Tech Sector Wage Fixing Included Dozens of Companies, Million+ Workers

[roo_ster]

Revealed: Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees

http://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/

Back in January, I wrote about “The Techtopus” — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

This timeline is important to establish because it demonstrates precisely what makes this scheme illegal: secret cross-agreements between two or more parties to fix wages in the labor market, at a time when tech engineer wages were soaring, threatening profits.

Lots of damning docs at the linky.

If only we would all support Welfare for Billionaires more H-1B visas, this would be totally unnecessary!

[Balog]

I read that this morning, and I think it's a somewhat misleading title. The agreements prevented cross company recruiting, not "wage fixing" per se. There seems to be a significant difference between "Don't steal our guys, we won't steal yours" and "Let's agree that we won't pay over $X for Job Y."

[RevDisk]

I read that this morning, and I think it's a somewhat misleading title. The agreements prevented cross company recruiting, not "wage fixing" per se. There seems to be a significant difference between "Don't steal our guys, we won't steal yours" and "Let's agree that we won't pay over $X for Job Y."

In the modern tech world, that is nearly the same thing as price fixing. Your recruitment sets your wages. Raises are nice and all, but expected to be roughly around inflation. In the tech world, you don't expect to be at the same company for more than 5 years because raises are rarely well above inflation. "No poaching" agreements are a way to limit competition. You have less companies competing, which means lower wages. Very much intentionally.

There should not be a settlement. There should be prison time for executives involved. There's a bloody good reason why wage stagnation has been hitting so hard. This isn't the entire ball of wax, but it's a fair chunk of it.

[makattak]

But.... but.... but...

Those companies are run by compassionate liberals! Ones who say things like:

"We do things because they are right and just and that is who we are. That’s who we are as a company. I don’t…when I think about human rights, I don’t think about an ROI. When I think about making our products accessible for the people that can’t see or to help a kid with autism, I don’t think about a bloody ROI, and by the same token, I don’t think about helping our environment from an ROI point of view."


They would NEVER cheat and lie and suppress competition!

The laws of economics don't apply to liberals! (Adam Smith: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”)

[just Warren]

I'm not sure why I should be outraged about this. And in no way should this be illegal.

No one owes you any particular amount of salary, or a tech job or any of the things that go along with it.

All this is is a group of people trying to keep input costs down.

That said, it makes for a mistrustful situation in the workplace once the agreement gets out. So I would not agree to do it as a business owner because the money saved up front is going to be a lot less than what it's going to cost me as I try to rebuild my workforce, deal with any sabotage, and boycotts. On the other hand if my company was small and theirs big I might not have had a choice as they could outspend me and grab all my talent. So faced with having sup-par employees and therefore a sub-par company I would rather run the chance of what did happen as opposed to being a weak company.

There is another issue here in that I was always taught that cartels eventually fail as every participant has motive to cheat. We'll need to get deeper into this to find out the details but I would not be surprised to find that the companies found creative work-arounds to entice people over. 

Finally, with all these companies involved why didn't they close ranks and tell DOJ to go piss up a rope? If these companies wanted to they could totally crippled the parts of the federal government that depends on computers. Instead they knuckled under. It would have been a Hell of a power struggle.

[Ron]

I'm not sure why I should be outraged about this. And in no way should this be illegal.

No one owes you any particular amount of salary, or a tech job or any of the things that go along with it.

All this is is a group of people trying to keep input costs down.

It should be done all up front and in the open then so the employees realize they are dealing with a cartel and not their individual employer(s). Maybe a voluntary union and a couple of strikes would even out the playing field then.

These tech billionaires became rich off the brainpower and skills of the very folks they were colluding against, artificially capping the market value of their skill set. Backroom collusion is not free market capitalism.

I'm with Rev on this, f'em.

[RevDisk]

I'm not sure why I should be outraged about this. And in no way should this be illegal.

No one owes you any particular amount of salary, or a tech job or any of the things that go along with it.

All this is is a group of people trying to keep input costs down.

That said, it makes for a mistrustful situation in the workplace once the agreement gets out. So I would not agree to do it as a business owner because the money saved up front is going to be a lot less than what it's going to cost me as I try to rebuild my workforce, deal with any sabotage, and boycotts. On the other hand if my company was small and theirs big I might not have had a choice as they could outspend me and grab all my talent. So faced with having sup-par employees and therefore a sub-par company I would rather run the chance of what did happen as opposed to being a weak company.

There is another issue here in that I was always taught that cartels eventually fail as every participant has motive to cheat. We'll need to get deeper into this to find out the details but I would not be surprised to find that the companies found creative work-arounds to entice people over.  

Finally, with all these companies involved why didn't they close ranks and tell DOJ to go piss up a rope? If these companies wanted to they could totally crippled the parts of the federal government that depends on computers. Instead they knuckled under. It would have been a Hell of a power struggle.

If they formed an open cartel, I'd be fine with that from a libertarian POV. That you know what you're getting into. As a libertarian, I'm fine with the government forcing folks to be open and honest about commerce, such as nutrition labels, patent applications or providing full disclosure. That's the government's job. To provide a level playing field so that commerce can take place.

I'm in no way fine with secret corporate cartels controlling employees outside of the workplace environment. If they told the DOJ to piss up a rope, I'd be fine with the FBI hauling the responsible folks to jail, fining the companies involved and making them pay for every penny of damage they caused.

Additionally, they were using this cartel to promote H1B fraud and lobbying to change work visa law. That is definitely NOT kosher.

[MechAg94]

A public cartel wouldn't necessarily be a bad thing as long as it wasn't a monopoly, but it wouldn't last.  The problem with the cartel at that point is that all their best people would go to companies outside the cartel to make more money.  More than likely all the best and newest ideas would also go outside the cartel.  The cartel would fail.  However, it isn't in the nature of a cartels to exist without trying to be a monopoly one way or the other.  Big companies don't like competition. 

I think enforcing the basic boundaries of free markets is a legitimate role of Govt and law enforcement. 

[RevDisk]

A public cartel wouldn't necessarily be a bad thing as long as it wasn't a monopoly, but it wouldn't last.  The problem with the cartel at that point is that all their best people would go to companies outside the cartel to make more money.  More than likely all the best and newest ideas would also go outside the cartel.  The cartel would fail.  However, it isn't in the nature of a cartels to exist without trying to be a monopoly one way or the other.  Big companies don't like competition. 

I think enforcing the basic boundaries of free markets is a legitimate role of Govt and law enforcement. 

The problem is if an employee doesn't know who is or is not in said cartel, and yep, I see it as a legitimate function of government to sure such things are public.

[Ron]

This is a feature of crony capitalism; government is supposed to protect the individual from this type of market manipulation.

We do ourselves a big favor by not automatically favoring big business over government.

Both need to be shackled and monitored 24/7

 

[Ned Hamford]

There is a world of difference between a no-compete clause in an employment contract and supposed competitors colluding to limit employment mobility. 

Given outsourcing and immigration shenanigans too, this particular job market is the pinnacle of crony capitalism pitfalls.  Service isn't better; production is deflated; innovation is downright stagnate.  Employees aren't wanted; just drones.  If you lock down the market, innovation is only destabilization from the cartel monopoly.  And why look, we just gave the internet away. 

The end times are upon us! Hearken and despair!   

[roo_ster]

This is a feature of crony capitalism; government is supposed to protect the individual from this type of market manipulation.

We do ourselves a big favor by not automatically favoring big business over government.

Both need to be shackled and monitored 24/7

Just as insider trading deforms the market in equities, insider hiring deforms the market in hiring.

Crony capitalist market-destroying (and thus information-destroying) collusion is not something a libertarian who values and understands the market ought to support.

[Scout26]

I hate that it's called "Crony Capitalism", how about the "Economics of Pull", in getting the government to fund your enterprise, and suppress your competitors, and legalize the illegal so you can "succeed".

But yes, this is just wrong.   It was making employees chattel in a way similar that Healthcare Insurance^* did.

[roo_ster]

Really, you can not make up this sort of thing.  What was the old economics prof joke punch line?  "First, assume a can opener."

http://marginalrevolution.com/marginalrevolution/2014/03/the-silicon-valley-wage-suppression-conspiracy.html

Not as long as the OP and worth reading to get a taste of how someone worked double-hard to explain away a reality that does not coincide with his theory.

A couple comments

prior_approval March 25, 2014 at 12:49 pm

    ‘I would suggest caution in interpreting this event.’

    Best satire site on the web.

    Reply

    FE March 25, 2014 at 12:58 pm

        Yes, I think the meta-joke being retold here is the one about how an economist sees something that works in practice and wonders if it could work in theory. So many layers to this blog.

For one thing, we don’t know how effective this monopsonistic cartel turned out to be.  We do know that wages for successful employees in this sector are high and rising.

Here is wage data for coders:


Considering how much the earnings for the companies in questioned grew in real terms, the number of years it was in place, and it was kept secret those years, I will suggest that the collusion was effective.

Steve Sailer March 25, 2014 at 7:37 pm

    In the half decade after Steve Jobs started this collusion conspiracy, Apple became the highest market cap company in the world. The notion that Steve utterly failed at his efforts to illegally extract some of that market cap from his employees’ paychecks is not exactly consistent with Jobs’ lifetime track record at being extremely good at getting what he wanted.

    Reply

    James Hare March 25, 2014 at 10:09 pm

        Saying nothing of the fact that Jobs had demonstrated from his earliest business dealings that he was more than willing to shortchange his colleagues even if his “contribution” was simply finding the smartest guy to do the work. He screwed Woz over a couple of thousand bucks. Why would he think twice about screwing people he didn’t know?

[Levant]

Revealed: Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees

http://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/

Lots of damning docs at the linky.

If only we would all support Welfare for Billionaires more H-1B visas, this would be totally unnecessary!

And yet so many so-called libertarians are anti-union. Corporations can, even if illegally, band together to get labor at a lower price but labor is not supposed to group together for a better wage.

[Headless Thompson Gunner]

The difference is that it's legal for the unions, illegal for the employers.  It should be illegal for both, or legal for both.  Giving special privileges to one side but not the other is wrong.

[MechAg94]

That is one of my beefs with unions.  Why should unions be able to monopolize an entire industry when the companies can't?

[Levant]

The difference is that it's legal for the unions, illegal for the employers.  It should be illegal for both, or legal for both.  Giving special privileges to one side but not the other is wrong.

I think I can go along with that.  Having less laws, having government stay out of business, is always better for workers and employers than having government in the middle of it.

[MechAg94]

I hate to cause a thread drift, but I recall hearing a while back that the original Anti-Trust Act was only one page long.  I am sure the court decisions made up for it, but if that law was passed today it would probably be 5000 pages. 

[Ned Hamford]

Yup: http://www.linfo.org/sherman_txt.html