We don’t know whether the Federal Trade Commission is right that forbidding noncompete agreements in labor contracts will increase wages by nearly $300 billion per year. Nor do we have a strong opinion about whether the ban can be carried out via regulation, as just proposed, or requires legislation like the wise bipartisan Workforce Mobility Act; the courts will suss out the inevitable legal challenges. Finally, we think it’s possible the FTC has written its rule a bit too broadly, touching almost all employees in almost all sectors of the economy.
That said, there is absolutely no question that constraining ordinary Americans, from construction workers to nurses to hairstylists to software engineers to journalists, from starting their own businesses or switching jobs within their industry for six months or a year or two deprives them of a core economic right to capitalize on their experience and skills and pursue better opportunities. And that is precisely what noncompetes, which affect an estimated 30 million American employees laboring for businesses of all sizes, do. Workers without the ability to switch employers or set up a shingle in their field of choice is profoundly disempowered.
Nor are noncompetes aimed merely at those in the upper echelons, in whom companies have arguably invested the most and who presumably have been trusted with top-tier trade secrets. Research shows that large shares of low-wage workers are frequently being barred from job-hopping. Plenty of those made to sign noncompetes lack college degrees or even high-school diplomas.
Lots of Republicans are railing against the FTC for supposedly meddling in the free market, but defenders of the perverse tool are the ones far guiltier of doing that by setting back competition, innovation and dynamism.
All the members of Congress blasting the proposed rule on the merits should stop and think about the staffers they hired from the offices of fellow elected officials and all the strategists they poached from campaign rivals. The world of politics couldn’t function with strict noncompetes; why should the American economy at large?
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