The Silicon-Valley No Poaching Agreement

I take it as factual that Apple, Google, and many other major Silicon Valley companies illegally formed a cartel not to poach each others’ employees.  And they should get punished for doing it.

The more interesting question, which Tyler Cowen attempts to get at, is how material the wage suppression effect was.  Here, I’d be cautious about accepting the wilder claims of, say, Pando Daily (which has been awesome at raising awareness of this bad behavior), or the commenters on Hacker News who imagine that without the cartel, developers would be paid like lawyers.  The fact is, the cartel was pretty limited in effect: it was just a no-cold-call agreement.  That’s not to say that top engineers did not move among the firms in the cartel, or the not-exactly rare firms outside the cartel (such as Facebook).

Cowen hypothesizes that employees of the participating companies priced (some of) the existence of the cartel into their agreed-on salaries anyway, which seems like a stretch to me.  It implies a lot of background knowledge that nobody seems to have consciously had.  He also hilariously tweaks the noses of outraged liberals who are against ultra-high salaries every time except when they can decry corporations for not giving ultra-high salaries to elite engineers, by suggesting that the cartel was pro-income-equality, which, while funny, is probably also wrong.  That is, the cartel presumably flattens wages for engineers, but probably for society as a whole, the excess salaries are captured by execs or investors, who are richer yet than elite engineers.

Still, the fact of the matter is that there isn’t that much scarcity for software engineers.  Perhaps the cartel suppressed salaries by a few percent, but there is no data anywhere to suggest that it’s more than that.


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