I really appreciated that compensation expenses on the balance sheet of a typical investment bank are fixed at 37-39% throughout the year, with the delta between salary and allotment being paid out as bonuses. It significantly improved my income.
I would gladly work at a tech company with a similar incentive structure, and I think more engineers should start asking for it. Financiers get paid a lot in the form of bonuses, but the correct answer is not to daisy cut by hollowing out their income. We should be asking why tech employees don't also make the same kind of revenue.
When Google and Apple have profits per employee of over $1M but the average engineer salary is only slightly higher than $100K according to glass door while both these companies are building stockpiles of cash holdings, something is obviously broken.
I suspect part of it is the 'doing it for passion' mantra, but another part of it was Apple HR's now obviously crooked refrain of 'we pay the prevailing market wage'. Just because I'm doing something I'm passionate about doesn't mean I like getting ripped off.
I'm not trying to be a shill for Google here, but I think it is a little misleading to say Google is hoarding all of this money and making their engineers live on pennies. The engineers are paid well, and while they (and other tech companies) don't have the partner-type structure, there still are competitive forces driving wages up (assuming the companies are generating profits and can afford it). And... if an engineer wants a partner type structure, they can always just quit and found a company where the wealth accumulates for them just as directly as it does in finance.
It seems to me you're sneaking in a little argument about what people 'deserve' here, and appealing to a predatory modesty. OH, sure, google is making an insane amount of money, and they're not passing it down to the people doing the work, but do workers NEED that money? Couldn't they, in fact, get by with less than they're paid now?
I really just wanted to dispute the numbers here, because I disagree that big tech companies are somehow more unfair to the employees than finance companies. Assuming there aren't illegal anti-poaching agreements, market forces operate in SV the same way they operate in the finance sector to drive up salaries of talented employees.
And it seems to me that if you want to strike off on your own (which is a risky but good was of generating "true value" for yourself), it is easier to do that in SV with a tech startup than it is in the finance industry.
Isn't the entire point of this debacle that there are anti poaching agreements, however?
- People don't want to look like, think of themselves as, or hire those that just in it for the money. It would be incredibly crass and uncool to change jobs just for salary, it should only be about caring more about something.
- Time-consuming and unpredictable hiring processes inhibit switching. There is probably a better company for most people somewhere, you know you might switch if you could predict whether you were going to get an offer. But if takes 3 days of vacation time for all-day interviews, and you have absolutely no idea whether you would be accepted or if you will happen to know the CS trivia they'll happen to ask, and you probably won't because of the supposed false negative bias, maybe not.
Finance sector, on the other hand, has to hire super geniuses willing to work 120 hours a week because to do otherwise would be to admit that most of what they do is dumb luck, defeating the whole façade.
Um... did you even RTFA?
Having been at Google as well, you can tell me if you shared my experience that seemed the most enlightening about this, that during the various periodic review processes, there seemed no question of "are you adding additional value, should you be compensated as such." This is a discussion that I haven't had at any of the tech jobs I've worked, in that I've honestly never felt my wages were in any meaningful way tied to the value I contributed. (qualifier, I think I've fell on both sides of this line, in that it hurt and helped me, I just find the lack of incentive alignment may be the "way to approach this problem")
Something this big clearly had effects on salaries across the board, at a scale where its difficult to casually judge the exact effects. Would wages everywhere be higher if it wasn't for this? I don't know, but I don't think we can rule out the possibility.
At that point, the infrastructure of the company is creating a lot of that value - the same engineer at another company would not generate nearly the same amount of revenue.
Most police in the USA are believers in the broken widows theory - surly the same applies in corporate law.
Liar's Poker, here we go again. This is the exact sentiment that plagued the finance industry in the 80's and lead to the bonus fiasco that exists today on the Street.
The question is what do we do about and is it the same? (I don't have an answer, just curious)
A couple of interesting notes:
1. In Raghuram Rajan's HAS FINANCIAL DEVELOPMENT MADE THE WORLD RISKIER? he notes:
Therefore, the incentive structure of investment managers today differs from the incentive
structure of bank managers of the past in two important ways. First, the way compensation
relates to returns implies there is typically less downside and more upside from generating
investment returns. Managers therefore have greater incentive to take risk.
2. Daniel Pink talks about the Candle problem and two main points on his thesis:
- As long as a task requires only mechanical skill, bonuses work as they would be expected – the higher the pay, the better the performance.
- Once a task calls for even a rudimentary amount of cognitive skill, a larger reward often leads to poorer performance.
 - http://www.amazon.com/Liars-Poker-Hodder-Great-Reads-ebook/d...
 - http://www.nber.org/papers/w11728
 - http://www.spencertom.com/2009/10/25/daniel-pink-on-the-surp...
In practice, it looks like tech companies were able to avoid wage competition through collusion, while keeping their workers hopefully waiting for the option payout.
If collusion like this gets appropriately punished, wages should get bid up, along with option incentives.
An ibanker like compensation might work at a "hits" business like a casual game company, where there is strong reason to believe that whatever confection you are coding on this year isn't going to last beyond the vesting period for your initial option grant. If you overtly reward making hay while the sun shines, there would be less bitterness when it gets cloudy.
If you're a tech person, how do you determine how much of the profit was generated by that one person? Also, how do you pay based on profit generated when the profit is spread out over the life of the product?
Google and Apple are huge money-printing machines, not startups.
How much profit per employee is not the right way to approach compensation. It should and often is based on what it will take to keep an employee happy.
(There are similar periodic attempts at licensing software engineers at the state level in CA. These generally don't go well either, and appear to be the same kind of rent-seeking behavior as unions, judging from the howling nonsense proposed as core competencies to test against, e.g., lots of EE knowledge, and stuff involving obsolete technology and software development models that don't work).
At some point in their growth, senior management is far enough away from the day to day engineering that the differences between individuals becomes nearly completely obscured except for a small percentage of standout folks.
This level of management is incenting a group to 'grow the company' and they need more folks to do more things. The problem is that engineers have wildly variable effectiveness in a role (they aren't fungible as folks would like) and the recruiting group is being rated on 'quality hires'.
So if you split the population of engineering talent into loosely defined groups of 'employed at a hot company', 'employed at a non-hot company', or 'unemployed' the recruiters consider these (unreasonably) to be 'best', 'ok', and 'not ok' groups to recruit from because they correlate the hot/not-hot bit to their incentive probability.
In the 80's it was Intel, AMD, and National Semiconductor all trying to growth by hiring the 'hot' talent from their competitors. In the 90's it was Ebay, Yahoo, and Sun, and in the naughts it was Google, Oracle, Intuit, Paypal etc.
So you have this system set up and the 'cheapest' way (in an economic sense) for a recruiter to be successful is to exploit the work of some previous recruiter that was successful and recruit the top talent from their pool into your pool. Combined with California's labor laws which favor employees and you end up with a situation that repeats itself over and over and over again.
The issue is that recruiting quality people out of the entire pool is "hard" and poaching the top engineers at a competitor is "easy." We don't incentivize recruiters to do the hard work, which leads to a host of other problems as well (like ageism, university discrimination, etc)
 'hot' in this context is buzzworthy or having good growth and execution press. (exemplars, 'Google', 'Facebook' or 'Apple')
 'non-hot' is a company that is idling along (not failing) but not generating a lot of buzz either (exemplar 'Computer Associates' or 'IBM')
It's quite funny to see that the downsides of near-instantaneous at-will employment are hitting companies so hard that they're willing to engage in such a boneheaded scheme, when sympathy is normally focused on employees.
Perhaps if these companies want to bring back some semblance of employee loyalty, they should start incorporating longer termination notice periods in their contracts and making employees happy before they want to leave, rather than treating individuals as interchangeable cogs and getting what they ask for.
I understand your thinking but I don't think it logically holds together. If the main concern was stability, that could be addressed by matching/topping any competing offers ... so you're right back to this being about holding down wages.
If anything I might buy the argument that Jobs was a huge control freak and that's what drove him to do this more than anything else, but how do you think this went down.
Jobs really didn't like having his engineers poached because it disrupted continuity. So he said to himself ... what am I gonna do? what am I gonna do? Offer 2x whatever Google is offers? Noooo ... that would never work. I need to call up Google and threaten a poaching war?
I'll go with Occam's razor. The simplest explanation is the best.
And please note, I'm certainly not defending any of this behavior, just examining possible motivations.
(And well that's how exploration of different narratives goes, it's a constant struggle compared to simply picking from the limited two-sides-max of mainstream press)
And an ignorant, unstructured, or illegal approach to benefiting yourself often hurts other people.
- why pay a writer to write a whole article when you can just reprint a press release with slight edits?
- they live in fear of "losing access" because they have nothing else to cover
- kool-aid-drinking sells
E.g., can you imagine TechCrunch announcing a new startup and then criticizing its concept? it would make startups would think twice about giving them any releases, writers would be able to produce less content, no kool aid.
outsider media, on the other hand, can land on the other end of the pendulum of being overly cynical, paranoid, underinformed etc.
On the other hand, that's the only thing that would make me read TechCrunch and take them seriously.
Wait, the result of an investigation where wrongdoing was found is ... that the companies agreed not to do it anymore? Yes, I know there is a still a civil class action lawsuit going, but still.
Apple gave them my old address (even though they know my current address), so I had to request a claim number since the mailing got lost.
As a software engineer: I've been chased by recruiters while heads-down on a project. It's an annoying distraction. With the tools at my fingertips (glassdoor, social and professional networks of other engineers that aren't particularly restricted by corporate borders in a deeply-interconnected era), I know the market value of the job and I know who's willing to offer more and less; I also can know about the corporate and engineering culture of the other companies. In short: if I want a change, I know where the door is and I know who's hiring. While in general, I'd agree with the notion that decreased price signalling could depress wages, I think it's a stretch to push software engineers working at the listed companies into an "oppressed workers" mold; it's a notoriously well-compensated field.
It's certainly a booby-trap to reason from one's own experience. But I find myself thinking that software engineers themselves might welcome the idea of a "no cold-call" list.
I've even had recruiters call me on my desk phone at work trying to do a sales pitch.
Please remember that your company is more than its product – it’s a group of people surrounded by a community of family, children, neighbors, etc. Whether your goal is world-changing or niche, do your best to take care of those people as professionally as you can. Business is business of course, but don’t rationalize bending the rules just to make a few more bucks.
If you get caught, you’ll pay. But even if you get away with it, remember how powerful a guilty conscience can be at turning profits into dust.
I do believe fines and jail time have some effect on them, though.
Do customers care about that? When you search on Google, or buy a Macbook, do you care about the people behind them? I imagine most customers don't.
OP: Revealed: Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees
HN: Apple and Google’s wage-fixing involved dozens more companies, over 1M employees
Maybe this is too nit-picky even for HN, but: Why does the headline here on HN only name "wage-fixing" (aka the symptom of the problem) instead of also naming the underlying cause like the article does: This is a cartel. Dropping the word has a whiff of spin.
I sure as heck hope they get the treatment they deserve and that this will strengthen the understanding that this type of stuff is exactly why you want strong unions. Judging from the history of both in the US, I'm not holding my breath, though.
"Revealed: Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees" - 106 characters
HN has an 80 character limit for titles.
would have fit snugly in 79 characters ;-)
For the same reason HN wants to roll out pending comments.
Unions are fundamentally socialist. That isn't using socialism as a bad word, but as a factual description of the fundamental fairness and equality notions of union. In many situations it provides protection and balance between the employee and employer.
Does that really apply to highly paid employees who are actively recruited as standouts? The ones paid far above many of their peers because they're at the high end of the curve?
Unions are the antithesis of the solution. Indeed, the union approach would be the same problem (if not worse). There would be no standouts. No exemplary talents. Unions would mandate the specific lowest common denominator compensation and conditions.
Again, I see the value in some places, but it is woefully ill-suited for this situation.
Professional associations -- ala doctors and lawyers -- is more suitable for this field. Unions are not something most would benefit from.
You negotiate the "rate for the job" if some one is good and need s more pay well promote them to a higher grade thats why you need to have a proper career track for all you staff.
That forces concepts which are nearly orthogonal in these types of companies (duties performed vs. value-added) to be artificially commingled.
While you could theoretically say that you can fix this by inventing enough job positions to be able to give the most-qualified the best wages, what really would end up happening is that you'd have a unique job position for every person (or in other words, exactly what you'd have without the union).
As a practical example, consider placing your union idea in the context of the NBA. "NBA Point Guard: Paid $11MM". But Michael Jordan was worth far more than $11MM to the Bulls, while even in 2014 Jose Calderon is not quite worth that much to the Mavericks.
So what do you do, split point guard up into "MJ-tier Point Guard: $33MM" and "not-quite-average Point Guard: $6.7MM"? Of course not; you negotiate with each player individually.
The situations we are talking about are actually more akin to professional athletes or sought after writers -- employers are actively seeking them out and recruiting them, at escalating wage levels, because they offer potential multiples of value to the company over "just any paper qualified candidate". Compare this to, for instance, auto-assembly or steel-working, where the difference in company value between resources is largely a wash.
We are specifically talking about the tech corridor right now. My home base is in the Toronto area but I seldom deal with Toronto area clients because the environment is dismal here: The pay is terrible, the product is terrible, and the mentality is of the "replaceable cog" variety, every project failing just enough until it's replaced by an innovative product made elsewhere. A union here might make sense because the situation already is pretty miserable. The same is true of the United Kingdom, to respond to another commentator. My comments about union specifically relate to the hyper-competitive, hyper-innovative and excellence seeking, silicon valley area.
The AMA is not a union by any traditional metric. It is a professional association. If a doctor is lured to a hospital for enormous sums of money, the AMA has absolutely no say over it. Nor do they dictate that another doctor has to be offered the job because they've been practicing for two months longer. Nor do they dictate that the doctor has to be paid for scale grade 7E because to do otherwise would cause resentment among other doctor's.
It would be great to have a professional association (presuming it didn't become too involved in its own enrichment). No thanks to unions.
Nor does union have to do all that stuff. You're attacking a strawman.
You know the entire uk telecoms infrastructure was revamped with zero fuss about new technology one of the main reasons was all the techies where union members.
And I know one ftse100 CEO was a union member and had been an activist and the CTO of one of the worlds largest phone manufacturers was a member of my branch.
as I said you just repeating folk propaganda based on stories about decades old "craft unions" which have nothing to do with how a union for developers/engineers woudl work
May be the model could work for developers?
Colluding to not recruit between those players sounds like an intent to limit (to some extent) employees options, which would reduce upward pressure on wages.
What would you call that?
I'm generally a fan of Google, but I have a negative opinion of Eric Schmidt. So many times he says and does things that seem so fundamentally detached from real life.
EDIT: Just wanted to add that the hero of this story -- the only one who actually saw that it was wrong and probably illegal, was Edward Colligan, then the CEO of Palm - http://pando.com/2014/02/19/court-documents-reveal-steve-job...
While I can see the lack of sympathy because these employees are so well compensated and rewarded for the work, if this affected blue-collar jobs instead there would be people on the streets, and quite rightly.
As someone else pointed out, Google and Apple are probably making on the order of $900k/year profit per employee - there is obviously cash in the bank to pay market salaries without resorting to disgraceful tactics like this.
Basically, anyone paying a competitive market rate these days is effectively benefiting from this. As a programmer, you should approach companies with this mindset.
Young people can afford less salary but prefer equity, fun culture, amenities and perks (citation needed 2).
A Sr. Java Developer living in Charlotte, Atlanta or Texas needs to make a 6 figure salary to stay in a middle class level quality of living (2 kids, single family home, 2 cars, hole foods market)
A Single Developer in SF needs the same amount of money to live well in the city with roommates.
a NC bank wanting a good web developer can either pay a young SF developer the same money she is making there to compensate for the loss of "living in SF is more fun for young adults than in Charlotte" + "it's a bank, we don't have a ping pong table or beer in the fridge" effect.
Or pay a salary that is going to be enough for a bit older developer who has a family, to live comfortably.
If you consider that there is a cost to moving to Charlotte that is more than a monetary cost, that cost needs to be taken into consideration in the compensation.
Seems like the kind of thing that a union would help protect against.
1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those that:
(a) Directly or indirectly fix purchase or selling prices or any other trading conditions
(b) Limit or control production, markets, technical development, or investment
(c) Share markets or sources of supply
(d) Apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts
Once you talk about refusing to hire potential employees who apply of their own volition, that would be another thing, but in my mind "no cold call" != "wage fixing scheme".
The extremely enginuitive and extremely lucky are going to strike it big and have these concerns. But you're enginuitive and lucky, right?
That being said, it's not exactly a suppression of the salary as I believe it is quite reasonable, but more like an equal playing field. You wouldn't go to another firm based on salary.
If you were affected, you should have gotten a (snail-mail) letter.
Having said this irl to other developers, the more I think about that, the more it disappoints me. Why? Because when I think about the mid level employee faced with making decisions, and they have to have an internal dialog with the selves as to if something is evil or not there are a lot of influencing factors that come into play. Is compensation bonus or promotion tied to the thing under consideration. How do individuals differentiate between evil and just really bad? My guess is that human nature (my own included ) is a lot easier swayed to 'well this is morally or ethically bad but not evil' when my own self interest is a factor in the decision to do or not do certain things.
Thinking about that slogan for the last fee years makes me wish they had gone the opposite direction and raced to the top: be righteous, be ethical, be morally strong.
For full disclaimer, I live in a world of my own construct where the glass is always half full and the scales always balance. However for, practical reasons, I have learned to understand the motivations behind the way the world and adjust my expectations accordingly.
But of course, there's no talent in Denver or Des Moines, but plenty overseas (if it's cheap enough)
It's intolerable to have to call somebody on Mountain Time or Central Time, but OK to have to coordinate meetings on the other side of the world.
Its direct evidence for Christ's sake.