Big companies collude to hold down pay.

http://online.wsj.com/article/SB10001424052748703440604575496182527552678.html?mod=WSJ_hps_LEFTWhatsNews

by rmk • 16 years ago

73 68 16 years ago

online.wsj.com

tessro• 16 years ago

Can anyone track down a non-paywalled story?

anigbrowl4• 16 years ago

Search for the headline on Google and click on the link from there instead of here. At worst, registering will let you read a lot more stories for free; they don't spambomb free registrations.

whatusername• 16 years ago

http://www.google.com.au/search?q=Deal+Near+in+Hiring+Probe+...

anigbrowl4• 16 years ago

The companies have argued to the government that there's nothing anticompetitive about the no-poaching agreements. They say they must be able to offer each other assurances that they won't lure away each others' star employees if they are to collaborate on key innovations that ultimately benefit the consumer.

Some economists believe that banning such agreements could harm Silicon Valley's open, collaborative model.

If the existence of an agreement isn't disclosed to the employees, then the model is not really what it is always held out to be, but something more akin to private industrial policy. I don't believe this is any better for consumers than for employees over any length of time. I've personally felt (as a consumer) that tech & internet development have stagnated in the last year or two, notwithstanding the existence of new things; perhaps this is why.

Settlement or litigation, this is probably going to set off a wave of cross-hiring because firms will no longer have the security of the agreement in place when negotiating employment agreements, and turning away a candidate from another firm with good skills may look suspicious. Good for engineers, good for the local economy, probably good for innovation; not so good for CFOs and CIOs who like sleeping at night.

I'm guessing companies will settle rather than fight; but if not, it'll set off a sector-wide feeding frenzy in the market. This should make the rest of the year interesting. It's partly political, to be sure, but slow wage growth in a period of generally rising productivity per capita has been a source of discontent for quite a while now. There is a lot of pent-up frustration, and also a lot of companies sitting on cash reserves in search of a market signal; neither situation is sustainable.

Incidentally, Microsoft, IBM and Genentech are all said to be in the clear.

lazyjeff• 16 years ago

This definitely should be disclosed to the employee. From my understanding, it would make it difficult to get a job at Apple if you accept an offer at Intel. Basically, this closes doors for you, and makes a job offer at Intel less valuable.

scott_s• 16 years ago

I've personally felt (as a consumer) that tech & internet development have stagnated in the last year or two, notwithstanding the existence of new things.

I can't reconcile those two clauses.

gabrielroth• 16 years ago

I think the poster above is suggesting that the new things, though extant, are not sufficiently many/various/innovative/useful/delightful to constitute satisfying progress.

anigbrowl4• 16 years ago

Oh, sorry! I meant that some people are innovating, but that the overall trend has been towards sameness and value extraction. Many superficially novel offerings are only stylistically different.

It's hard to articulate; I feel like I've seen the pattern before at least twice, and soon after there's a game-changing disruption. The two previous instances would the browser and web services. This time? Adaptive structural decomposition.

jorgeortiz85• 16 years ago

Implicit collusion is easy to maintain, even without explicit agreements.

Unless the settlement or ultimate ruling has some enforcement teeth to it, it's unlikely that anything will change very much.

_delirium3• 16 years ago

There's been some interesting research on that in airline fares. Airlines are pretty careful these days not to engage in any private collusion, but they have quite complex dances of intention-signalling via their fare raises/decreases, their pre-announcements of those fare changes, their press conferences at which they discuss what they might do in the future (and what actions by their competitors might influence them one way or another), etc.

The goal is to avoid price wars and maintain some sort of soft price-fixing, but to do it all entirely publicly without direct discussions. It's not as blatant anymore as it used to be, but at its height (until some 1990s lawsuits), they were effectively conveying things like price-floor offers, e.g. "if you don't cut on route X, I won't either", but via completely public press conferences that openly said things like, "we're not planning to cut fares in the next 3 months on this route, unless a fare cut by Competitor A or B out of these hubs forces us to".

sabat• 16 years ago

Some economists believe that banning such agreements could harm Silicon Valley's open, collaborative model.

Banning such secret agreements would harm an "open" model? Irony, anyone?

Tangurena2• 16 years ago

In many states, non-compete agreements are enforceable. In CA, they aren't worth the paper they are written on.

If CA courts had held non-compete agreements to be enforceable, "Silicon Valley" never would have happened as the free flow of technical expertise never would have happened.

These companies are trying to bypass the legal system by conspiring to make their own arrangement of "non compete agreements" without the knowledge or consent of the workers.

marknutter2• 16 years ago

So they'll all just end up with a less talented workforce in the long run, leaving room for younger, more innovative, and generous companies to eat their lunch.

aero142• 16 years ago

That is the way it should work at least. This gives credence to the companies defense that they did it to allow cross company cooperation without poaching. But do all of these companies really have engineers meeting and working on the same projects? Sounds pretty flimsy to me. I can't figure out what the goal of it was because none of the explanations really sound all that useful.

btilly2• 16 years ago

Standards organizations frequently have very good people from many of those companies working closely together under circumstances that make it very clear how much the company trusts those people.

okaramian2• 16 years ago

This would be great in theory, but however you cut it, it really sucks when the most capitalized companies are all colluding with eachother to prevent the market from working efficiently.

marknutter2• 16 years ago

It also sucks that the most capitalized companies are so big and powerful, but that doesn't mean they're unassailable.

hugh32• 16 years ago

Companies colluding to drive down pay is, of course, the mirror image of unions, which have employees colluding to drive up pay.

yummyfajitas6• 16 years ago

It would be interesting to see how many union supporters also support monopsony agreements between corporations.

gloob• 16 years ago

Given that the purpose of unions is to weaken companies' bargaining position by preventing them from "divide-and-conquering" the workers, I would guess...almost none? And it would be perfectly ideologically consistent?

hugh32• 16 years ago

I've found you don't generally get far with people by pointing out that their political principles are horrendously inconsistent.

In fact, it's only a tiny minority of people who care whether their political principles are consistent or not.

Daishiman• 16 years ago

Who told you a union supporter believes that what is "fair" to workers should also be allowable by corporations?

peppone• 16 years ago

depends on which union model you take german style codetermination might be ok with that or the laissez faire model not so much

guelo2• 16 years ago

If there's going to be an unfair bias between labor and capital I'll side with labor everytime. Besides, labor has been on the losing side for a decade now, http://www.nytimes.com/imagepages/2008/04/09/business/200804...

yummyfajitas6• 16 years ago

Labor hasn't been losing at all. Wages haven't gone up that much, but total comp has. Companies give their workers a greater portion of their compensation in (untaxed) insurance, rather than in (taxed) wages.

http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTa...

Pylab made me a nice graph of total comp (based on tables 6.2D and 6.4D from http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected...):

http://imgur.com/aDwkL

gaius3• 16 years ago

It doesn't really matter which side you're on, either in principle cartels are OK or they're not.

_delirium3• 16 years ago

Indeed a mirror image, and possibly causally related. In the U.S. at least, the big union-organization frenzy was, perhaps not coincidentally, mostly in industries dominated by large industrial trusts that colluded with each other. It seems like a reasonable defensive reaction, even if not ideal: if your counterparts are all colluding with each other, so you have no real choice of employers, you pretty much have to collude as well if you want any chance of negotiating a decent deal.

(And, often, the industrialists were colluding with local governments in addition to each other, making it even worse; especially during the period of the "mine wars".)

I don't really like unions, but collusion like this is an understandable reason to form them: if the companies are all agreeing behind closed doors to do X and not do Y, the only real ways to force them (since they've removed the ability of market competition to do so) are to either: 1) pass a law banning the objectionable practice, e.g. California's prohibition of non-compete agreements; or 2) get a large enough group of people to all agree not to work for any company unless certain terms are met.

loewenskind2• 16 years ago

A cooperation is in a much stronger position than an individual employee. Unions were created to try and make the positions more even.

Dove• 16 years ago

It would be interesting to see companies genuinely compete for talented developers. I don't think the guys that are 10x as productive would be making 20% more anymore.

joshhart• 16 years ago

How do you identify someone who is 10x more productive? The difference between good and great is not always apparent in an interview.

Perhaps developers with significant amounts of open source work could be identified but I'm sure that for every one of those there are several amazing developers who are instead working on proprietary stuff.

jcdreads• 16 years ago

The difference between good and great is usually pretty obvious to former colleagues who are now at a new company that's hiring.

InclinedPlane• 16 years ago

There's no objective method, but many experienced programmers are capable of using subjective measures. Indeed, such skills are a huge competitive advantage to established dev. shops with talent (hire the best, keep hiring the best).

mahmud2• 16 years ago

I know someone who is 10x more productive than his entire team, I worked in a next-door department and watched the beast do his magic. Truth be told, no one liked him. We couldn't keep up with him, all our bug reports would be several releases too old. We couldn't get him to install an IM client, he doesn't carry a phone, his email response rate is ~5%, several days too late, and only responds to say he can't make it to social gatherings, etc.

We wasted weeks holding meets to architecture something he already had in place, grrrr.

He wasn't a child, but a grown man with gray hair. Not exactly a prima dona either; he will happily talk to you for ours about your build problems and give you all the help you need. He was just not very good at communication. He was a fake "yes man"; he says yes to every request and suggestion, but somehow only his more sensible ideas end up in deployment.

I don't think someone who is 10x as productive, but emits zero feedback or communication is worth the trouble of poaching from others, specially of you're a big corp. Give him 10x market rate and let him bootstrap a startup all by himself, sure, but this particular guy would suck in a team environment.

He really didn't fit any "hacker" stereo-type either. He was a fit soccer player / yogi, worked strictly 9-6, and had a taste for illicit leisure .. I think.

muhfuhkuh• 16 years ago

That's what "solid B+" players are for: the rented lakehouse party, the corporate kumbayas and sufficiently-buzzed Wednesdays at the bar across the man-made pond in the drab, suburban office park. That's where A+ players go to die. That's why even at mid-sized software companies, we didn't hire the A+ players because they make hiring managers and peers feel stupid and impotent.

I should know: I'm a B+ player.

And, if by "illicit leisure" you mean "smokes the herb", I think you'll find that alot of guru type hackers are WAY into that kinda stuff. In fact, at my company, our HR technical recruiter once said that if corporate all of a sudden started random drug testing, half of the developers would be gone before they could read THC on the LabCorp printout.

gaius3• 16 years ago

One thing I've learned is some people artificially appear more productive by offloading unpleasant tasks. Some of those requests, for example, might have been things that customers specifically asked for. And someone else on the team would have had to implement them, maybe on top of their regular workload, just because this guy wouldn't. Some of those emails he wouldn't answer might have been blockers for other people. If you can get away with it, great, but eventually people will figure it out.

loewenskind2• 16 years ago

>We couldn't get him to install an IM client, he doesn't carry a phone, his email response rate is ~5%, several days too late, and only responds to say he can't make it to social gatherings, etc

This is probably why he was so much more productive. I've personally turned off notification on my email and tend to set my IM to "away" because it's too distracting to productivity when people can just interrupt me at any moment. We already have a bloody meeting every morning. What ever you have to say can certainly wait until then. I wonder if anyone has done a study of how much money has been lost to these "open plan" working environments.

patrickgzill• 16 years ago

Does a human being have the right to contract with whomever he wants to sell his labor to?

Seems to me that these agreements might interfere with that, although the article does not seem to give enough information to tell exactly how they were structured.

quanticle2• 16 years ago

>Does a human being have the right to contract with whomever he wants to sell his labor to?

Yes, a person does, but I don't think that question really gets to crux of the matter. I think the question is whether these companies were forming a cartel of sorts. Not a cartel of widget or oil production, but a cartel of jobs production. Its actually not clear to me that existing anti-trust law covers this case, and, from the DoJ's actions, it isn't clear to them either.

If the Justice Department was confident of its case, we'd be seeing a lot more publicity in order to put pressure on the companies involved. The fact that DoJ isn't raising a ruckus over this means they think they have enough to go to trial, but not necessarily win. In circumstances like these, where the law isn't exactly clear on the topic, both sides seek to settle because neither wants to be proven wrong in open court.

_delirium3• 16 years ago

An interesting flip on the right-to-work laws. Those are usually targeted at union-negotiated exclusivity provisions, e.g. if a company and a union sign an agreement that the company will hire only members of that union, states with "right-to-work" laws hold any such contracts unenforceable. It'd be interesting if the principle were extended to ban any contract that interfered with the ability of two parties to come to terms, though. For example, if I have a right-to-work as a programming employee, do I also have a right-to-consult as a programming contractor, rendering any exclusivity provisions standing in the way void?

It seems to me like the principle should be similar. If a company has an exclusive-vendor agreement with an engineering-consulting firm for all its engineering services, that seems very much like the case where the company has an exclusive-hire agreement with an engineering union for all its engineering employees (just think of the union as a labor-selling firm). In both cases they've agreed to only purchase a certain category of services from a certain category of providers. I'd be somewhat amenable to banning all these kinds of exclusivity agreements (including non-compete, no-poaching, union-labor-only, exclusive-vendor, etc.).

btilly2• 16 years ago

The problem is that even if you made a contract between the colluding companies unenforceable, the companies would be glad to collude anyways because it is in their best interest to maintain the agreement.

ataggart• 16 years ago

>Does a human being have the right to contract with whomever he wants to sell his labor to?

Yes, but it's a negative right, not a positive one. There needs to be a willing purchaser of his labor, and they have the same negative rights.

Tangurena2• 16 years ago

In most states, non-compete agreements are upheld by courts. In California, non-competes are almost always thrown out by courts [1]. In other states, such as NY or OH, non-competes are always interpreted in favor of the company.

What was being done by the companies is an informal arrangement to make non-compete agreements exist even in the cases where the employee didn't sign one.

Notes: 1 - Pretty much the only non-competes upheld in CA courts are ones where the signing party sells a business or is a major partner.

Kliment• 16 years ago

Is there a full list of the companies involved somewhere? I'm finding it hard to find.

awakeasleep• 16 years ago

Wow. I personally read the companies argument as huge lie.

> They say they must be able to offer each other assurances that they won't lure away each others' star employees if they are to collaborate on key innovations that ultimately benefit the consumer.

It seems like they want to build their business on deception, and hope that the employees can't figure out where is a better place to work, instead of what I interpet as an honest solution, being open and allowing people to choose where to work based on good information, and then trusting them.

known• 16 years ago

Since Corporations have become bigger and smarter, Govt cannot monitor their day-to-day illegal & immoral activities. It is better to breakup these corporations into smaller entities to promote competition and solve unemployment crisis

donaldc• 16 years ago

This is especially interesting in light of the recent stories about Google offering huge raises and incentives to keep key employees from jumping to Facebook. Good thing that Google and Facebook don't have a no-poaching agreement.

But not so good that all these other companies had no poaching agreements.

Big companies collude to hold down pay.

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