How European Startups Are Battling Labor Laws For Developers and Programmers

Nerval's Lobster writes "The United States with its H-1B controversy isn't the only country going through that sort of immigration upheaval. As the cult of entrepreneurship spirals upward in Europe, the intricate vagaries of immigration policy on the continent are being newly scrutinized by our company-building classes. Freshly venture-backed European Internet companies want talent, and they are going to remarkable lengths to get it — but not always legally. Milo Yiannopoulos talked to whole bunch of entrepreneurs and investors in Europe about the fudges, shortcuts, workarounds and, in some cases, 'strategic decision-making' are — just about — getting their companies the talent they need. For example, one well-known Parisian venture capitalist told Milo that he knows of 'at least nine' startups in France employing developers illegally, keeping them off the books not only to avoid France's notoriously onerous labor laws but also because it would have been impossible, or simply too expensive, to import them officially."

Comments

so why not set up shop elsewhere?

[Chirs]

If the laws of the land are too onerous, the correct solutions are either to change the laws or else go somewhere else.

Re:so why not set up shop elsewhere?

[cayenne8]

If the laws of the land are too onerous, the correct solutions are either to change the laws or else go somewhere else.

That's what most companies do.

Why doesn't the US set corporate tax to near "0"....for all companies set up physically IN the US with over X number of employees in the states? I'd think we'd be attracting all sorts of businees to our shores. The lack of corp tax would offset to a great deal the higher salaries to be paid here.

Also, make those non-tax incentives to have to hire US citizens....

Re:so why not set up shop elsewhere?

[gnoshi]

1. Because it is a race to the bottom: if you're getting companies in there because of your 'near zero' corporate tax, don't be surprised if they move to another country with 'nearer zero' corporate tax, and lower payroll tax as well, and maybe poorer working conditions.
2. Because if a company isn't paying corporate tax, then it is much harder for it to be worth having them in the country (the cost of servicing their existence may exceed their return to society/government)

Re:so why not set up shop elsewhere?

[gl4ss]

If the laws of the land are too onerous, the correct solutions are either to change the laws or else go somewhere else.

Maybe they can't move to the other place to work legally either, Setting up a legal entity in China can be an adventure of it's own.
But it's not really that hard to employ people legally in europe, even if they're from India or China. Hell, it's easier to get the travel permits if you employ them legally.

HOWEVER.. if you don't employ them officially you can screw them. Also you save a ton of money in taxes. That's what "uuu it's too expeeensive!!!" and bitching about the labor laws is about.

actually, they can _screw_ the owners. technically it's the employers fault and they could ask for all the benefits, unpaid holidays etc if the company folds and the owners/employer would be on the hook for them(it's not the illegal immigrant who arranged the situation so technically I think it's just, it's also practical. that's why people employing illegal immigrants generally don't want them to mingle with general population because they would tell all kinds of things about rights and how their illegally acting employer is potentially in deep shit because dodging taxes is serious business)... really, what the fuck is a thousand bucks on paperwork to get some guy that's going to cost you 6-10 thousand euros (legally paid ok pay) per month anyhow, are you going to make your talent live in illegal 10 persons per apartment shithole in some Parisian suburbs? are yo looking for coders or pizza delivery boys?? If your business needs them to work for pennies and you can't afford the taxes, make them partners or something - don't be a dick, it's going to cost you a ton if you are.

In other words, it's not really a problem in Europe to get the permits, it's relatively cheap as well.

Re:so why not set up shop elsewhere?

[stenvar]

Because it is a race to the bottom:

Yes. It's called "competition". It's what keeps markets efficient and prices low. It's what makes people better off over time.

Re:so why not set up shop elsewhere?

[gnoshi]

Because it is a race to the bottom:

Yes. It's called "competition". It's what keeps markets efficient and prices low. It's what makes people better off over time.

Sure, I'll acknowledge competition can encourage market efficiency and prices low. It's a bit of a stretch to claim that a race to the bottom makes people better off over time. It makes some people better off over time, but I think you're overreaching an awful lot to claim it 'makes people better off over time' more generally than that.

e.g. it is 'efficient', temporarily, for companies to use as close to slave labor as they can obtain with the minimum safety standards that prevent loss due to injured or killed workers that exceeded the cost of having safety equipment and protocols. It reduces production cost to a minimum, which makes things cheaper.

Re:so why not set up shop elsewhere?

[nbauman]

That's what economic theory teaches. Reality is more complicated.

Here's reality: Suppose I'm a contractor with a bunch of construction workers digging trenches. Now trench collapses are a major cause of workplace deaths. You prevent trench collapses by shoring up the sides of the trenches if they get too deep or the soil is too damp. It takes longer to shore up the sides, so it takes longer and costs more to do the job safely. If the trench collapses, and kills a few workers, it doesn't cost the contractor anything, because it's a worker's compensation case, which means the state pays (and doesn't pay much), and these businesses are run as corporations, so the contractor simply goes bankrupt and starts a new corporation.

Most contractors don't shore up the sides of the trenches. They can bid low for these jobs. If a contractor were to shore up the sides of the trenches, it would cost him more, he'd have to bid more, and he wouldn't get the job.

So the result of competition in the free market is for contractors to run their businesses in a way that kills their employees. Because unemployment is so high, they can always get more employees, who are desperate for work and willing to face the risk of death.

And that's the race to the bottom.

(OSHA can't stop it because they they don't have enough inspectors. They'd need a thousand times as many inspectors to visit all these small sites.)

Re:so why not set up shop elsewhere?

[SerpentMage]

This is the classical mistake where people like you assume that labor is a resource like steel, or oil. Humans are not a resource, for they are unpredictable, and stochastic. Meaning if I drop steel I have certain physical properties. Where as if I drop a person I will have a multitude of reactions.

"For example, in the classic case of the original Luddites, when it became cheaper to make clothing due to technological advance, people had more money to spend elsewhere, and that elsewhere is where the new jobs go, and you invariably see more jobs created than had existed before that "job costing" technology was invented. It happens every single time, without fail"

Silicon Valley; In fact jobs have left and have not been created. Sure there are success stories, but the influence of Silicon Valley as a job creator has waned. Take for example Apple, or Oracle, who have jobs there, but have created a huge number of jobs outside of that region. Facebook is a bit of the old culture of creating jobs in silicon valley. New jobs have not replaced the old jobs. I can bring in many other examples of where more jobs are not created.

"As for minimum wage...If your wage was below what you're willing to work for, then you'd simply not take the job. This is a fact. Most people do in fact work at above minimum wage. Minimum wage has the following effect: For the low end workers who really aren't worth a shit (there are many out there - this nobody can deny) they simply have no job at all. Whereas they could have at least had SOMETHING, they now have nothing. This has two effects: Increased unemployment, and higher prices. Because prices now go up to match that minimum wage increase, your purchasing power hasn't really gone anywhere. Most people tend to equate money with wealth, and that relationship isn't one to one."

Wrong, another example, Germany. Germany has no minimum wage and in fact there is this concept of hunger wages. This means a person is working full time, and does not even come close to making enough money to support their family. I am talking wages of about 1 euro per hour. The government kicks in social help to make ends meet. Germany has shown that to survive you will take work below your pay because you need to do something.

"A classic example I look at is this: Back in 2001, I paid $3800 for a 50" tv. The thing was pretty massive not just in diagonal length, but it was pretty fat too - it was rear projection. A really big and obnoxious TV by today's standard. Last year I "upgraded" my whole living room: Bought a new leather couch, ($1,200) built a 5.1 surround system from the ground up (none of the HTIB crap, a truly good sound system, $1,000ish with 8 channel lossless audio) and a new samsung 50" tv that has a MUCH better picture quality than the one from 11 years ago, consumes a lot less power and is light enough for one person to carry. Total spent was $3,200. Basically by spending less I have more "wealth" than I did 10 years ago - and that's even ignoring inflation."

Oh yes just because I can pay for cheaper consumer crap things are ok. I am going to ask how old are you? For life also includes health care, education, etc. These costs have become prohibitive for the poor. Sure they are given loans and then get jobs where they can barely pay back these things. But hey as long as I can get get cheap consumer crap all is ok, right?

"When somebody tells you that the poor are poorer and the wealthy are wealthier because - adjusted for inflation - the poor are making fewer dollars today than they were in the 90's, they have no idea what they are talking about. "

Again you don't know what you are talking about. Cheaper consumer crap yes. Cheaper food? NO, but I guess you don't buy food do you? Again the question of age. The poor are poorer than the average poor of say 40 years ago. When economists measure poverty and such they don't measure it in absolute values like how much currency you have. The measure it in terms of what you can afford for the monies you make. Again, g

Buy American?

[girlintraining]

Hey. I'm an American. Our H1-B visa program has tanked our industry. Substandard code, slipping release schedules, low wages. There is plenty of domestic talent here already, and I'm not even here on a visitor's pass.

What would it take for me to get out of my mismanaged and failed country of fools and into your country, which appears to be slightly less mismanaged and the changes are being pushed by startups who want to pay me well instead of MegaCorp(tm) who wants to pay me minimum wage to do something that takes 10 years of training to get into?

I'm deadly serious here. I could line up about 50,000 americans inside a week for you guys -- we're unemployed but we have the skillset. Our H1-B Visa program has killed our tech sector. Don't fall for the same trap we did.

Re:Buy American?

[DaHat]

Substandard code, slipping release schedules

That sounds more like a management issue than it does an H1-B problem.

If someone is churning out substandard code and causing schedules to slip... be they an American or H1-B holder... replace them... it's that simple.

Re:Buy American?

[Intrepid imaginaut]

I think a lot of the better educated in the US are starting to look with interest at Europe's social protections. My sister and her family moved to the land of opportunity a month ago, and are already working out exit options since there's no way in hell they can afford university or health fees for the kids. Yes it's not perfect but you'd be surprised how financially advantageous paying your taxes into social systems can be.

Re:Buy American?

[Luckyo]

Not "worker" but "society". These safety nets are created to ensure the future continuity of society through making everyone's future safer. A good example you list is maternity leave. Most of the developed countries already have bare minimum birth rates to hold their populations steady, and many would be in decline if not for immigration. This is a massive time bomb because our retirement systems are designed so that we have enough people providing for those who no longer provide for themselves. As this pool is depleted, societal order built on wealth will collapse. Japan has this problems in a very severe form due to their extreme xenophobia preventing immigration from plugging the short term loss accrued and as a result they're already struggling even though enough time hasn't lapsed for the problem to become even remotely bad. This is the issue of next twenty to thirty years and it's going to keep getting worse during this period.

So we have a choice: deprive the owner class of some income and give all mothers in the country a significant incentive to get children desperately needed to maintain the society, or award owner class with a bit more money, and make sure that it will be next to impossible to get children unless you're very safe financially and have society hang on the verge of a cliff in twenty years or so due to collapsing birth rate.

It's called "short term gain versus long term gain". You are advocating the short term gains and fully willing to throw the future under the bus for them. This is a very common way of thinking among those of the current owner class, as they believe that they and their capital will be allowed to leave the society when it starts to collapse and go to another healthy society to parasite off until its eventual collapse. And the circle will continue.

They are likely wrong, and forgetting the lessons of French Revolution and what happens to owner class alongside everyone else when society really does collapse in a large Western contry. While many of the owner class in the developing countries successfully dodged this bullet and just left for European countries and US after parasiting their own countries to the point of societal collapse, it's highly unlikely that US and European countries will allow for the same thing to happen to them. A far more likely outcome is the way of the guillotine and mob justice on those who remain alongside massive confiscation of property and a complete collapse of society to the point where there are no "healthy economies" to run to due to global impact of a collapse of a large Western country.

Re:Buy American?

[Xest]

Look, I get it, you're unemployed, you're bitter, and you're looking for blame, but you've been going on like this for weeks now and it's tiresome.

I'll admit I'm not American, and I don't know the vagaries of the H1-B system, maybe that means I don't know what I'm on about, but maybe alternatively it allows me to be objective.

You see here's the thing, I hear a lot whining about how H1-B has decimated the US technical industry, and the people I hear it from all seem to have one thing in common - they're unemployed or they seem to believe they're underpaid, and it's all the fault of immigrants. So I decided I'd look at the fact.

I figured I'd see exactly what these low paid immigrant workers are getting paid and so forth, and I found this site which seems to have a pretty good database:

http://www.h1bwage.com/

For 2012 a search of programmer came up with 10k records, developer another 10k, whether any of these crossover I'm not sure, but hey let's call it 20k anyway. Estimates are shaky but currently the amount of developers in the US seems to be anything from about 1 million to 4 million depending on who you ask, but again let's given the benefit of the doubt and pretend there are only 1 million, so H1-B visas account for 2% of developer jobs each year based on these figures, that's a small amount but it's certainly not negligible so it's a fair criticism that H1-B immigrants are taking at least a non-negligible amount of jobs each year. Note that the number of developers has grown each year, and so has the visa cap, roughly linearly so the figure will be reasonable for past years also.

But I also found figures for average salaries for developers, they seem to have remained fairly stagnant for a few years (if the economy isn't growing much, neither will wages grow much) at roughly $73k per year as the average and the top 10% earning an average of $110k. So the next issue is that immigrants are being employed because they accept less money and are bringing salaries down, again though looking at http://www.h1bwage.com/ I can't really see how that's true - the majority are getting paid more than the average so if anything H1-B immigrants must be raising the average.

In fact, many of the companies that I see chided here for wanting to increase the H1-B quota "to bring down developer wages" are doing quite the opposite. Facebook in 2012 was paying an average of $115k per developer, Google $125k, Microsoft $104k, Apple $119k. Given this, all these major companies are paying well above the average developer salary to immigrants, and all except Microsoft are paying above the average paid to the top 10% of developer salaries in the US.

So here's what frankly I think the facts say the reality of the situation is, that in practice, across the globe it's not ever going to be the case that every American programmer is better than every other programmer in the world, in fact, there will be a sizeable segment where the opposite is true, that is for example, that perhaps the bottom 50% of American programmers are statistically going to be nowhere near as talented as the top 10% of developers in almost every other country in the world. That's bound to be a lot of developers, and awful lot. What this means is that technology companies who want to populate their company with the best talent available no matter where in the world that comes from are going to have to use the H1-B visa program.

I'm not saying there aren't companies taking the piss, one company at least stood out on my peruse through and that was Wipro, they clearly seem to pay a little below average on average, and lot in some cases whilst also taking up more than their fair share of the quota, but by and large the H1-B visa program seems to be being used for what it's intended to be used for, on average does not appear to decrease average developer salaries but in fact increases them and that companies such as Facebook, Microsoft etc. want to

Didn't want to pay prevailing wages

[Animats]

Typical employer whining about not being willing to pay prevailing wages. From the article:

• "Getting a regular visa wasn't an option because of the salary thresholds"
• "Canadian cousin flew in to London via Germany. ... She was due to stay with us to help us out with our newborn baby, and also to do some unpaid work experience at my wife's business."

As usual, it's employers whining that they can't find wage slaves.

Re:Didn't want to pay prevailing wages

[ebno-10db]

We're not talking about megacorps here, we're talking about small businesses.

So? Small companies that can't survive without special privileges deserve to die. It's a harsh reality called "capitalism" and "competition", though many people seem to like those things only when they're applied to other people. As for "anything that allows them to grow a business is only going to help your country", it's utter crap. If a company isn't competitive in an environment where other companies do fine, it means that company is a failure. Giving it special privileges to stay afloat is called welfare. The resources would be better invested in a competitive company.

Hate labor laws?

[i kan reed]

You might be a greedy scumbag, regardless of the amount of money you have already accrued. Check for the following symptoms: not wanting to pay taxes on money your employees earned for you, feeling it is totally acceptable to dumb toxic waste from your country off the coast of Somalia, or stealing from babies.

But seriously, this isn't "battling labor laws," this is breaking the law for a higher profit margin.

Re:Hate labor laws?

[rmstar]

Not to mention the insane amount of paid time off many Europeans get.

What is insane is how little paid time off people get in the US. I am sure most americans would love to have a decent break every now and then without having to fear that the job is gone when they are back.

In fact, without having to fear.

Re:Hate labor laws?

[girlintraining]

My company has an entire office full of people in Italy that do nothing because we have no more use for the facility but the local laws do not allow us to fire them.

We call those types of people Senators over here in the USA.

Not to mention the insane amount of paid time off many Europeans get.

Paid time off... that sounds nice. I'm putting in 60 hours this week.

Many are out of work needlessly. If the government would unpucker its asshole and allow the crap people to be fired, the companies wouldnt be so afraid to hire new ones.

Sounds like the government may have been reacting to high levels of unemployment by making it more difficult to fire people for crap reasons just to rotate in someone at a lower wage. As I understand it, Europeans take quality of life a bit more seriously than over here -- national health care, a solvent social security system, generous unemployment and welfare packages, vacation days that aren't just stand-ins for sick days, and your CEOs over there don't make 4,500x more than your rank and file. It's almost like they... care about the working class.

Look, I can appreciate bad laws interfering with commerce and employment. I sympathize. But only to a point. The system we have over here which throws the working class under the bus is not an improvement. I do not often hear of cities in Europe being reclaimed by nature because it was infested with poor people and we didn't care enough to rebuild it. I don't hear about expensive cell phone plans with limited options and everything is locked in by vendor. I don't hear about nightmare housing situations where 20% of a country's homes sit vacant while nearly the same number of people are homeless.

You may have traded a lack of profit and industry production for a better quality of life and resent that fact, but take it from someone whose country chose the former over the latter: It's bad. It's real bad over here. For every person who "made it" and became a success story, there's dozens who are living hand to mouth and afraid they won't be able to afford food next week.

Europe has its problems... but choose wisely which ones you want to trade them for.

Re:Hate labor laws?

[ebno-10db]

The laws being talked about are the ones where it is literally impossible to fire the employees unless they commit a crime.

No, these are startups whining they can't hire anybody they want from anywhere they want, wages, visas, etc. be damned.

"Importing" labor?

[Noryungi]

Yeah, right.

It's more like: "We don't want to pay proper wages for good techies, so we are breaking/bending every rules to exploit cheap illegal labor and keeping more of the venture capitalist money for ourselves".

Seriously, I have seen this in many a start-up, in France and elsewhere: pay people low - even though their knowledge is what makes your bloody start-up possible - and fire them as soon as they start demanding correct wages and reasonable working hours. Meanwhile, the CEO is looking for the nearest Porsche dealership. It's simply disgusting, and it has nothing to do with France laws and regulations (which can be a pain in the neck, I admit).

Re:"Importing" labor?

[Noryungi]

You're confusing Europe for the United States. We just made labor exploitation legal. Not exactly a new concept -- the H1-B visa program might have screwed up, but we built our entire railways at the turn of the last century on the backs of chinese immigrants. The European Union has much stricter laws regarding labor exploitation, and also immigration. It's flat out near-impossible to immigrate into many of those countries.

Nope. First of all, re-read the original article: we are talking about people working illegally in European countries. It is entirely possible to move to Europe illegally - just like in the USA, get there with a student (or tourism) visa and just stay in the country instead of going back home. Sure, it sucks because you can be caught (asked to provide valid ID, etc.) and sent back to your country, opening a bank account, renting a place, etc. all of these things are somewhat harder to do when you are illegal, but they can be done in every European country that I know of.

Second, European laws are sinking very fast to the level of the USA. More and more EU countries, under pressure by the same kind of people that are described in the article, are dismantling the only thing that makes life bearable: the protection they gave to their workers. In France, where I reside currently, a law is being considered that would make hiring/firing even easier than in the USA, while reducing social benefits, including firing compensations and unemployment benefits. And it's the same thing pretty much all over Europe.

Remember that unemployment is rising to never-before-seen levels. Youth unemployment stands around 25%-30% in Southern Europe, and sometimes much higher. In the meantime, start-ups are looking at illegal immigrants for techie jobs... Why is that? Because, yes, these people want to stuff as much money in their pockets as possible.

Again, this has nothing to do with finding labor - it has everything to do with screwing Joe Techie. Same as the US H1-B visas.

great reasoning!

[Njovich]

Along the same line of reasoning, you should just steal that Porsche that you are selling, as it would have been impossible, or simply too expensive, to buy it officially.

Yes, of course it's a pain in the ass that you can't just hire people in 1st world countries for 3rd world prices. However, if we want to maintain our social system, that's not viable. So they should either hire them in the low wage country themselves, or pay a good price for this skill they say is not available on the local market (depending on country, that means a salary between 2500 and 5000 euro per month to be eligable for a highly skilled migrant visa). If it's really such a uniquely skilled person, that should be no problem of course?

Re:I've run into this

[0123456]

The problem is that the EU allows most people from any EU nation to move to other EU nations. As the locals get fed up with millions of people arriving in their country with whom they have nothing in common, who often can't speak the same language, and who take many of the low-paid jobs that locals used to do, they demand that their politicians do something about immigration. The politicians can't do anything about EU immigration because it's controlled by the EU, so they impose tougher and tougher rules on non-EU immigration, which are counterproductive and fail to solve the problem, but win votes.

France isn't representative of Europe

[dutchwhizzman]

Europe isn't like the USA. The countries have different languages and laws. Not like state laws in the USA, but real country laws. Sure, EU legislation is deminishing these, but there still is a lot more difference in EU countries than there is in the USA. French labor laws are considered borderline communistic by some other EU countries. On top of that, a lot of French IT companies insist that candidates speak fluently French, while in a lot of EU countries English is sufficient, even if that's not the native language where the company is. In the UK, Netherlands, Germany and several nordic countries, this whole article is not relevant at all. There are probably several other countries to which this applies as well, but I have no direct contacts there so I can't speak for those.

startup whiners

[joe545]

That whole article sums up what is wrong with these venture capitalist funded start-ups; they want to compete on a different playing field than established companies. They want to be able to import cheap labour from other countries as they aren't willing to pay the going rate for local engineers. They don't want to register their employees properly as they will be liable for more taxes and to give their employees the rights they are entitled to.

As a European, I'm glad these guys are finding it difficult to ride roughshod over the laws has to protect workers. If you can't afford to do things the proper way then your business is not viable. Complaining that you can't find exploitative loopholes that depress wages for the rest of us is laughable.

Re:I hear Bangladesh has cheap labor, cheap buildi

[ebno-10db]

So, riddle me this: how do you pay your workers a lot of money, but offer a cheap product?

Henry Ford figured it out. Anyone who can't doesn't deserve to stay in business.

avoid France's notoriously onerous labor laws

[manu0601]

The company wants to "avoid France's notoriously onerous labor laws", but it still operates in France, rather than India or China. There must be some reason for that choice. Perhaps some reason paid by taxes, or even guaranteed by labor laws...