The Silicon Valley wage suppression conspiracy

Many readers have asked me what I think of the email chain which shows evidence that Silicon Valley firms conspired to hold wages down, by refusing to engage in competitive bidding for workers’ services.

I would suggest caution in interpreting this event.  For one thing, we don’t know how effective this monopsonistic cartel turned out to be.  We do know that wages for successful employees in this sector are high and rising.  Many a collusive agreement has fallen apart once one or two firms decide to break ranks, as they usually do.  Without legal enforcement, or without an NCAA-like clearinghouse enforcement structure (also backed by the law), it is hard to find examples of persistently successful monopsonistic labor-buying cartels.  One reason is that workers can find means of switching firms which do not directly implicate the new hiring firm as the villain which plucked them away.  The most successful collusive agreements are not usually monopsonistic and furthermore they are often based on self-sustaining and self-interested norms which do not require articulation in the form of incriminating emails.

A second point is this.  Let’s say you knew that when you took a job at Apple or Google that no other Silicon Valley firm would bid you away.  You don’t need to have explicit knowledge of the workings of the cartel, rather you simply observe that other people in your general position seem to stay put rather than receiving fantastic outside offers.  Given that you have outside alternatives, you would demand, and receive, higher wages in the first place for moving to one of those firms.  This actually would increase wage compression and limit inequality, albeit while decreasing efficiency.  Still, workers as a whole would win back some of what they seemed to be losing, albeit not all of it.


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