Silicon Valley seeks to suppress wages. Oct 27, 2014, Vol. 20, No. 07 • By IRWIN M. STELZER
At minimum it is unseemly, at maximum an example of chutzpah as practiced in Silicon Valley. Having shot themselves in the foot, some prominent tech billionaires want the president to bypass Congress and minister to their wound. They have poured cash into his campaign coffers, and now is payback time. They want him to increase the number of H-1B visas that allow them to hire high-skilled foreign tech workers. Which he has promised to do, never mind that Microsoft has just laid off thousands of workers. Or more important, that some of the very companies that want to cash in their Obama IOUs have been engaged in a conspiracy—get this—to depress wages.
Having formed a cartel to prevent “poaching” and competition for workers and having kept wages of these workers below levels that would have prevailed in a competitive market, CEOs in the home of fierce competition for technological advantage now find that below-free-market wages are producing a labor shortage. To dampen any increase in pay that American tech workers might finally get now that the conspiracy has been uncovered, the unchastened executives want Obama to increase the supply of foreign laborers.
For those of us who believe in the market system, there is something unsettling about the thought of the billionaire bosses of Google, Apple, Adobe, Intel, two Disney subsidiaries, and Intuit sitting around a table and agreeing not to compete for staff. Facebook declined an invitation from Google to join the conspiracy. Sheryl Sandberg, Facebook’s chief operating officer and a former Googler, announced that she refused to “limit Facebook’s recruitment or hiring of Google employees.”
These are the self-styled “disrupters,” believers in the virtues of a market system that allows them to compete for customers even if, especially if, that competition destroys existing enterprises. Schumpeter’s gale of creative destruction is, to them, holy writ.
Unless, of a course, a faint breeze of competition wafts through the Silicon Valley labor market. Then, with the notable exception of Facebook, competition for staff becomes “poaching,” a process that might start a “wage war,” putting a dent in their petty cash piles. So they agreed not to compete for skilled workers. “If you hire a single one of these people [Apple engineers], that means war,” Google cofounder Sergey Brin says Steve Jobs threatened him, also warning tiny Palm that if it poached any of his engineers he would initiate patent litigation that they would not have sufficient resources to defend. With Google signed on, Eric Schmidt, then its CEO, lined up Intel and Intuit. Paul Otellini, then president and CEO of Intel, called the arrangement “a handshake ‘no recruit’ ” agreement. And at one point, Schmidt agreed to the firing of a recruiter who had solicited an Apple employee. To avoid creating “a paper trail over which we can be sued later,” Schmidt and Otellini confined themselves to emails—reflecting a charming faith by these highest of high-tech executives in the confidentiality of emails of the sort that have made several Wall Street traders and previous price-fixers involuntary guests of the government.
With such an arsenal of smoking guns, and so many adversely affected high-tech workers, it should come as no surprise that in 2010 the Antitrust Division of Eric Holder’s Justice Department got wind of the cartel. In 2010 a Justice Department investigation brought the conspiracy to light and resulted in a complaint that was settled when the conspirators agreed to end their ban on cold-calling rivals’ staff. But not only did Holder, nowadays continually threatening unspecified bankers with jail time for unspecified crimes, not seek jail time for the specific miscreants that confessed to the specific crime of conspiring to fix wages. Justice did not even ask that the confessed conspirators be fined. Odd for a Justice Department that has become a profit-center for the government by virtue of massive fines levied on financial institutions and individuals who have committed crimes that in many cases are not quite so straightforward as those of Jobs, Schmidt, Otellini, et al.
One need not be a cynic to wonder whether there is an inverse relation between contributions to the Obama machine and the penalties for lawbreaking. After all, at minimum the Justice Department could have attempted to claim the extra profits earned by the conspirators by virtue of a plot that had the inevitable effect of depressing wages. In effect, Holder approved of the redistribution of income from the hardpressed middle-income Silicon Valley workers about whom his boss is ostensibly so concerned to shareholders and executives of some of the world’s most profitable companies.
What the new GDP figures actually reveal. Oct 13, 2014, Vol. 20, No. 05 • By LAWRENCE B. LINDSEY
Two weeks ago the Commerce Department released its final estimate of Gross Domestic Product for the second quarter. That marked five years since the recession ended—a period of massive experimentation with expansionary fiscal and monetary policy. While those policies were doubtless well intended, all they did was what standard economic theory says they would do—move future economic output to the present. They did not by any means increase long-term economic growth.
Rock-star economist Thomas Piketty— tough on inequality, soft on elitism May 26, 2014, Vol. 19, No. 35 • By CHRISTOPHER CALDWELL
The New York Times columnist Paul Krugman has written that Capital in the Twenty-First Century, Thomas Piketty’s new book on inequality and wealth, “will change both the way we think about society and the way we do economics.” Clive Crook describes the raptures with which intellectuals have greeted the book as almost “erotic.” President Obama’s advisers have been buttonholed about Piketty at speaking appearances from here to Dublin. Capital has reached number one on Amazon.com.
May 19, 2014, Vol. 19, No. 34 • By THE SCRAPBOOK
The Scrapbook cited Gary Becker last week, in a list of outstanding recipients of the Bradley Prize. We’re sorry to have a sadder reason to mention his name this week: He died May 3, at the age of 83. “He was perhaps the greatest living economist,” George Mason University economist Tyler Cowen eulogized. Becker’s influence is felt far beyond his own field, however. If the basic lesson of economics is that incentives matter, Gary Becker taught the world that incentives matter everywhere.
8:04 AM, May 5, 2014 • By MICHAEL WARREN
Governor Rick Perry of Texas criticized President Barack Obama's Washington-centric approach to solving problems in a Sunday appearance on NBC's Meet the Press. Perry was asked by host David Gregory about the recent botched execution of a convicted murderer in neighboring Oklahoma and the announcement from Obama that his administration would be "analyzing" the use of capital punishment in various states. Perry said he was confident about how Texas administered executions, and then offered a critique of Obama.
11:25 AM, Apr 30, 2014 • By MICHAEL WARREN
Health care costs rose in the first quarter of 2014 by 9.9 percent, according to a quarterly report from the Bureau of Economic Analysis. The jump in costs with respect to real GDP comes after several periods of more modest health care cost growth. In 2013, for instance, costs only grew 2.4 percent from the previous year.
Mar 17, 2014, Vol. 19, No. 26 • By FRED BARNES
President Obama talks, talks, talks about jobs. The first 20 minutes of his State of the Union address in January was all about jobs. Immigration reform would “create jobs for everybody,” he said. His energy policy “is creating jobs.” Obama said he’s assigned Vice President Biden to make sure training programs match workers with “good jobs that need to be filled right now.” Last week he described his new budget as “a road map for creating jobs.”
Conservatives and the unemployed.Mar 3, 2014, Vol. 19, No. 24 • By IRWIN M. STELZER
Millions of Americans, glutted with benefits that until now have seemed likely to be renewed and renewed again, have suddenly become devoid of ambition, shed the work ethic, and taken to the couch and the TV remote. Or found a back pain or emotional problem that entitles them to the even higher benefits designed to ameliorate the plight of truly disabled workers.
A better approach to poverty.Feb 10, 2014, Vol. 19, No. 21 • By ELI LEHRER and LORI SANDERS
President Obama’s State of the Union speech brimmed with ideas to increase upward mobility and spur job creation—most of which have been tried previously, without good results. From calling on Congress to raise the minimum wage to announcing the creation of six new “high-tech manufacturing hubs” centered around research universities, too many of these ideas flow from misplaced confidence in the ability of top-down government policy to steer the economy and lift the circumstances of those in poverty.
A modest proposal for the new Fed chairman. Jan 27, 2014, Vol. 19, No. 19 • By ANDREW FERGUSON
It's been more than a week now and I’m beginning to suspect she’s not going to call, so here I will offer Janet Yellen the advice I’ve been hoping to give her privately since the Senate confirmed her as the new chairman of the Federal Reserve. My advice is: Think about John Cowperthwaite. By this I mean: Really think about
There are better ways to help workers than the minimum wage.Dec 23, 2013, Vol. 19, No. 15 • By IKE BRANNON
There is a vintage Corvette parked on the street nearby, a 1977 canary yellow model in perfect condition. The NADA Blue Book says it’s worth around $15,000.
The car is someone’s toy: I know that because it hasn’t been moved for an entire year. I’ve seen the owner visit it a couple of times to rev the engine and give it a sponge bath, but it’s been in the exact same spot since last Christmas.
50,000 words, boiled down—way down.Dec 23, 2013, Vol. 19, No. 15 • By ANDREW FERGUSON
Everybody has an opinion about the pope these days and, what’s worse, feels compelled to express it. Rush Limbaugh has an opinion about the pope. He says he finds the pope “upsetting.” And he’s not even Catholic!