Image from a recent advertisement opposing New York state legislation that would ban noncompete agreements
You switch on the TV. On-screen, a hammer smashes first an alarm clock, then a light bulb, with shards of glass flying everywhere. An ominous voice predicts imminent doom. Then, for good measure, a second alarm clock is shattered. It seems to be a political advertisement. But what could possibly be such a threat?
The answer: a bill to let workers freely take a new job without interference by their current employers. The nonprofit arm of New York’s Business Council recently launched an eye-popping seven-figure ad buy in a last-ditch effort to tank a state bill to ban noncompete provisions in employment contracts, passed by the legislature and awaiting a decision by New York Gov. Kathy Hochul. Having lost the policy argument, New York’s business class is resorting to high-strung hysterics.
In contrast, in the land of actual data and analysis, last month the Economic Innovation Group, a bipartisan policy shop focused on fostering dynamism in the American economy, issued a guide for policymakers about noncompetes, in which University of Maryland professor Evan Starr, a prominent expert on the topic, reviews recent empirical literature. Starr and other economists have researched noncompetes for over a decade, taking advantage of naturally existing experiments in which comparable states pass different policies, allowing for analysis of the real-world impact.
Starr’s review of the research concludes that noncompetes cause considerable harm to workers, small businesses, and innovation. By barring workers from getting jobs with their current employer’s competitor, noncompetes suppress wages, since they shield firms from labor market competition. Enforcement of noncompetes harms small businesses: It “reduces new firm entry, innovation by startups, and the ability of new firms to grow.” Indeed, in a recent survey of small-business owners, 44 percent reported having been subject to a noncompete that prevented them from starting or expanding their business, and 35 percent reported that they couldn’t hire an employee they wanted because of a noncompete. As for innovation: When noncompetes are more widely permitted, it reduces patents filed, and the patents filed are less valuable; the overall effect is a net “reduction in overall innovation and the misallocation of inventive talent across firms.”
In short, the contrast between the sky-is-falling ad and actual data by respected researchers could not be more stark. And data aside, it should be emphasized that noncompete agreements represent an egregious infringement of workers’ freedom. This is supposed to be a country where people can at least take whatever jobs are available, not become effectively tied to an employer through slanted contracts reminiscent of feudalism.
This Chicken Little tendency to predict economic doom based on slim to no data is not unique to this issue (noncompetes) or location (New York). Business associations nationwide too often reflexively oppose laws infringing on their power over workers without offering serious analysis of the issues at hand. But knee-jerk doomsday predictions devoid of data shouldn’t receive the deferential credence that policymakers sometimes give them. Fundamentally unserious arguments should not be taken too seriously.
The Chamber of Commerce and other mainstream business and trade organizations routinely oppose pro-worker bills of all types, from raising minimum wage and expanding overtime coverage, to creating protections against new workplace dangers like body-churning warehouse quotas or deadly heat on the job. This last hazard—increasing scorching temperatures—requires the simplest of interventions: rest, shade, water, and gradual acclimatization. (Every parent who’s taken kids to the beach on a hot day could tell you this.) Of course, operationalizing these measures in a business setting takes some thought, but the basic concept of some preplanning to keep workers alive despite rising temperatures should hardly be controversial.
In a recent survey of small-business owners, 44 percent reported having been subject to a noncompete that prevented them from starting or expanding their business.
The U.S. Chamber of Commerce has also extensively lobbied against paid sick day laws, even though many members support such policies. And business groups routinely decry what they describe as the “patchwork” of different jurisdictions’ nearly identical paid sick leave laws, although employers that have implemented sick leave requirements have found them to be “no big deal.” But if the “patchwork” is the problem, you’d think business groups would be out front supporting strong federal legislation on the topic. But that hasn’t happened. On the contrary, major business groups, particularly airline associations, have fought state and local paid sick leave enforcement tooth and nail. Airlines run some of the most logistically complex operations in the history of humankind, in locations ideal for spreading illnesses, yet they claim a measly five guaranteed sick days will stop them short on the runway.
Not content to oppose only potential worker protections, some business associations are taking aim at century-old worker protections: Amidst a surge in child labor violations, over a dozen states have seen bills to roll back child labor laws, and several have passed. Business groups, along with a right-wing dark-money outfit, the Foundation for Government Accountability, have led some of these efforts. For example, the president and CEO of the Iowa Restaurant Association was a driving force behind rollbacks there, according to minutes from the state’s workforce development board. Iowa law now allows minors to work in hazardous jobs prohibited by federal law, thereby endangering children and confusing employers. Even several Republicans in the Senate recently proposed bipartisan measures to strengthen child labor laws, showing just how out of touch some state-level trade associations are in their apparent determination to return to the 19th-century days of child textile spinners.
Indeed, it sometimes seems as though business groups’ dire forecasts are taken straight from the history books. In 1905, North Carolina cotton mill owners successfully defeated a child labor law, arguing that if hiring children under 14 became illegal, every mill in the state would close. Over a century later, we routinely hear the same arguments.
Fortunately, not all employer groups take this reflexive approach. The Main Street Alliance, a network of small-business owners, has supported paid leave and other workplace standards. And national organizations don’t always reflect the policy preferences of their members: In 2016, leaked research commissioned by the Council of State Chambers showed that 80 percent of surveyed business executives supported raising their state’s minimum wage.
To be sure, legislative proposals on employment and other matters deserve serious study and deep consideration. There are real questions business groups could be asking about some pro-worker bills; after all, in any area of policymaking, well-intentioned proposals can sometimes lead to unintended consequences. But business groups damage their credibility when the response to every suggestion that might help some worker somewhere, regardless of the issue or data, is an automatic and foreboding no.
Of course, evidence-based policy analysis by business leaders won’t fix what ails the American economy: We need a much fairer deal for workers in too many ways to count. But for their part, business leaders should at least be sincere and sober enough to meaningfully analyze proposals. A smashed alarm clock is not a policy argument, no matter how ominous the voiceover. If all you can offer on a complex issue is a spooky ad, you don’t deserve to be taken seriously, least of all by lawmakers weighing policies that shape the lives of working people.
