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.