Netflix Knows How to Hire More Workers

NetflixI have long complained about what feels like the constant drum beat for more technology workers via the H1-B visa system. The idea is that high tech companies just can’t find American workers with the skills they require. But the truth is, if high tech companies really were desperate for workers, they would pay them more. That’s how markets work. If all programmers were paid minimum wage, companies would find it very hard to hire them. That’s why programmers are paid more than minimum wage. And now, if high tech companies really can’t find enough programmers (for example), they could pay more—maybe steal a little talent away from the finance industry.

Of course, the issue is that these companies want more highly skilled workers, but they don’t want to pay them the going rate. So they go crying to the government to mess with the free market and allow them to get workers for less than the market rate. I’ve never heard a politician push back on this, “If you can’t grow your company by paying the market rate, then your company is not efficient enough to grow!” Instead, we see them all wringing their hands as though job number one is to see that companies are profitable rather than that workers have jobs. It is inexcusable.

Well, not all companies think that the government should take care of their profit margins. Bloomberg Businessweek reported last week on Netflix’s unusual approach to hiring:

Netflix can now hire just about any engineer it wants… Managers routinely survey salary trends in Silicon Valley and pay their employees 10 percent to 20 percent more than the going rate for a given skill. Fired employees also get ultragenerous severance packages; the idea is to remove guilt as an obstacle to management parting ways with subpar performers.

So let me get this straight: Netflix pays more than the market rate to get better engineers? How can that be? Did their managers take economics in college or something? My understanding is that business majors were required to eschew all economics. That’s why American business developed in the way it has. This Netflix idea could potentially revolutionize American business. But I wouldn’t count on it.

Some might counter that this is all fine for Netflix, but not all companies can pay more than the going rate. All Netflix is doing is pulling employees away from other high tech companies. This is true, but it isn’t the whole story. By paying high tech workers better, more people will enter the field. Also: more people will study engineering and science in school if they know they can make a lot of money. So by paying more, Netflix helps themselves relative to other high tech companies, but they also help all high tech companies by raising the average salary.

I’m not saying that more immigration is a bad thing. Far from it! I think immigration is a great thing. But the reasons for more immigration is not that big corporations can get employees for less than the going rate. This is basic economics folks. But our political leaders don’t want to understand it because big business pretends it doesn’t know how to get more highly skilled workers.

H/T: Dean Baker

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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