How Silicon Valley Conspired to Pay Workers Less So That CEOs Could Make More

| Sun Jan. 26, 2014 9:32 PM EST

A while ago I read—but only vaguely processed—some coverage of a government antitrust action being taken against several big Silicon Valley companies who had agreed not to hire each other's employees. But until reading this Mark Ames story at Pando, I had no idea how widespread the conspiracy was. This was no mere informal gentlemen's agreement. It was a dogged, rear-guard fight against the rising wages of top engineers in the Valley:

That DOJ suit became the basis of a class action lawsuit filed on behalf of over 100,000 tech employees whose wages were artificially lowered — an estimated $9 billion effectively stolen by the high-flying companies from their workers to pad company earnings — in the second half of the 2000s. Last week, the 9th Circuit Court of Appeals denied attempts by Apple, Google, Intel, and Adobe to have the lawsuit tossed, and gave final approval for the class action suit to go forward.

....The companies argued that the non-recruitment agreements had nothing to do with driving down wages. But the court ruled that there was “extensive documentary evidence” that the pacts were designed specifically to push down wages, and that they succeeded in doing so. The evidence includes software tools used by the companies to keep tabs on pay scales to ensure that within job “families” or titles, pay remained equitable within a margin of variation, and that as competition and recruitment boiled over in 2005, emails between executives and human resources departments complained about the pressure on wages caused by recruiters cold calling their employees, and bidding wars for key engineers.

....The companies in the pact shared their salary data with each other in order to coordinate and keep down wages — something unimaginable had the firms not agreed to not compete for each other’s employees. And they fired their own recruiters on just a phone call from a pact member CEO.

....Just before joining the wage-theft pact with Apple, Google’s human resources executives are quoted sounding the alarm that they needed to “dramatically increase the engineering hiring rate” and that would require “drain[ing] competitors to accomplish this rate of hiring.” One CEO who noticed Google’s hiring spree was eBay CEO Meg Whitman, who in early 2005 called Eric Schmidt to complain, “Google is the talk of the Valley because [you] are driving up salaries across the board.” Around this time, eBay entered an illegal wage-theft non-solicitation scheme of its own with Bill Campbell’s Intuit, which is still being tried in ongoing federal and California state suits.

Read the rest for more, including emails from company executives who were apparently stupid enough to put a lot of their scheming down in discoverable form. These guys may have been high-flying heads of the new digital economy, but their attitudes toward tight labor markets were as old as time: They all figured the free market is great, as long as no one tells the workers about it.

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