You Have Nothing to Lose But Your Options

by on May 11, 2006 · 8 comments

Joe at TechDirt debunks a reactionary column about the need for tech workers to unionize:

Historically, a powerful union tool has been the ability to exclude non-members from the workforce. This is why unions are so vehemently against “right to work” laws, or these days, outsourcing labor overseas. Closely related to this is opposition to technologies that reduce the need for human employees, like in the example of the plumbers that were against waterless urinals. Though such a mentality is completely anathema to the tech world, it’s not surprising to see it at a column called The Luddite–the fear that technology would take jobs away from humans was the same fear that the original Luddites had. Even more important, perhaps, is that the delineation between labor and management–central to the union ethos–doesn’t hold at most technology companies. Often, company equity is part of an employee’s compensation package; so even if their wages seem to stagnate due to competition from Indian programmers, they benefit when their company saves money.

Indeed.

  • http://yglesias.tpmcafe.com Matthew Yglesias

    If outsourcing work has a net positive impact on a firm’s workforce because the reduction in wages is compensated for by the positive impact on workers’ stock options, then there’s no reason for a unionized workforce to object to outsourcing. Insofar as unions do object to wage-reducing measures, that’s precisely because their members don’t, in practice, have a sufficient equity stake to make this a good deal. In principle there’s no reason workers couldn’t get enough equity to make that arrangement benefical, but a union would be a big help in getting that contract.

  • http://www.techliberation.com/ Tim

    Matt,

    I think the problem is that different workers have different stakes in a given company. Unions thrive when you have a relatively homogenous work force–like workers on an assembly line–who are all roughly interchangeable. They’re divided into clearly-defined job categories and paid according to a standard union scale. Since the workers all have roughly the same stake in the company, they can offer a united front when dealing with the employer.

    In a modern technology company, you have a lot more variety. You have some workers who got in on the ground floor and have lots of equity. You have others who arrived fairly recently and have little equity but have rare skills that commanded a considerable salary premium. Still others might be lower-skilled and not have a lot of other job prospects.

    A standard union negotiating process can’t work in a firm like that, because the workers themselves aren’t going to agree on what’s best. The collective bargaining process will break down into infighting among workers.

    Equity stakes accumulate over time. So even in a firm with generous stock options, the newer workers won’t have as large of a stake in the company’s fate as long-time workers. That, it seems to me, is as it should be. If I worked at a company for 10 years, I’d be annoyed if my union focused its energy on getting more equity for the guy down the hall that joined the company 6 months ago.

  • http://yglesias.tpmcafe.com Matthew Yglesias

    If outsourcing work has a net positive impact on a firm’s workforce because the reduction in wages is compensated for by the positive impact on workers’ stock options, then there’s no reason for a unionized workforce to object to outsourcing. Insofar as unions do object to wage-reducing measures, that’s precisely because their members don’t, in practice, have a sufficient equity stake to make this a good deal. In principle there’s no reason workers couldn’t get enough equity to make that arrangement benefical, but a union would be a big help in getting that contract.

  • http://www.techliberation.com/ Tim

    Matt,

    I think the problem is that different workers have different stakes in a given company. Unions thrive when you have a relatively homogenous work force–like workers on an assembly line–who are all roughly interchangeable. They’re divided into clearly-defined job categories and paid according to a standard union scale. Since the workers all have roughly the same stake in the company, they can offer a united front when dealing with the employer.

    In a modern technology company, you have a lot more variety. You have some workers who got in on the ground floor and have lots of equity. You have others who arrived fairly recently and have little equity but have rare skills that commanded a considerable salary premium. Still others might be lower-skilled and not have a lot of other job prospects.

    A standard union negotiating process can’t work in a firm like that, because the workers themselves aren’t going to agree on what’s best. The collective bargaining process will break down into infighting among workers.

    Equity stakes accumulate over time. So even in a firm with generous stock options, the newer workers won’t have as large of a stake in the company’s fate as long-time workers. That, it seems to me, is as it should be. If I worked at a company for 10 years, I’d be annoyed if my union focused its energy on getting more equity for the guy down the hall that joined the company 6 months ago.

  • http://weblog.roth-cline.net Matt Cline

    It seems like Matt Y.’s comment argues that a union “would be a big help” in getting workers equity in their companies. (Matt, correct me if I’m wrong.)

    But is this a problem that needs solving? Do workers not have enough equity? More generally, do they not have as much equity as they would like? And if not, why not? I hear more tech workers complaining that their compensation is too much equity than too little equity. (Yes, that’s totally anecdotal, so I’m not too hung up on it.)

    I think that Jim is totally right: the power balance between management and (say) programmers is totally different from the power balance between management and assembly-line workers. (For one thing, programmers are not fungible.) The labor union was not designed to address the balance of power that exists now in the technology industry, and it shows in the archaic language and perspective used by union advocates.

    (Oh, and by the way, I say all of this as a “worker bee” programmer. A union won’t do me any good; I don’t want one for me, and I definitely don’t want one for programmers as a whole.)

  • http://weblog.roth-cline.net Matt Cline

    It seems like Matt Y.’s comment argues that a union “would be a big help” in getting workers equity in their companies. (Matt, correct me if I’m wrong.)

    But is this a problem that needs solving? Do workers not have enough equity? More generally, do they not have as much equity as they would like? And if not, why not? I hear more tech workers complaining that their compensation is too much equity than too little equity. (Yes, that’s totally anecdotal, so I’m not too hung up on it.)

    I think that Jim is totally right: the power balance between management and (say) programmers is totally different from the power balance between management and assembly-line workers. (For one thing, programmers are not fungible.) The labor union was not designed to address the balance of power that exists now in the technology industry, and it shows in the archaic language and perspective used by union advocates.

    (Oh, and by the way, I say all of this as a “worker bee” programmer. A union won’t do me any good; I don’t want one for me, and I definitely don’t want one for programmers as a whole.)

  • http://abstractfactory.blogspot.com/ Cog

    Good grief, Tim, how big do you think the median technology employee’s equity stake is, anyway?

    Ask around. Superstars and people at startups get big equity, but I’d guess that the median technology worker’s equity is worth about as much as a nice annual bonus. A couple hundred stock units at a large technology company grants the holder virtually no shareholder power and negligible dividend payouts (because most tech companies don’t pay much in dividends). For some sectors (e.g., game development), a mixture of reduced working hours, saner work/life balance, and greater job security would benefit workers much more than a sprinkling of equity.

    Note that Matt Cline’s point about “too much” equity-based compensation is further evidence for my point. You can bet that if Matt’s friends were receiving truly valuable cuts of equity, they wouldn’t be complaining. Their problem is that their equity’s not worth as much as, say, cash on the table (for one thing, it’s less liquid, because it usually comes with a vesting period) or other benefits.

    Now, I suppose it’s possible that the returns to technology employees from equity could, on average, outweigh wage stagnation from outsourcing and other economic losses. However, that’s a claim that requires empirical backing, and I’m pretty skeptical. Equity does not magically erase the line between management and labor. The returns from cost savings are still controlled by management, and may or may not trickle down to small shareholders. Managers may well eat up the savings from outsourcing by increasing their own compensation or plowing the money into foolish investments that don’t increase the stock price. (And, as I said above, most technology companies don’t pay out much in dividends.) Basically, Joe from TechDirt’s saying: “Trust management and you’ll get yours.” Workers throughout history have been told exactly this shortly before getting shafted.

    Really talented programmers may not need unions, but the median technology worker isn’t a very talented programmer and doesn’t need to be. It’s not quite the same as an assembly line worker, but not as dissimilar as you’d think.

    All that said, I’m planning to start at an industry job in the fall, and I don’t want a union. But the position I’ve accepted is much sweeter than the median programming job.

  • http://abstractfactory.blogspot.com/ Cog

    Good grief, Tim, how big do you think the median technology employee’s equity stake is, anyway?

    Ask around. Superstars and people at startups get big equity, but I’d guess that the median technology worker’s equity is worth about as much as a nice annual bonus. A couple hundred stock units at a large technology company grants the holder virtually no shareholder power and negligible dividend payouts (because most tech companies don’t pay much in dividends). For some sectors (e.g., game development), a mixture of reduced working hours, saner work/life balance, and greater job security would benefit workers much more than a sprinkling of equity.

    Note that Matt Cline’s point about “too much” equity-based compensation is further evidence for my point. You can bet that if Matt’s friends were receiving truly valuable cuts of equity, they wouldn’t be complaining. Their problem is that their equity’s not worth as much as, say, cash on the table (for one thing, it’s less liquid, because it usually comes with a vesting period) or other benefits.

    Now, I suppose it’s possible that the returns to technology employees from equity could, on average, outweigh wage stagnation from outsourcing and other economic losses. However, that’s a claim that requires empirical backing, and I’m pretty skeptical. Equity does not magically erase the line between management and labor. The returns from cost savings are still controlled by management, and may or may not trickle down to small shareholders. Managers may well eat up the savings from outsourcing by increasing their own compensation or plowing the money into foolish investments that don’t increase the stock price. (And, as I said above, most technology companies don’t pay out much in dividends.) Basically, Joe from TechDirt’s saying: “Trust management and you’ll get yours.” Workers throughout history have been told exactly this shortly before getting shafted.

    Really talented programmers may not need unions, but the median technology worker isn’t a very talented programmer and doesn’t need to be. It’s not quite the same as an assembly line worker, but not as dissimilar as you’d think.

    All that said, I’m planning to start at an industry job in the fall, and I don’t want a union. But the position I’ve accepted is much sweeter than the median programming job.

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