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>The economic principle of wages tied to productivity That's not an economic principle. There are no economic theories that make sense to support it. Why would

>The economic principle of wages tied to productivity That's not an economic principle. There are no economic theories that make sense to support it. Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Labor is a market good like any other. Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. >but it's fairly apparent that, absent an illegal covenant preventing it, there would have been more upward pressure on wages in SV The upward pressure exists when companies can't hire at the rate they want to pay and still have more to compensate. Even if companies have a wide gap where they could compensate more, the upward pressure will not exist if there are enough qualified employees to fill the positions at a lower wage.

fuzzfactor 9y ago
>Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Companies still fail to profit on some transactions whether intentionally or not. Probably not sustainable except for a non-profit corporation. Even giving away part of the money does seem to be so much less common that it is understandable for there to be not much remaining general perception that it occurs any more at all. But generousity can span the complete spectrum from compassion to empowerment to downright charity all the way to absolute philanthropy. Of course greed has its own spectrum too based around money-motivated indivduals having very little worthwhile to offer while also having very little interest in anything else. This should be able to be completely avoided by truly productive operators, whether capitalists or employees. But leaving money on the table can be very revealing about the generousity or greed of the other party. There should be enough to go around that you should be be able to avoid cutthroat negotiations especially when relative to the stronger party what you are leaving on the table amounts to table scraps for them. If you blink and someone rich as hell makes it disappear faster than a common thief could rob you I would consider that a bad sign. >Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. If a hardware company can truly afford to pay more than the market rate for components, and no one else is doing it, many times they should be able to gain a competitive advantage by leveraging the generousity to their suppliers into a much more productive and/or higher quality supply chain. For a very small premium on top of your minimum component cost you can virtually double the resources your suplier has to work with on your behalf, all they need to do is leverage it back in your favor and everybody wins. It is silly to think employees are any different.
jldugger 9y ago
> Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? I sure you get this, but traditional model is that an employer's willingness to pay is tied to productivity. Not necessarily at a 1:1, as there's risk, capital costs and other factors to consider. But anything meeting the hurdle rate is theoretically fair game, including labor. And on the margins, if an employer wishes to expand their employee base -- because it's profitable to do so[1] -- they'll have to offer candidates a better opportunity than they have now. US unemployment is low, and presumably tech even lower[2]. Over time, we would expect that growing companies raise wage rates in the labor markets they draw from. As you say, no different than any other market, all else held constant, an increase in demand leads to a new equilibrium price. A higher market rate for bolts, so to speak. > Companies don't pay more than the market rate for bolts just because they are doing well. Well, many clearly have bonus programs tied to overall corporate welfare. I think we're talking past one another. I'm suggesting the market rate could be higher, and that the demand side potential limiter of wages -- profitability of large labor market buyers -- doesn't seem to be a factor. You're pointing out that the supply side is equally important, and well, duh. And to bring the discussion back to the comment I was responding to originally, the fact that startups have to compete with established profitable firms for talent doesn't explicitly mean employees have too much bargaining power. > Even if companies have a wide gap where they could compensate more, the upward pressure will not exist if there are enough qualified employees to fill the positions at a lower wage. Certainly, the fact that they chose to secretly form a cartel doesn't support the 'flooded with qualified candidates' position. That's a lot of risk to take on (and eventually be slapped on the wrist for) if there's no upside. [1]: https://danluu.com/sounds-easy/ https://danluu.com/sounds-easy/ [2]: https://ycharts.com/indicators/unemployment_rate https://ycharts.com/indicators/unemployment_rate

fuzzfactor 9y ago

>Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? Companies still fail to profit on some transactions whether intentionally or not. Probably not sustainable except for a non-profit corporation. Even giving away part of the money does seem to be so much less common that it is understandable for there to be not much remaining general perception that it occurs any more at all. But generousity can span the complete spectrum from compassion to empowerment to downright charity all the way to absolute philanthropy. Of course greed has its own spectrum too based around money-motivated indivduals having very little worthwhile to offer while also having very little interest in anything else. This should be able to be completely avoided by truly productive operators, whether capitalists or employees. But leaving money on the table can be very revealing about the generousity or greed of the other party. There should be enough to go around that you should be be able to avoid cutthroat negotiations especially when relative to the stronger party what you are leaving on the table amounts to table scraps for them. If you blink and someone rich as hell makes it disappear faster than a common thief could rob you I would consider that a bad sign. >Companies don't pay more than the market rate for bolts just because they are doing well. It's silly to think employees are any different. If a hardware company can truly afford to pay more than the market rate for components, and no one else is doing it, many times they should be able to gain a competitive advantage by leveraging the generousity to their suppliers into a much more productive and/or higher quality supply chain. For a very small premium on top of your minimum component cost you can virtually double the resources your suplier has to work with on your behalf, all they need to do is leverage it back in your favor and everybody wins. It is silly to think employees are any different.

jldugger 9y ago

> Why would anyone engage in a transaction where they give away all of the money they would gain as a profit? I sure you get this, but traditional model is that an employer's willingness to pay is tied to productivity. Not necessarily at a 1:1, as there's risk, capital costs and other factors to consider. But anything meeting the hurdle rate is theoretically fair game, including labor. And on the margins, if an employer wishes to expand their employee base -- because it's profitable to do so[1] -- they'll have to offer candidates a better opportunity than they have now. US unemployment is low, and presumably tech even lower[2]. Over time, we would expect that growing companies raise wage rates in the labor markets they draw from. As you say, no different than any other market, all else held constant, an increase in demand leads to a new equilibrium price. A higher market rate for bolts, so to speak. > Companies don't pay more than the market rate for bolts just because they are doing well. Well, many clearly have bonus programs tied to overall corporate welfare. I think we're talking past one another. I'm suggesting the market rate could be higher, and that the demand side potential limiter of wages -- profitability of large labor market buyers -- doesn't seem to be a factor. You're pointing out that the supply side is equally important, and well, duh. And to bring the discussion back to the comment I was responding to originally, the fact that startups have to compete with established profitable firms for talent doesn't explicitly mean employees have too much bargaining power. > Even if companies have a wide gap where they could compensate more, the upward pressure will not exist if there are enough qualified employees to fill the positions at a lower wage. Certainly, the fact that they chose to secretly form a cartel doesn't support the 'flooded with qualified candidates' position. That's a lot of risk to take on (and eventually be slapped on the wrist for) if there's no upside. [1]: https://danluu.com/sounds-easy/ https://danluu.com/sounds-easy/ [2]: https://ycharts.com/indicators/unemployment_rate https://ycharts.com/indicators/unemployment_rate