Friday, January 31, 2014

God forbid salaries go up in tech!

Via Kevin Drum (and a lot of other places), a fascinating story of Silicon Valley CEOs conspiring to keep salaries down:
Just before joining the wage-theft pact with Apple, Google’s human resources executives are quoted sounding the alarm that they needed to “dramatically increase the engineering hiring rate” and that would require “drain[ing] competitors to accomplish this rate of hiring.” One CEO who noticed Google’s hiring spree was eBay CEO Meg Whitman, who in early 2005 called Eric Schmidt to complain, “Google is the talk of the Valley because [you] are driving up salaries across the board.” Around this time, eBay entered an illegal wage-theft non-solicitation scheme of its own with Bill Campbell’s Intuit, which is still being tried in ongoing federal and California state suits.
Driving up salaries?!?! Quit that, Google!

I think because chemistry is a much more mature business, there's a lot less likelihood that there is conspiracy amongst CEOs of chemical companies to keep salaries down. (Those CEOs much less likely to talk to one another, and much more likely to keep their legal departments in the loop -- I hope.) (Um, there's probably a lot more likelihood that there are conspiracies to keep prices of certain products high.)

Also, there's not enough growth amongst chemical and pharmaceutical companies to really drive a boom in hiring, which would put upward pressure on salaries and engender this sort of anti-poaching collusion. What a shame. 

3 comments:

  1. There is no need for a conspiracy of CEO's to keep scientist wages down. All you need is a western culture that fosters curiosity and excitement of science (which western culture does an oustanding job at, compared to say the middle east or China), grad schools ready and funded to take advantage of that excitement for a dispicably low compensation, and the promise from advisors "Oh, dont worry, you'll get a good job."

    And then, of course, a scarcity of decent jobs because they have been outsourced to China/India.

    I really dont see this changing ever, unless western culture went through a reversal of the scientific revolution.

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  2. And there never will be a boom if wages remain low. Where does growth in technology- and science-related industries come from? Personally, I think it comes from the human mind...particular minds that are in short supply. And are truly innovative thinkers going to go into fields that don't offer rewarding careers? Not likely.

    It's a chicken and egg statement, I know, but I can't see why "low wages -> low growth" is any less valid than "low growth -> low wages" in this particular case.

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  3. It’s not chemical company CEOs who collude; it’s the VPs of HR who do. Back in the mid 1990s I worked for DuPont, where talking about salaries was strongly discouraged. Until one day our relatively new lab director decided to give a talk about salaries; perhaps because he was a chemical engineer he thought it would be a good idea to be more forthright about the subject. At any rate, he put up a slide in which he showed the names of 10 chemical companies. The names I remember are DuPont, Dow, Union Carbide, American Cyanamid, Eastman Kodak, and 3M. I think that BASF, Procter & Gamble, and Air Products might also have been on the list. No oil or pharmaceutical companies.
    The lab director went on to say that each year the vice presidents of HR from the companies met and agreed on the salaries for new chemists (at each of the three degree levels), chemists with 5 years experience, and chemists with 10+ years experience, again taking into account degree levels. The same exercise was done for chemical engineers. Most of any year-to-year salary increases were pegged to the inflation rate, more or less.
    Apparently this salary collusion had been going on for a long time. Ostensibly, it was done to make certain that a chemist with 5 years experience would be making more than a new chemist at the same degree level. Of course, for a pool of chemists within a company with the same years of experience, some would make more and some would make less money than the agreed upon ‘average’ salary. This yearly ‘agreement’ functioned to keep chemists from going from one company to another for more money. And it explained how a chemist at Dow in Midland, MI (low cost of living) and a chemist at American Cyanamid in Stamford CT (very high cost of living) ended up with nearly similar salaries. I remember when we were in graduate school we could never figure out how this could happen, and why American Cyanamid didn’t offer better salaries.
    It also explained why when I was interviewing in the late 1980s, companies would tell me that they would match any offer I got from DuPont. It was never clear to me why DuPont seemed to set the standard.
    Naturally, these salary ‘negotiations’ had/have a trickle-down effect. Medium sized chemical companies would offer slightly less than these amounts, and smaller companies somewhat less than that.
    I left DuPont some time ago, and the division I was in was sold off. I would assume, however, that the same salary negotiations still take place; I can’t think of a good reason why they wouldn’t.
    So, there you have it. Is this legal? I don’t know. The lab director didn’t see anything wrong with it.

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