The rise of the non­com­pete is a new low for reg­u­lar work­ers

The Washington Post Sunday - - TAKING STOCK - BY MATT O'BRIEN matt.obrien@wash­post.com

If some em­ploy­ers had their way, you would have to pledge eter­nal fealty to them just to get a pay­check.

You would bend the knee, bow your head and swear to serve them faith­fully, now and for­ever, even if some­one else tried to hire you away for more money. And in re­turn for this loy­alty, you, of course, would get none. Your com­pany could fire you when­ever it wanted and wouldn’t have to take care of you when you got old. If you were re­ally lucky, it might, just might, give you a small 401(k) match. In other words, it’d be cap­i­tal­ism for bosses and feu­dal­ism for work­ers.

Now, as much as this might sound like a car­i­ca­ture, it’s ac­tu­ally the way things are in Idaho. Well, ex­cept maybe for the gen­u­flect­ing. As the New York Times’s Conor Dougherty re­ports, the state’s non­com­pete laws are so strict that peo­ple can’t leave their jobs for new ones un­less they can show that it wouldn’t “ad­versely af­fect” their cur­rent em­ploy­ers. That’s an im­pos­si­ble stan­dard that would leave work­ers — and, more to the point, their wages — en­tirely at the mercy of their bosses.

This is not, to put it mildly, the way things are sup­posed to work. When unem­ploy­ment is as low as it is now, com­pa­nies are sup­posed to have to fight over work­ers by pay­ing them more. If there’s one thing chief ex­ec­u­tives ex­cel at, though, it’s cut­ting ev­ery cost other than their own bonuses. They’ve fig­ured out that it’s a lot cheaper to sim­ply tell their em­ploy­ees that they’re not al­lowed to leave than it is to pay them enough that they wouldn’t want to leave in the first place.

Which is to say that Idaho isn’t the only state go­ing medieval on work­ers. Many are. Non­com­petes, which started off as a way to stop a com­pany’s top ex­ec­u­tives from re­veal­ing le­git­i­mate trade se­crets to ri­vals, have turned into a tool for sup­press­ing wages that now cover 14 per­cent of all peo­ple mak­ing $40,000 or less, ac­cord­ing to the U.S. Trea­sury De­part­ment.

There’s no rea­son that sand­wich mak­ers or doggy day-care work­ers or sum­mer camp coun­selors should have to sign non­com­pete agree­ments like some of them have re­cently. No rea­son other than that busi­nesses know they can get away with it.

Jobs were so scarce for so long in the af­ter­math of the Great Re­ces­sion that com­pa­nies re­al­ized they could put al­most any con­di­tion on them and still find plenty of peo­ple will­ing — no, des­per­ate — to take them. To the point that even peo­ple who were try­ing to get jobs at Jimmy John’s felt like they had to prom­ise they wouldn’t take any of the se­crets they were about to learn about putting slices of meat in be­tween pieces of bread to go work for, say, Sub­way in­stead.

It’s a re­minder that eco­nom­ics isn’t just about sup­ply and de­mand. It’s also about who has the power to make de­mands. Which ac­tu­ally has more to do with govern­ment poli­cies than mar­ket forces. Things like how high the min­i­mum wage is, how easy it is to form a union, and, yes, how tough non­com­pete laws are af­fect the bal­ance of power be­tween cap­i­tal and la­bor in­de­pen­dent of the unem­ploy­ment rate.

So does the wel­fare state it­self. In­deed, busi­nesses have his­tor­i­cally been op­posed to So­cial Se­cu­rity, Medi­care and, more re­cently, Oba­macare be­cause those pro­grams cost them not only money but also con­trol over their work­ers. When the govern­ment helps peo­ple be able to af­ford to re­tire, com­pa­nies can’t af­ford to hire quite as many of them — not if they want to main­tain their profit mar­gins. That’s be­cause work­ers have more bar­gain­ing power when there aren’t as many of them ac­tu­ally look­ing for, well, work.

The same kind of logic, by the way, ap­plies to stim­u­lus spend­ing. As econ­o­mist Michal Kalecki ar­gued in 1943, a govern­ment that hires un­em­ployed peo­ple is a govern­ment that doesn’t have to give busi­ness what it wants to get them to hire un­em­ployed peo­ple. The more the govern­ment does, then, the less sway busi­nesses have over the econ­omy and ev­ery­one in it.

The im­por­tant thing to un­der­stand is that cap­i­tal­ists don’t be­lieve in cap­i­tal­ism. They be­lieve in prof­its. There’s a dif­fer­ence. Cap­i­tal­ism is about free com­pe­ti­tion, while prof­itabil­ity, taken to the ex­treme, is about the lack of it.

Af­ter all, the best way to make money is to drive ev­ery­one else out of busi­ness and to then force your work­ers to ac­cept sub­sis­tence-level wages. It’s the con­tra­dic­tion at the heart of cap­i­tal­ism that, if it weren’t for the fact that gov­ern­ments can in­ter­vene to save the sys­tem from it­self, could very well lead to rev­o­lu­tion.

That’s what hap­pens when you turn work­ers into vas­sals.

MICHAEL NA­GLE/BLOOMBERG NEWS

Non­com­pete con­tracts have turned into a tool for sup­press­ing work­ers’ wages.

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