Comment by billyhoffman | Hacker News Reader

Comment by billyhoffman | Hacker News Reader

Parent Full thread

If some of the biggest employers in the bay area artificially cap the salaries of their workers, of course it will effect how other companies price their openings.

Three Hypothetical, but perfectly plausible conversations (no one would ever negotiate like this, but ignore that, these are inner motives/dialogs to some extent)

Company: "And what were you thinking for starting salary?"

Interviewer: "I'm at Apple now, I make X. I'd like 1.15X"

Company: "Done! I was going to pay you 1.5X but whatever"

or

Interviewer: "My asking pricing is X"

Company: "Well, I know DevOps people working at Google make .75X, so we will offer you 0.95X"

or even more likely:

Slightly drunk friend #1: "I really hate my job, and I'm only making X. Am I underpaid?"

Slightly drunk friend who works at Adobe: "Nah man, I only make X if we hit our bonus numbers! At least its a stable job with benfits, unlike all these startups that flame out."

Friend #1: "Yeah, I guess you're right."

I see, you have no evidence for sweeping claims of "Billions and Billions". You only have some 'just-so' stories and intuitions. But in each of your cases, a person checking compensation at just a few non-cartel places would do just fine.

So, if the cartel employees and their friends in your conversations stay slightly-drunk/stupid/lazy, they'll keep working at rates lower than are available to them. Meanwhile, anyone shopping around gets paid a competitive rate, unaffected by the non-poaching agreements.

I can believe there's some localized harm there, especially for long-tenured people at the cartel companies, but any damage is self-limiting. It's not massive on an "entire greater Bay area technology job sector" basis.

Also note, these cartel companies were also constantly hiring from non-cartel sources, and there was no coordinated "cap" or "ceiling" on such offers. They had to win such employees in unrestricted competition versus both cartel and non-cartel companies – and they often did!

Since employees talk (as in your examples), even long-tenured in-cartel employees would then get info about fully competitive compensation offers, and up their expectations for the next compensation-review. So again, any damage from non-poaching collusion faces practical checks on its magnitude.

If you're an Apple/Google/etc employee who wishes you'd been cross-recruited with a big compensation offer, you have a right to be angry. (But, you're still probably not that angry, given how well things have been going for top employees at those places in the relevant era!)

But if you've been employed elsewhere, your anger is misplaced. The non-poaching agreements didn't hurt you... and maybe even helped for the reasons I gave above.

Software engineers as a rule are grossly underpaid relative to the actual value they provide, whether they are employed at Google or Web Body Shop X in Podunk Midwest Town Y. Collusion of this sort is deleterious on the whole precisely because of the indirect but very much desired effects of wage depression, even if some individuals benefit and others are more disproportionately harmed.

What's your evidence for "grossly underpaid"? Do all of the tens of thousands of employers meet in secret to hold the line against higher salaries? Are there laws against software engineers starting their own firms where they'd be paid their full value?

Your claim doesn't pass the smell test. Pay levels are set by a giant, uncoordinated, massively competitive process.

If you know any software engineers who are grossly underpaid for the value they can provide, hire them! Then "underpay" them just a teensy bit, instead of the "grossly underpaid" exploitation they suffer under now. Pocket the difference for yourself, as a reward for seeing their true value so much better than every other employer.

Where is your evidence that pay is "set by a giant, uncoordinated, massively competitive process?" Pay is set by a variety of factors that generally favor the wealthy and connected, usually in such a way that workers rarely benefit from expanded wealth (wage stagnation). Additionally there is a coordinated effort (see: any Koch political outfit or its allies) to weaken and destroy unions, which are the principle means other than law that laborers gain in wages and working conditions. Moreover, there is very strong evidence in the form of the subject of this thread that pay is set, at least to some non trivial extent, by acts of collusion.

It seems to me you believe very strongly in a black-and-white world where "the market" functions just fine. It is terribly out of sync with actual evidence, though, which you simply brush aside while scribing arguments containing numerous unsupported assertions and demands that others support their statements. As if we should simply accept your point of view as the truth by default.

There's no "wage stagnation" in this industry. Also, for the positions under discussion, no unions to "weaken and destroy". I can't tell if you are a software engineer in the bay area, but as one trust me that there are hundreds of high-tech employers who don't coordinate, and they do spend a lot of effort and money to attract and retain employees.

You know who wasn't part of the alleged cartel? Facebook. Microsoft. Yahoo. Amazon. Oracle. Salesforce. Twitter. Yelp. Autodesk. HP. Cisco. VMWare. AMD. Workday. Electronic Arts. Zynga. Netflix. Etc. Etc. Etc.

Also, no seed- or VC-funded or YC-backed startups of the past 10+ years were part of the cartel. Also, no consulting/contracting shops were part of the cartel.

You seem to be applying some sort of undifferentiated-laborer/factory-floor model to a region/industry where it doesn't apply.

There certainly are market failures; when they happen, they can be studied and quantified. There's no evidence of that here. All we have is angry crusaders with grandiose damage claims, who probably weren't even affected by the no-poaching agreements.

maybe less than the US but the average for devs in London UK is less tan a tube driver gets.

An it is statistics 101 that if you change the skewness and kurtosis of a distribution if effects not just those at the top.

I see it the other way around. Collusion in hiring and wage fixing is illegal, and it is considered serious. It can be considered a crime.

It is difficult to establish the exact damages in a situation like this. This is one of those things we have made illegal because we understand it is very harmful, but it's difficult to determine just how harmful. And yes, it is important to provide evidence of harm.

But here's where I start to deeply disagree with you. This isn't a situation where two parties were both operating in presumably good faith, and some damages occurred, and we're trying to figure out who should foot the bill for what damage. This is a situation where one party behaved highly illegally, and based on the emails, there's really no question it was ugly.

So ok, I'm not going to let plaintiffs pick a number out of thin air, there needs to be some justification. But I'd say at this point that the burden should be more on the defense. Why shouldn't we say billions at this point?

I also probably disagree with you deeply on how harmful this sort of thing is.

If "these cartel companies were also constantly hiring from non-cartel sources," then why did they enter an agreement to stop poaching employees from each other? Clearly it was concern enough to potentially violate the law to stop or slow.

Obviously they were "hiring from non-cartel sources" – after all, their staffs grew significantly, at all experience levels, during the no-poach period. Those people had to come from somewhere else, and I've seen no allegation the cartel coordinated on offers to this large pool of external people.

I believe the companies entered the cartel because staff churn is highly-disruptive to ongoing and innovative projects. Churn leaks proprietary info, it deters investment in staff development, it inconveniences or demoralizes those that remain, and it spreads an often-corrosive mercenary attitude.

Also, bidding wars for cross-recruited employees will often mean the "winner" suffers the "winner's curse": they are the bidder that erred in overestimating value. And while that delivers a temporary cash bonanza to the employee – "woohoo, this year I'm significantly overpaid!" – it could mean an unsustainability that later hurts their career and lifetime earnings.

The best projects and workplaces instead have a strong continuity-of-staff, where firm-specific expertise compounds over time, and teams "gel" to become familiar, highly-effective collaborators. As a result, the welfare of the firm and the employee are not in zero-sum opposition in such matters! Many cartel employees, and especially average employees, may have gained when their workplace stability and productivity was protected from constant poaching. You'd need a lot more study to know for sure. But the law isn't often based on economic analysis, or even domain expertise, but more often on lawyer/legislator superstitions.

It's not helpful to think of this as something perpetrated by cartoon villain managers, twirling their mustaches thinking of ways to sneak a few dollars out of their poor, ignorant workers' wallets. It was talented tech managers doing what they thought led to the most sustainable and productive teams, made up of highly-educated and well-informed professionals. Consider: the very middle managers who needed to implement this policy, for their own hires, also knew it applied to themselves as well.

Reply on news.ycombinator.com