Oct 28, 2016 ยท 3 minutes

Earlier this week, I wrote about the latest settlement in the ongoing Techtopus wage theft saga.

As a reminder, Techtopus was a years-long, widespread agreement between technology companies and movie studios not to poach each other's employees, thus artificially keeping down wages. The biggest ringleaders included Apple, Google and Adobe, but ultimately the scam roped in dozens of smaller firms and lead to an initial settlement of $415m.  

As if that weren't bad enough, Pando's Mark Ames then reported that animation studios including Disney, Sony, and Dreamworks had got in on the act. That reporting led to a second class action suit, which we dubbed Techtopus II. 

Late last week, Dreamworks has offered to settle a lawsuit over its own involvement in Techtopus II for $50m. Assuming the Dreamworks offer is accepted, the outcome pushes the total settlements in Techtopus II close to $100m, in addition to the $415m settlement in the original Techtopus case. As I wrote earlier in the week, hopefully at  the very least the size of these settlements will prompt Silicon Valley companies to think twice before "disrupting" laws designed to protect and fairly compensate workers. 

Today comes another sign that Techtopus is having an impact, and that things are moving in the right direction. The White House's Council of Economic Advisors has published a paper (embedded below) entitled "LABOR MARKET MONOPSONY: TRENDS, CONSEQUENCES, AND POLICY RESPONSES."

The Council of Economic Advisors is "charged with offering the President objective economic advice on the formulation of both domestic and international economic policy."

The paper seeks to "address long-term challenges of slow wage growth and rising inequality..."

Over the past 15 years, while profits rose, the decline in labor’s share of national income accelerated, reaching its lowest level ever since World War II. And though this trend has begun to show signs of reversal since mid-2014, labor’s share of income is well below the 2000 year level (Figure 1). At the same time, labor income itself has become increasingly unequally divided. Researchers have focused on the divergence between worker skills and employer needs—a challenge brought about by technological change and a trend in educational investments that, while rising, has not kept pace with demand, which has risen even faster

Early in the paper, the authors describe the factors that are most likely to lead to anti-competative practices generally, and wage fixing specifically:

Collusion is more likely to occur when a small number of employers recognize their mutual effects on wages and working conditions, and when workers cannot easily find employment outside the colluding firms: for example, a geographic area is dominated by a single industry with a few firms and the workforce has specialized skills that cannot easily be applied in other industries.

Does that sound familiar, Silicon Valley?

And -- sure enough! -- the paper goes to to cite tech industry wagefixing as an example of something that resulted in both slow wage growth and rising inequality.

Recent Department of Justice cases provide examples of collusion that restricted competition in hiring software engineers among technology firms in Silicon Valley...

 When fewer firms compete for a given type of worker, each firm is more likely to exercise monopsony power. Smaller numbers of firms may also facilitate collusion. Indeed, evidence of rising market concentration and monopoly-style profits is especially strong in the health-care and technology sectors

The entire paper is embedded below and worth reading whether you're a Silicon Valley founder who wants to understand why colluding with your friends and rivals to drive down wages is a bad (not to mention illegal) thing, or if you're an employee who wants to better spot the signs that your employer might be involved in the next Tectopus cartel. 

Either way, it's heartening that the issues of wage theft amongst tech companies, and allied industries, have now officially made it all the way to the White House. 


20161025 Monopsony Labor Mrkt Cea by Pando Daily on Scribd