Later On

A blog written for those whose interests more or less match mine.

The Bondage of American Workers

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Paul Krugman writes in the NY Times:

American conservatives love to talk about freedom. Milton Friedman’s famous pro-capitalist book and TV series were titled “Free to Choose.” And the hard-liners in the House pushing for a complete dismantling of Obamacare call themselves the Freedom Caucus.

Well, why not? After all, America is an open society, in which everyone is free to make his or her own choices about where to work and how to live.

Everyone, that is, except the 30 million workers now covered by noncompete agreements, who may find themselves all but unemployable if they quit their current jobs; the 52 million Americans with pre-existing conditions who will be effectively unable to buy individual health insurance, and hence stuck with their current employers, if the Freedom Caucus gets its way; and the millions of Americans burdened down by heavy student and other debt.

The reality is that Americans, especially American workers, don’t feel all that free. The Gallup World Survey asks residents of many countries whether they feel that they have “freedom to make life choices”; the U.S. doesn’t come out looking too good, especially compared with the high freedom grades of European nations with strong social safety nets.

And you can make a strong case that we’re getting less free as time goes by.

Let’s talk first about those noncompete agreements, which were recently the subject of a stunning article in The Times (the latest in a series), plus a report from the Obama administration pushing for limits to the practice.

Noncompete agreements were originally supposed to be about protecting trade secrets, and therefore helping to promote innovation and investment in job training. Suppose that a company trying to build a better mousetrap hires a new mousetrap engineer. Her employment contract might very well include a clause preventing her from leaving a few months later for a job with a rival pest-control firm, since she could be taking crucial in-house information with her. And that’s perfectly reasonable.

At this point, however, almost one in five American employees is subject to some kind of noncompete clause. There can’t be that many workers in possession of valuable trade secrets, especially when many of these workers are in relatively low-paying jobs. For example, one prominent case involved Jimmy John’s, a sandwich chain, basically trying to ban its former franchisees from working for other sandwich makers.

Furthermore, the terms of the clauses are often defined ridiculously widely. It’s as if our hypothetical mousetrap engineer were prohibited from seeking employment with any other manufacturing firm, or in any occupation that makes use of her engineering skills.

At this point, in other words, noncompete clauses are in many cases less about protecting trade secrets than they are about tying workers to their current employers, unable to bargain for better wages or quit to take better jobs.

This shouldn’t be happening in America, and to be fair some politicians in both parties have been speaking up about the need for change (although few expect the Trump administration to follow up on the Obama administration’s reform push). But there’s another aspect of declining worker freedom that is very much a partisan issue: health care.

Until 2014, there was basically only one way Americans under 65 with pre-existing conditions could get health insurance: by finding an employer willing to offer coverage. Some employers were in fact willing to do so. Why? Because there were major tax advantages — premiums aren’t counted as taxable income — but to get those advantages employer plans must offer the same coverage to every employee, regardless of medical history.

But what if you wanted to change jobs, or start your own business? Too bad: you were basically stuck (and I knew quite a few people in that position).

Then Obamacare went into effect, guaranteeing affordable care even to those with pre-existing medical conditions. This was a hugely liberating change for millions. Even if you didn’t immediately take advantage of the new program to strike out on your own, the fact was that now you could.

But maybe not for much longer. . .

Continue reading.

See also “How Noncompete Clauses Keep Workers Locked In,” by Charles Dougherty, which begins:

Keith Bollinger’s paycheck as a factory manager had shriveled after the 2008 financial crisis, but then he got a chance to pull himself out of recession’s hole. A rival textile company offered him a better job — and a big raise.

When he said yes, it set off a three-year legal battle that concluded this past week but wiped out his savings along the way.

“I tried to get a better life for my wife and my son, and it backfired,” said Mr. Bollinger, who is 53. “Now I’m in my mid-50s, and I’m ruined.”

Mr. Bollinger had signed a noncompete agreement, designed to prevent him from leaving his previous employer for a competitor. These contracts have long been routine among senior executives. But they are rapidly spreading to employees like Mr. Bollinger, who do the kind of blue-collar work that President Trump has promised to create more of.

The growth of noncompete agreements is part of a broad shift in which companies assert ownership over work experience as well as work. A recent survey by economists including Evan Starr, a management professor at the University of Maryland, showed that about one in five employees was bound by a noncompete clause in 2014.

Employment lawyers say their use has exploded. Russell Beck, a partner at the Boston law firm Beck Reed Riden who does an annual survey of noncompete litigation, said the most recent data showed that noncompete and trade-secret lawsuits had roughly tripled since 2000.

“Companies of all sorts use them for people at all levels,” he said. “That’s a change.”

Employment lawyers know this, but workers are often astonished to learn that they’ve signed away their right to leave for a competitor. Timothy Gonzalez, an hourly laborer who shoveled dirt for a fast-food-level wage, was sued after leaving one environmental drilling company for another. Phillip Barone, a midlevel salesman and Air Force veteran, was let go from his job after his old company sent a cease-and-desist letter saying he had signed a noncompete.

Then there is Mr. Bollinger, whose long-running legal battle is full of twists and turns that include clandestine photography, a private investigator, a mysterious phone call and courthouse victories later undone by losses in appeals court.

Read the whole thing.

Written by LeisureGuy

22 May 2017 at 10:44 am

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