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

Idaho’s not so libertarian and backing the individual as you probably think

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Conor Dougherty reports in the NY Times:

Idaho achieved a notable distinction last year: It became one of the hardest places in America for someone to quit a job for a better one.

The state did this by making it easier for companies to enforce noncompete agreements, which prevent employees from leaving their company for a competitor.

While its economy is known for agriculture — potatoes are among the state’s biggest exports — Idaho has a long history as a technology hub. And the new law landed in the middle of the tech world, causing a clash between hungry start-ups looking to poach employees and more established companies that want to lock their people in place.

“We’re trying to build the tech ecosystem in Boise,” said George Mulhern, chief executive of Cradlepoint, a company here that makes routers and other networking equipment. “And anything that would make somebody not want to move here or start a company here is going to slow down our progress.”

Alex LaBeau, president of the Idaho Association of Commerce and Industry, a trade group that represents many of the state’s biggest employers, countered: “This is about companies protecting their assets in a competitive marketplace.”

Versions of this clash have played out nationwide, as state lawmakers consider whether to make it easier or harder for companies to block workers from jumping to competitors. Both sides in the debate, which bridges party lines, say they are trying to create an environment in which local businesses can thrive.

For the most part, states have been moving toward making it easier for people to switch teams, but Idaho went the other direction with legislation that was friendlier to employers. The resulting law was particularly strict because it put the onus on employees to prove that they would not harm their former employers by taking the new jobs.

Proponents note that the statute applies only to “key employees” who tend to have more responsibility and better pay. But employment lawyers say Idaho companies tie down all levels of workers, not just top executives, with tough employment contracts. And indeed, the new law has roots in a yearslong fight waged by a woman who never finished high school but built a career selling tech-training services, only to be sued when she left for a better-paying job.

The most extreme end of the spectrum is California, which prohibits noncompete agreements entirely. Economists say this was a crucial factor behind Silicon Valley’s rise, because it made it easier for people to start and staff new businesses. But as states like Utah and Massachusetts have tried to move closer to this approach, legislators have run into mature companies trying to hold onto their best employees.

When Mike Schultz, a Republican state representative in Utah, introduced an ultimately successful bill last year to make such agreements harder to enforce, incumbent businesses were his biggest opponents. “But then you had the new entrepreneurs, and most of those guys were in favor of doing away with noncompetes,” he said. “Those are the guys out there growing and trying to hire people.”

A recent survey showed that one in five American workers is bound by a noncompete clause. They cover workers up and down the economic spectrum, from executives to hairdressers. Despite their widespread use, these agreements often catch departing workers off guard because they are rarely highlighted during interviews and are usually tucked inside employment contracts that are full of impenetrable legalese few people can understand.

The growth of restrictive employment contracts dovetails with a broad pattern in the labor market: People don’t quit their jobs as much as they used to. The share of workers changing jobs has been on a long-run decrease since 2000, according to research by the economists Steven J. Davis at the University of Chicago’s Booth School of Business and John Haltiwanger at the University of Maryland.

One explanation offered by economists is that a bloat of regulations has made it harder for employees to change careers or move across state lines. The barriers include employment contracts and occupational licensing laws that cover a third of the work force and require people to spend months or years training to do even basic service jobs.

The impact has fallen disproportionately on start-ups and high-growth companies, which tend to be against strict employment agreements because they are primarily concerned with growth.

“The noncompete is a two-edged sword,” said Matthew Marx, a professor at Boston University’s Questrom School of Business. “Although it enables companies to retain their employees, it makes it harder for them to recruit workers with relevant experience.”

It also ends up hurting wages, because most people get raises when they switch jobs. This goes far beyond defectors to the economy more broadly, and Idaho’s tech scene shows why.

An Answer to Poaching

Boise is one of America’s most remote metropolitan areas. Despite its Rocky Mountain setting, or perhaps because of it, the city and surrounding suburbs grew to prominence and affluence thanks to homegrown businesses like the semiconductor giant Micron Technology, a former start-up itself, as well as the J. R. Simplot Company and the Albertsons grocery chain.

Over the past several decades, these companies got so big that the city gained a reputation as a hub for Fortune 500 headquarters. Today, however, a new group of entrepreneurs is building on Idaho’s tradition of homespun growth. . .

Continue reading.

“Poaching” is the pejorative term for when a company offers a fair market salary to a person employed at another company that does not pay the employee a fair market salary, and the employee leaves. Companies really don’t like it when employees leave, and they also don’t like to pay competitive salaries, so they turn to the government if they can, in order to keep salaries capped well below fair market value.

Companies, in fact, hate free competition and the free market. They want to play a game that’s rigged in their favor.

Written by LeisureGuy

16 July 2017 at 7:09 pm

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