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The End of Apple-Google No-Poaching Pacts Could Bring Even More Talent to Silicon Valley

Silicon Valley
Google headquarters on Jan. 30, 2014 in Mountain View, California. Google is one of the companies mentioned in the hiring antitrust lawsuit. Photographer: Justin Sullivan/Getty Images

For those living outside Silicon Valley, the most shocking thing about the no-poaching agreements among some of the world's largest tech companies is that engineering salaries could be even higher than they are now.

Thanks to court records from the recently settled antitrust case over hiring in the Valley, we now know that the late Steve Jobs, Google Executive Chairman Eric Schmidt and others from Intel and Adobe Systems made a secret pact not to recruit from one another. EBay settled a U.S. lawsuit last week accusing it of agreeing not to hire employees from Intuit, which makes Mint and TurboTax. Lucasfilm and Jobs's Pixar, now both owned by Walt Disney, settled claims with the U.S. in 2010.

The oil-baron-like disregard for the law shows the Valley's incalculable hubris, which is the subject of this week's cover story in Bloomberg Businessweek. And while the pacts helped to drive salaries below free-market rates, the dismantling of these deals suggests that employee compensation is about to go up. That's a terrifying thing for tech companies, and not just for those in the Valley.

Competition for hiring tech workers is expected to become more fierce in the Valley, which would in turn raise salaries, says Jim Hall, the executive director of Oxford University's Entrepreneurship Centre. As a result, the talent flight from other cities around the world will probably accelerate, says Jay Eum, a managing director at investment firm TransLink Capital who focuses on the South Korean market.

It's hard to imagine Silicon Valley's gravitational pull getting any stronger than it is now. Top engineers routinely migrate to the Valley for higher-paying and higher-profile jobs, and startups often relocate once they gain momentum to be closer to the pool of talent and capital there. Jonathan Barouch, the chief executive officer of a Sydney-based social-media analytics provider called Local Measure, says competing with the Valley for engineers has always been challenging, and he fears it could get worse.

"U.S. tech wages are very high by comparison to other tech hubs," Barouch says. "Anything that puts upward pressure on wages is likely to exacerbate this situation."

Money speaks volumes, but it isn't the only thing employers can offer. Some tech companies outside the U.S. try to entice talent with intangible benefits and the prospect of "changing the world," says Hall. Others promise work-life balance, flexibility on relocation and beautiful scenery.

"Sydney offers some pretty amazing lifestyle benefits," says Barouch. Though, he recognizes that not everyone will be able to look past the dollar signs. "The ending of the no-poaching agreement," he says, "may very well mean a second wave of migration."

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