S. higher education institutions. For doctoral degrees, that number was even higher, as temporary residents accounted for 59 percent of the degrees awarded in these fields that year.
The substantial majority of H-1B petitions filed by Microsoft are for core technology positions, and technology and engineering positions account for about 90 percent of Microsoft's H-1B workforce. Many of these H-1B employees have been seeking permanent resident status for many years and would no longer be dependent on their H-1B visas but for multi-year delays in the green card process.
With these factors taken together, we do not expect to see a significant change in the proportion of H-1B employees in our workforce following the job reductions.
I want to underscore that we are rigorous in our compliance with the requirements of the H-1B program. We are familiar with published reports about abuse by some employers in the H-1B visa category. We believe that the H-1B fraud issue is important and needs to be addressed. We recognize that every H-1B employer has an obligation to ensure that the program's rules are followed. We support H-1B reform efforts to ensure that users of the program follow both the spirit and the letter of the law.
Finally, I want to convey our commitment to help broaden opportunities for all Americans. The country's long-term competitiveness requires that the United States produce more university graduates in science, technology, engineering, and math. While government will take the lead in strengthening America's public education system, the private sector should support these efforts.
At Microsoft, we have a number of education-focused public initiatives. hrough our Partners in Learning program, Microsoft works closely with governments and non-governmental organizations across the country to strengthen information technology training by providing a wide variety of educational resources for teachers and schools. These include training programs and software tools that have already reached over 3 million students and roughly 200,000 teachers. Similarly, we have founded a public-private initiative in Washington State to work with educators and businesses to develop new approaches to improve middle-school math education. And Microsoft Research is deeply involved with important research efforts at universities across the country.
In addition, we recently announced a new program called Elevate America, which will provide technology training to 2 million people nationwide during the next three years, working closely with state and local governments.
Ultimately, as a company and as a country we need to combine short-term adjustments to the economic crisis with long-term efforts to strengthen our economic competitiveness. We recognize the impact that our decisions have on employees who are affected. We strive to make thoughtful employment decisions and then assist the individuals who are impacted by them. We also strive to take a long-term approach that will enable Microsoft to remain a leader in technology innovation and an important contributor to the country's competitiveness now and in the future.
We hope that this information is helpful to you. We look forward to working with you and your staff if we can be of assistance in addressing these important issues.
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