With $12 million in state funding as an incentive, IBM is building an IT center in Dubuque, Iowa, that it said will employ 1,300 workers providing support to IBM's U.S. outsourcing clients.
The state finalized the agreement to contribute to the project on Thursday. And while the money that Iowa is pitching in is clearly an incentive for IBM to locate in Dubuque, another reason for the company's interest may be the state's lower IT wages.
Indeed, IBM's decision to locate in a renovated building in downtown Dubuque, which has a population of just under 60,000 people, may be part of a trend by vendors to expand in lower-cost -- and lower-wage -- regions of the U.S.
Mike Blouin, president of Greater Dubuque Development Corp., said that as part of the deal, IBM is obligated to offer salaries that begin in the low-$30,000 range and go all the way up to $70,000 or so, with the average salary in the mid-$40,000.
Greater Dubuque Development Corp. was involved in the talks surrounding the project. IBM officials declined to comment on the wage agreement.
IBM has already received some 3,000 applications for positions so far, with a third meeting meeting basic requirements for work, said Blouin. Hiring will begin this spring.
Blouin said that 10% of IBM's workforce will come from the company's existing labor pool, with the remainder hired locally and from two- and four-year colleges within 100 miles of Dubuque. In fact, IBM has already started recruiting students from nearby Kirkwood Community College.
The lower cost of living was a factor in IBM's decision, said Blouin. The company "is clearly trying to demonstrate that they can bring work to the U.S. shores and do it competitively," he said.
IT salaries in the Midwest can be 20% to as much as 50% below the wages paid on the East and West Coasts, said Nate Viall, a Des Moines-based recruiter who specializes in finding candidates for IBM's i (formerly i5/OS) midrange application-development jobs.
IBM, which has some 80 global delivery centers worldwide, said growth in its services business is creating the need for expansion. The types of jobs at the new center will include systems management services and operations, database management and project management services.
A labor group, Alliance@IBM, said that more than 4,000 IBM employees have been laid off in recent months. IBM wouldn't confirm those figures, but it said any cuts are part of an ongoing shift in business. A spokesman for the union said that some employees have been offered jobs in Dubuque, but Alliance@IBM was unsure exactly how many had received offers.
IT services providers have been turning to relatively rural areas to cut costs. For instance, Perot Systems Inc. in Plano, Texas, last fall announced that it was adding 90 jobs to a services center it has in Bowling Green, Ky., bringing employment at that site up to 300.
According to the Foreign Labor Certification Data Center Online Wage Library, whose prevailing wage data is used by companies that hire H-1B workers, an entry-level computer programmer job in Des Moines starts at around $42,800. That same job in the Newark, N.J., area would begin at $55,000.