How Silicon Valley CEOs Conspired To Suppress Engineers' Wages 462
Oneflower writes "As we discussed last week, a lawsuit is moving forward that alleges widespread conspiracy among the CEOs of Apple, Google, Intel, Adobe, Intuit, and Pixar to suppress the wages of their tech staff. Mark Ames at Pando explains how it happened, and showcases some of the emails involving Steve Jobs and other CEOs. Quoting: 'Shortly after sealing the pact with Google, Jobs strong-armed Adobe into joining after he complained to CEO Bruce Chizen that Adobe was recruiting Apple’s employees. Chizen sheepishly responded that he thought only a small class of employees were off-limits: "I thought we agreed not to recruit any senior level employees. I would propose we keep it that way. Open to discuss. It would be good to agree." Jobs responded by threatening war: "OK, I’ll tell our recruiters they are free to approach any Adobe employee who is not a Sr. Director or VP. Am I understanding your position correctly?" Adobe’s Chizen immediately backed down.'"
Affects all engineers... (Score:5, Insightful)
There's a knock-on effect... for those of us not employed at the named offenders, the salaries are suppressed. I hope they're convicted.
Time for unionization in the tech sector yet? (Score:5, Insightful)
You'd think, from a free-market standpoint, that collective bargaining would somewhat equalize the sale and purchase of labor.
But nah, us engineers are too smart for that. We're all superstars and we're always looking to stab eachother in the back for a percentage.
threatening war? (Score:0, Insightful)
Jeez, cmon. This is just about agreements to not directly recruit each other's employees. Nothing stopping those employees from applying to another company to gain better salary...
Re:So, cue up.. (Score:5, Insightful)
Collusion, by definition, is not a free market.
When you think of a model of the "free market", think of hundreds or thousands of small merchants gathered in a town square hawking their goods, with many of them selling similar items.
CAPTCHA: "parent is an idiot"
Steven Jobs (Score:5, Insightful)
He always had the reputation of being a visionary and major league a**hole. I guess he's dead long enough now that we can acknowledge the latter again?
Re:So, cue up.. (Score:5, Insightful)
OK. I am actually a free market libertarian software engineer. This does bother me, but I would suggest that the solution to these sorts of problems is exposure rather than laws. I don't feel that my ability to market my skills is significantly affected. I don't need to work for any company that would underpay me. Even though these are big companies, the percentage of software engineers they hire is a small percentage of the total.
As far as examples of negative aspects of the free market go, this is pretty mild.
I would suggest that a free market approach would be to go one step further and have shareholders conspire to limit CEO salaries. Those cut into corporate profits as well.
Re:So, cue up.. (Score:5, Insightful)
The fuck does the political alignment of the douchebags involved have to do with the economic policies that allow the abuse.
If you have a party that says "repeal all murder laws" and a party that says "murder laws are okay, we should maybe have them"(the political economic balance in the US). You shouldn't be going "Ha! At least one murderer was for the anti-murder party." as if it settles the issue. It's retarded.
Re:see also, increasing the # of H1Bs awarded (Score:4, Insightful)
Re:Affects all engineers... (Score:5, Insightful)
Absolutely, accountants uses average salary data for determining the maximum a position should pay is, meaning a group of major companies colluding hurts every single person in this field.
Re:So, cue up.. (Score:5, Insightful)
OK. I am actually a free market libertarian software engineer. This does bother me, but I would suggest that the solution to these sorts of problems is exposure rather than laws. I don't feel that my ability to market my skills is significantly affected. I don't need to work for any company that would underpay me. Even though these are big companies, the percentage of software engineers they hire is a small percentage of the total.
As far as examples of negative aspects of the free market go, this is pretty mild.
I would suggest that a free market approach would be to go one step further and have shareholders conspire to limit CEO salaries. Those cut into corporate profits as well.
Lots of luck.
A Corporation is NOT a one-person-per-vote democracy. It is one-SHARE-per-vote.
And guess who owns the majority of the shares in most corporations?
Re:Steven Jobs (Score:2, Insightful)
Again? I don't recall a time where it wash;t acknowledged that he was an asshole. I think everyone agrees, he was an asshole. He had some good traits for which he's admired but I think everyone, Apple hater and Apple fanboy alike, has always admitted Jobs was a dick.
And, to be clear, let's not forget that this story isn't about Jobs - it's about a significant number of CEOs. Let's keep the focus on the big picture rather than attempting to spin it as one man being a dick.
Re:see also, increasing the # of H1Bs awarded (Score:5, Insightful)
The only one with your interests is you (and possibly your friends and family). The sooner people realize that the better. You have a professional voluntary relationship with your employer, where they are trying to get the most work out of you for the least money, and you are trying to get the most money out of them for the least work.
It's like buying a house. Is the seller your enemy? No but he's definitely not your friend either. It's a voluntary relationship where each side can expect the other to exploit any weakness for their own interest. That doesn't mean this relationship can't be beneficial to both parties under the right circumstances. A lot of companies take the strategy of getting people to produce by instilling company loyalty by treating their employees really well. Some don't.
Ironically Google is actually one of the companies that treats it's employees the best. Maybe they need to have strategies to keep employees salaries in check. I know I might be tempted to feel entitled to a ridiculous salary if I worked at google.
Re:So, cue up.. (Score:5, Insightful)
You're funny.
Only laws will prevent this from happening. Perceptions can be swayed by gradually introducing change and exposure and by gradually "normalizing" this obviously criminal activity. Exposure is not effective, it can be managed with enough positive spin. Only laws with strong deterients are effective.
You say about Apple, Google, Intel, etc. "the percentage of software engineers they hire is a small percentage..." I don't think you know what those companies do.
Re:So, cue up.. (Score:4, Insightful)
Nice troll, but I'll have fun with it...
1) conspire all you want, but Silly Valley isn't the end-all/be-all - there are lots of other just-as-exciting places to work.
2) You can gain more from their reputation than they can save by keeping your wages lower. For example, I could go there, do my time for a couple of years at $HOUSEHOLD_NAME, maybe do that at two or more of them, then go back to my home region with one hell of an intimidating resume, plus experience and ideas that can be put to damned good use. This allows me to command a far more comfortable salary/cost-of-living arrangement when I get back home. (Note: raw dollar counts are a stupid metric - always count cost-of-living, but I digress...)
3) Because of the above (and more), It's Silly Valley that loses out more than I do. I'll explain: I have personally turned down point-blank job offers from a few of the aforementioned names in TFA, because I already have similar big names on my resume, and they're not willing to compensate enough for the area's insane cost-of-living. What I mean is, after cost-of-living adjustments, they'd have to pay me $180k/yr or more to match the same level of financial comfort that I enjoy where I am now. Meet or beat that comfort level, and I'll move. Otherwise, unless I have no real alternative? I'll turn it down with a smile.
4) Because of the above (and more), the smarter tech folks are similarly clued-in, and are therefore harder to find and get (let alone keep) in that area. This in turn means this: over time, those companies lose out on the best talent, but upstart companies elsewhere gain that talent instead, allowing the little guys to more effectively compete. Meanwhile, Silly Valley winds up with a majority of people who boil down to two types:kids with no experience who leave as soon as they wise-up, or burn-outs chasing their own eventual start-up on the side (which means the latter will be somewhat worthless to the corp who hires them, and are likely stealing the company's ideas along the way while those ideas are still embryonic.)
QED: The market eventually does even things out, if you let it. Just because it doesn't happen on an instant-gratification timescale doesn't mean that it doesn't happen, eh?
Re:So, cue up.. (Score:5, Insightful)
Collusion, by definition, is not a free market.
...And since collusion is natural behavior in situations like this for company managers, it follows that in order for a market to be free, the behavior of its participants must be regulated.
Which, seriously speaking, is a rather interesting point.
Re:So, cue up.. (Score:5, Insightful)
Re:So, cue up.. (Score:2, Insightful)
Re:How does this keep salaries down? (Score:5, Insightful)
It is self-defeating but not for the reasons you mention, as noted by other replies.
The reason it is self-defeating is that suppressing the salaries in fields where you badly need talent downregulates the cultivation of additional talent, and if the particular class of worker in question has any sideways mobility, may cause talent to leave those fields for either higher pay or easier work. A deficit in skills, whether highly compensated or not, negatively affects your end product, and even if you are colluding with competitors, negatively affects the market volume since there is less demand for crappy product. (For example, there is less demand now for Google hosted services than there would have been if they had not made a habit/reputation of pulling the rug out from underneath released products.)
Re:So, cue up.. (Score:5, Insightful)
Which, seriously speaking, is a rather interesting point.
And one which many ideologues try very hard not to understand. "Free market" is more of a slogan than a clearly defined idea. I prefer the term "competitive market" to emphasize what's really important.
Re:So, cue up.. (Score:4, Insightful)
Re:So, cue up.. (Score:5, Insightful)
Not that interesting in practice. No one sane would argue that the CME commodities markets are not free markets. They're a shining example of free markets working well, doing the sorts of things that economic theorists expect (unlike much of the rest of the economy).
These markets have a bunch of regulations - the key is that most of the regulations are market rules, not laws, and the power of the government is mostly focused on fraud prevention, contract enforcement, and preventing counterparty payment risk (a critical subset of the previous items). What's not regulated is price, nor legal preference given to certain sellers - no government-granted monopolies. That's what makes a free market.
There will always be anarchists calling themselves libertarians, but mainstream libertarian though expects the government to provide contract enforcement, fraud prevention, and in general enough criminal law enforcement where it's safe to trade.
Re:So, cue up.. (Score:5, Insightful)
What you're saying is something unsavory that businesses might do in a free market, isn't the free market. The free market means precisely that. Companies are free to collude, price fix, bribe, etc. It's only regulation that prevents it from happening. Just because you don't like one consequence of the free market doesn't mean you get to disavow it as part of the cost of doing business.
This is one of the primary fallacies of free market thinking; that businesses will be somehow compelled to do the right thing without the boot of the government on their necks.
Re:I worked for HP in silicon valley 20 years ago (Score:2, Insightful)
When I left HP I went to work for Fujitsu- they didn't participate in the salary fixing- and instantly got 40% pay increase and kept my vacation time.
This is why this type of collusion is really a non-issue. It is not the case that every single company participates in the collusion. The ones that don't, benefit, and eventually employees will move over to them. At some point the colluding companies will realize they are being hurt and stop the practices. No extra regulation is needed to prevent the free market (which does temporarily include collusion among willing participants) to self-adjust.
Re:So, cue up.. (Score:5, Insightful)
The "exposure" is not going to come from a few or even many Engineers complaining in isolation that there might be some collusion going on as the alternative offers are drying up.
The exposure doesn't need to come from engineers. It can come from anyone who knows about it.
The only reason we know about it at all is because there was a lawsuit filed accusing them of this illegal action. If it becomes totally legal, nobody's going to be filing that lawsuit in the first place, and the parties involved will continue to do it secretly.
Re:Steven Jobs (Score:5, Insightful)
I think everyone, Apple hater and Apple fanboy alike, has always admitted Jobs was a dick.
You haven't been around too many true Apple fanboys. Here are some of the standard cult responses:
1) He never gave to charity, despite his riches: "He probably gave anonymously"
2) He parked in handicapped spaces, like a dick: "It was probably for security reasons."
3) He screwed over his friends, co-workers, and employees on a regular basis, even Woz: "He had already given them so much just by creating the company."
4) He openly berated and insulted everyone around him: "It was just to drive them to be better and realize their potential."
5) He tried to deny the paternity of his own daughter, rather than pay child support, even after he became rich: "Well, he did acknowledge her eventually."
Re:So, cue up.. (Score:5, Insightful)
You know, I think I'm going to start using 'competitive market' instead of 'free market'? In areas where competition is impractical, such as water/electricity to the house, I prefer that the provider be a cooperative. Otherwise most of the regulation methodologies I support are designed to increase competition.
Re:So, cue up.. (Score:4, Insightful)
You are missing part of the equation. Buy a house in Slicon Valley and when you come to retire, move to a region with low cost of living, taking with you a much larger cash pile from selling that much more expensive house. Leverage can produce wonderful effects (it can also bankrupt you as many people found out during the recession).
I would also argue that start-ups tend to be in California because employment agreements that prevent you from moving to a competitor are not enforcable in CA.
Re:So, cue up.. (Score:5, Insightful)
I see you crossing the line from "libertarian" to "anarchist" if you don't see a legitimate role in the government preventing this sort of collusion. Much like there are rules on all the commodities exchanges, backed by laws, that prevent collusion to corner the market in any given commodity. It's a very minimal low-touch sort of role for the government to prevent this sort of thing.
Had this been 2 small companies no one cares about colluding, I wouldn't see much problem either, but this is a non-trivial portion of all software jobs in the valley, enough to distort the market. This is exactly why you're not allowed to control more than 10% (or whatever it is, but I think that's right) of a specific commodity contract.
Re:So, cue up.. (Score:5, Insightful)
In this example, say that the employees of the colluding companies are making $100k/year whereas they are really worth $120k/year. Non-colluding companies can now easily poach these employees by offering them, say, $110k/year.
So let me get this straight:
- Without the collusion between employers, the employees would make $120K/year.
- With the collusion between employers, the employees would move to a different company and make $110K/year.
- Conclusion: The collusion between employers is costing the employees at least $10K/year.
That's not a self-correcting system, that's damages. The companies who colluded can easily attract talented people making less than $100K/year by recruiting in different areas of the country (where techies frequently make less than $100K/year), or different areas of the world (where techies make far less than $100K/year) via H1B, so they'd suffer some turnover but no major disruptions.
Re:A Three word solution to this: (Score:5, Insightful)
Well? Many engineers see themselves above and superior to manual laborers which unions typically represent. Also their superiority has convinced them that they will become C*Os and the like making LOTS of money. Little did they know there have been so many big companies and their leaders consolidating and conspiring to make their output less expensive.
There's a LOT wrong with the current tech market and NONE of it has to do with true free market capitalism and everything to do with seeking to get around it or controlling it.
When you casually look at the whole free market idea, you should quickly realize that the free market is very much pro-little-guy. When the little guy becomes the big guy, things become a LOT more expensive and perilous. Too many up and comping little guys for anyone to remain king of the hill for any amount of time...that is unless they start cheating.
In free market capitalism, it takes a lot of work and good ideas to get to the top. It takes a continuous flow of work and good ideas to stay there. But that's not what the kings of the hills want. Like Microsoft, they want to dominate a market and then get by making crap and spending their money on schemes to keep other people from competing with them. Not free market capitalism.
Re:So, cue up.. (Score:3, Insightful)
Re:So, cue up.. (Score:5, Insightful)
However, by the nature of collusion - where each participant has incentives to screw over the other participants, or non-participants can take advantage of the collusion - it is an unstable, temporary arrangement, and will fall apart sooner rather than later.
One of the alleged provisions of the arrangement was to punish companies that reneged on the deal by targeting its key engineers for recruitment. At that point what you have is regulation by cartel. This, by the way, was what government *was* before the advent of the modern democratic republic state. An aristocracy may spend nearly all of its time fighting itself tooth-and-nail, but it closes ranks against outsiders.
Re:So, cue up.. (Score:5, Insightful)
A free market is a necessary, but not sufficient, component of a competitive market. And what we really want is an efficient market.
A “Free Market” is when 2 people freely exchange goods. The problem is that there is a asymmetry between the people. One buyer has superior knowledge, for example when selling a used car or house. The seller knows if the car is a lemon or not. Or because there is a difference in power. Thousands of employees on one side, a few companies on the other. By collusion the companies are increasing their power relative to the employees.
You can’t eliminate this asymmetry – it is the nature of the beast – but you can minimize it.
Re:So, cue up.. (Score:4, Insightful)
One place where techies earn a lot less than $100k / year is the UK. Not a country you'd associate with little money...
Well, there are numerous problems with this comparison. You want to measure real wage, not the money wage. The real wage/money wage ratio for Britain is probably obviously higher than that for the US worker. Consider, a British pound trades for 1.65 US Dollars [x-rates.com] right now. After that, you factor in taxes (everyone loves to do that, right?) .
And, then you factor in things like standard of living. Everyone loves to point out the increased gas costs and rent, but not underline the fact that more people don't own a car, or even feel like they need to, because of public transportation. Like, I live in NYC because I hate driving, so it's a "feature" to me. YMMV. Google employees, for instance, save money because of amenities like the Google busses we're hearing so much about. Then you have to factor in the social services that are provided for each country. It is a lot cheaper to be pregnant in Britain. Yes, because the taxes are higher, but if you factor in taxes, you have to factor in what you're getting for them.
I haven't done the work, but I'd be interested in the results.
Re:So, cue up.. (Score:5, Insightful)
Could you say that again, except coherently this time?
Libertarianism is an attempt to solve the problem of providing safety and basic social order with the minimum possible government that gets the job done. It's an optimization exercise. There's very little agreement on what that looks like, exactly, but widespread agreement that fraud prevention and contact enforcement (and some sort of criminal justice system) are part of it.
Anarchism is the claim that we can have safety and basic social order with no central leadership at all (anarchy means "no leader", not "no laws"). I view this like Marxist communism: cool idea, wrong species.
Re:It's not about wages (Score:5, Insightful)
You either have no idea how the engineering job market works or are being deliberately obtuse.
These companies set the price for engineering hires throughout the valley. If they collude to keep salaries down, all other companies vying for engineering talent will not have to pay the market rate. In effect, they are guaranteeing themselves access to engineers at depressed wages by market manipulation.
And in the real world, you retain talent by paying for it. It doesn't work for free. If the talent is so freaking important, then pay for it. It will stay if you are paying as much or more than is available on the outside. If you are a business, and you have critical folks, you should be paying them like they are critical, not limiting their job options.
You would care about this if you were the talent in question, getting underpaid and reported for applying to another job. Imagine how many careers have been derailed in the valley by these HR departments reporting job seekers to their employers.
You would also care about this if you were a shareholder or current employee at one of the cartel companies, given that all who have applied for a job from one of these cartel companies to the other and been rejected now are a pain free class action waiting to happen. All who have had their wages depressed are a class action waiting to happen.
And in the end, everyone loses except the CxOs with their golden parachutes and the Blood Sucking Lawyers.
That's why this is fscking stupid and wrong. You can resume speculating about their motives, as though that means a gd damn thing.
andy
Re:Time for unionization in the tech sector yet? (Score:4, Insightful)
They "lost it" during dot-com and starting engineer salaries spiked up roughly 100% in about a year. It's not just engineers, any profession suddenly put into short supply becomes incredibly valuable. The AMA knows this, which is why it's so arbitrarily hard to get into med school. It's why garbage strikes (airline pilots' strikes, etc.) work.
It's 23 years since I got my MSCE degree, at this point I state my salary needs and work for the first person who needs my skills and can handle the salary. We generally agree that I provide good value for the company. When times get tight, I often survive the layoffs, though there were two companies (run by recent graduates) who let me go because they could keep 3.5 fresh-hungry kids on staff for my salary - an understandable choice, though I try not to work for recent graduates anymore.
Provide value to your employer, it actually isn't that hard to demonstrate that an engineer creates millions in value over the course of a few years' project development. Engineers don't usually need to spell it out for their employers, if you're productive they'll understand it implicitly. However, (and I'm including a 60 year old CEO in this next statement) immature leaders who rush out and spend huge sums on "market development" without ever gaining any sales traction will often view the engineers who gave them the product they asked for as liability and un-needed expense. If you see that scenario developing, the smart thing to do is look for a better organization to work for - as an Engineer, I have not often felt capable to (or, more accurately: empowered to) fix sales and marketing failures.
Re:I worked for HP in silicon valley 20 years ago (Score:4, Insightful)
You're dead wrong. If the majority of large engineering employers in an area, say silicon valley, are fixing salaries, the engineers can't all up and leave for the few companies in the valley that don't participate in the collusion, so the large, colluding companies are not being harmed. The only harm is to the engineers whose salaries are held artificially low.
Now the same a-holes are laying off engineers, claiming there are shortages, and lobbying congress for more H1B slaves.
Re:Why do people think that? (Score:4, Insightful)
Looking at the cost for the final connection from the power line/main water line is like looking at the cost of a door to try to say how much a store costs. The final connection to your house for power might be $500, but that's only for ideal connections. I've heard amounts in excess of $5k, and generally utility companies heavily subsidize final connections.
Consider if you have two competing water companies. In order to be truly 'competitive' they have to be separate. That means that they can't share the same pipes. That means that rather than running a 12" pipe to a neighborhood, each needs to run at least an 8" pipe. 12" pipe has more than double the capacity of 8", by the way, but it doesn't cost twice as much, as it only uses 50% more material. But half the customers are on each competitor...
Alternatively the companies would 'lease' capacity in their lines to each other, but if that happens they end up so tightly in bed with each other that they're effectively one company with two names anyways.
A secondary option that happens sometimes for electricity is that you have a service company that manages the lines, the company you purchase your power from is the one that arranges for 'your' electricity to get on the lines, whether that's by operating their own generators or just buying the power on the open market. But even then, there's such a natural advantage for the one that runs the lines in your area to manage that that it's a 'natural monopoly'.
This has been proposed for telecoms - your ISP arranges to lease the connection from your house and the appropriate backhaul to their facility where your packets then go to the internet at large. However unless the telecom company that owns the connection is forbidden from being an ISP(government regulation!), they have a generally insurmountable advantage along the lines of charging as much or more simply to lease the line than it is to simply go to them for internet service. Tends to kill competition.