Left Voice author Rose Lemlich pens a piece entitled Tech Layoffs Are About Punishing Workers and Driving Down Wages that is a breath of fresh air compared to what the magazine usually covers. It's actually about the real economy, as opposed to the mostly inconsequential travails of academics, or the generally irrelevant concerns of the 0.1% of the population that is legitimately trans. Beyond which Ms. Lemlich is a talented writer--a trait she shares with many of her colleagues.
That said, her understanding of how capitalism really works is abysmal. She really does need to learn some basic economics--even if it's only the Marxist sort. The very title of her article represents a misconception--that tech firms are all in cahoots to drive down wages and "punish" workers. The former is impossible. The firms are in competition with each other to hire the best workers, and thus compete to offer the highest wages possible. That's why Silicon Valley tech workers typically earn well into the six figures. The latter is ridiculous. Why would any firm want to "punish" its own employees? That's hardly a strategy to improve morale or increase productivity.
Ms. Lemlich quotes a Twitter person (@CubicleApril):
Pretty incredible that Google is trying to get away with blaming macroeconomic conditions for their layoffs, when over the last year they’ve spend 57.36B on stock buybacks.
That’s enough to support the 12,000 laid off engineers at their median engineer compensation for 23 years.
It is Ms. Lemlich's opinion that the $57.36B would be better invested in featherbedding Google's workforce rather than "wasted" on stock buybacks. She's wrong on several counts.
To begin, she misunderstands who the owners of Google are. She writes,
This is because capitalism is not altruistic: major shareholders don’t buy shares because they want to invest in these companies’ visions or provide startup capital for them to become more productive. They buy shares because they believe those shares will be worth more money in the future; this is their only pursuit as capitalists; it is the only way they make money.
Of course this is true--capitalists want to make money. But so do workers--otherwise why go out on the picket line demanding more wages and bennies. And how many workers will remain long at a particular job when a neighboring employer is offering a 10% higher salary? Like workers, capitalists are people, too.
But then her image of the capitalist is wrong--she obviously imagines some Monopoly game banker in a top hat who uses money for nothing more than wallowing around in a pool of gold coins. But that's wrong. According to Investopedia
The top individual insider shareholders of Google are Larry Page, Sergey Brin, and Sundar Pichai, and the top institutional shareholders are Vanguard Group Inc., BlackRock Inc. (BLK), T. Rowe Price Associates Inc., and FMR LLC.
Misters Page and Brin each own about 3% of the company. Mr. Pichai owns 0.1% of outstanding shares. Ownership by the institutional owners (Vanguard, Blackrock, & T. Rowe Price) is more complicated, but looks to be between 4% to 7% each. Total institutional ownership of Google stands at 78.4%.
The point here is institutions serve mostly pension funds and individual savers like you and me. Anybody who owns either a mutual fund or an ETF likely has money invested in one or more of those institutions. Pension funds obviously need to maximize returns on their investments--they're greedy like everybody else. But they're not the greedy capitalists of Ms. Lemlich's overheated imagination.
More, Ms. Lemlich apparently believes stock buybacks are just an exercise in frivolity--merely used for buying fancy yachts or custom lattes.
Stock buybacks reduce the number of shares in circulation, making them rarer and more valuable. Buying back stock does nothing to boost the productivity of a company, and it does nothing for the social good. The cost of these stock buybacks alone would’ve paid the salaries of every laid-off worker for decades. The executives are just using rising inflation and expectations of a recession as a propaganda tool to justify their greed.
She is correct that Google buying back stock does nothing to boost the productivity of Google. Stock buybacks are instead a way of returning money to shareholders. It is an admission that Google is no longer worth the investment. Indeed, Ms. Lemlich quotes an article in Business Insider that claims as much (links omitted).
But while Pichai, who made $280 million in compensation in 2019, said he took "full responsibility for the decisions that led us here," he failed to elucidate those choices. He didn't mention that during his time at the helm Google has been hit with billions of dollars' worth of antitrust fines, been left in the dust by OpenAI's ChatGPT despite "pivoting the company to be AI-first," and seen its core search product get steadily worse.
If Mr. Pichai really is that bad a CEO, then reallocating money away from Google is indeed a good strategy. It's an argument for more stock buybacks rather than fewer.
I can't judge the quality of Mr. Pichai's leadership. But I will say that Google has cornered the online advertising market and is unlikely to increase its market share. It is, therefore, no longer a growth company in the way it has been over the past few decades. So hiring on the expectations of future growth such as before the pandemic were likely not warranted. It is much better that the extra capital be reinvested elsewhere.
There are two ways that capital can be reinvested. One is that Google itself reinvest the capital in its own businesses--this is what Ms. Lemlich suggests should happen. Or the money can be returned to shareholders so they can individually decide where to reinvest it. The first option suggests that Mr. Pichai knows best where to reinvest all capital and never makes mistakes. The second option suggests that shareholders will, on average, make better investment decisions than Mr. Pichai.
Of course "reinvesting capital" is a rather bloodless way of saying that social resources generally should be reinvested. In particular, if Google is maxed out, then not only capital, but also labor should be reallocated to where it provides the most social utility. And that's what is happening: if talented people are being laid off from Google, they will in short order be hired by other companies that need both the investment and labor from talented employees. This is to the benefit of all concerned, especially including consumers.
Here is Ms. Lemlich's closing sentence:
Tech workers — because of their high wages, key place in the economy, and (until now slightly more certain) job security — are in a unique position to organize with workers in other sectors and coordinate actions in solidarity around issues facing the entire class in the face of a recession.
I'm not so certain. The whole tech industry--labor and capital alike--is now threatened by so-called artificial intelligence (AI), such as ChatGPT and its successors. These tools can now write programs better than most human beings, and do so a whole lot cheaper with a whole lot less capital. Tech jobs the world over are now at risk, the current holders of which will likely have to seek out new careers rather than just new jobs.
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