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.
It’s the worst form of energy policy, except for all those others that have been tried May 26, 2014, Vol. 19, No. 35 • By IRWIN M. STELZER
Having lived through and survived Richard Nixon’s promise of energy independence, Jimmy Carter’s effort to substitute a hair shirt and a woolly sweater for a thermostat set at comfortable levels, George W. Bush’s insistence that Americans surrender their incandescent light bulbs, other presidents’ support for subsidies for ethanol and nuclear power, and the current administration’s plan to substitute subsidized wind and sun for fossil fuels, I thought I had seen it all—every technique imaginable for interfering with free markets and consumer choice. I was wrong.
The system Obamacare destroys.Jul 16, 2012, Vol. 17, No. 41 • By IRWIN M. STELZER
President Obama has one thing right: Obamacare will end the process by which insured patients, or those capable of paying from their own pockets (e.g., the rich Saudi princes who inhabit the best suites in our hospitals), subsidize patients who show up in the emergency room, are treated, and then cannot pay their bills. That raises the cost charged to insured and self-paying patients as hospitals recoup their bad debts from caring for the poor.
from the capitalists.Jan 18, 2010, Vol. 15, No. 17 • By IRWIN M. STELZER
We have met the enemy and he is us. So Pogo might have described the situation that the business community has created for itself. There is no question that the Obama administration, and even more the Democratic leadership in Congress, harbor something between skepticism and hostility towards free markets.
The European Union wants to have a bigger economy than America and their welfare state, too.11:00 PM, Jan 26, 2004 • By IRWIN M. STELZER
THIS IS THE SEASON of high-level international meetings and, therefore, the season of many discontents. Europe's concerns about the fall of the dollar and America's fiscal profligacy were aired at the World Economic Forum in Davos last week, as were America's concerns about the inability of Europe's governments to stimulate domestic demand. The Europeans are watching their export industries suffer as the euro soars, and the value of the dollars their companies' U.S. subsidiaries earn drop like a stone, as the Euro appreciates to some 50 percent above its previous low.
Employment is a campaign issue, but what do the surveys really tell us about the jobs market?11:00 PM, Jan 21, 2004 • By IRWIN M. STELZER
IF YOU WANT TO KNOW why ordinary folks find it difficult to understand what economists are saying about the American economy, consider the question of jobs. We know a few things. We know that jobs are such an emotive political issue that one candidate for the Democratic presidential nomination promises that if elected his three top priorities will be, "jobs, jobs, jobs."
Deficits, pricey oil, and a weak dollar--will the Fed keep interest rates low?11:00 PM, Jan 12, 2004 • By IRWIN M. STELZER
THE DOLLAR IS DOWN. Oil is up. America is running huge trade and budget deficits. The Japanese are intervening massively in the currency markets to prevent the yen from rising, and the Chinese show no signs of abandoning the renminbi's peg to the dollar. So the euro is bearing the brunt of the dollar's decline, making euroland goods less competitive and snuffing out any signs of a European recovery.
Economic models come up with two very different futures.11:00 PM, Jan 5, 2004 • By IRWIN M. STELZER
AS ECONOMIC FORECASTERS cranked up their models at the end of last year, many pored over the printouts and decided that Robert Browning had it right when he wrote, "Never glad confident morning again." The economy seemed in such bad shape that the Democrats looked forward to teaching another Bush that "it's the economy, stupid." The unemployment rate was 6 percent and rising; the president's tax cuts threatened fiscal meltdown; the trade deficit was heading for a succession of records; the chairman of the Federal Reserve Board was warning of "corrosive deflation"; and the president had just
OPEC has kept the price of oil above $28 for some time; there are a host of reasons it won't be coming down anytime soon.11:00 PM, Dec 15, 2003 • By IRWIN M. STELZER
THE PRICE OF OIL has jumped about 7 percent in the past two weeks. Under ordinary circumstances, and for most commodities, volatility comes as no surprise and is of little consequence. But oil is different. For one thing, its price is affected by a powerful cartel, OPEC, that tries to lock in price increases. For another, it is so crucial to the functioning of industrial economies that past price jumps have thrown America and, in some cases, the world, into protracted periods of sub-par growth.
Why the dollar continues to do well in currency markets and where it's headed next.11:00 PM, Dec 8, 2003 • By IRWIN M. STELZER
WE WERE TAUGHT in graduate economics classes that if a country runs large and persistent trade deficits, the value of its currency will decline relative to the value of the currencies of its trading partners. Oh yes, other things being equal, of course. Then we entered the real world and found that other things are never equal.
Americans are overweight and the extra pounds are going to cost Big Business.11:00 PM, Dec 1, 2003 • By IRWIN M. STELZER
BY NOW, we will have consumed the leftovers from our Thanksgiving feasts, which saw us dispose of 45 million turkeys, perhaps 200 million sweet potatoes, and at least 50 million pies of various sorts. Add in stuffing made from white bread, cranberry sauce loaded with sugar, and carrots roasted in brown sugar and butter, and you have a dieter's nightmare--one estimate puts the carb content of a typical Thanksgiving meal at what Atkins would call "a whopping" 200 grams.
While the economy revs up, the administration turns to protectionism and over-budget spending.11:00 PM, Nov 24, 2003 • By IRWIN M. STELZER
ONLY ONE THING can stall the U.S. economic recovery that is now underway: a major policy error by America's politicians. And, unfortunately, they have two such blunders in mind, namely protectionism and fiscal profligacy.
The economy itself continues to grow, although not at the breakneck 7.2 percent pace that has been reported for the third quarter (that figure will be revised upward this week to something like 8 percent). The housing market is a principal driver. In October housing starts rose 2.9 percent from the previous month's level.
From the December 1, 2003 issue: A grotesquely irresponsible energy bill nears completion.Dec 1, 2003, Vol. 9, No. 12 • By IRWIN M. STELZER
IF PORK WERE A FUEL that could produce electricity and power SUVs, America would now be independent of imported oil. Unfortunately, the pork contained in the first new energy bill in over a decade has more to do with a desire to please Iowa corn farmers and assorted auto and energy companies than with the urgent need to reduce our reliance on oil from the world's most unstable region.
Retailers are expecting a big Christmas season. Will they be zooming into the black?11:00 PM, Nov 17, 2003 • By IRWIN M. STELZER
IF YOU THOUGHT the report that the U.S. economy grew at an annual rate of 7.2 percent was good news, wait until you see the revised estimate. I am told that the final figure will be at least 7.8 percent, and might well reach 8.0 percent.
So much for the look in the rear view mirror. The more important question is whether the road ahead will provide a smooth ride to a sustained period of economic growth or prove as bumpy as the one over which we have recently traveled.