What Do “Non-Compete” Contracts Do?

I tend to agree with the editors of the New York Times about this:

There is no single explanation for the stagnation of workers’ income in recent decades, but a key reason is that negotiating power shifted from workers to employers. The rise of noncompete agreements is both a symptom, demonstrating the power of employers to dictate terms, and a cause, undermining the ability of workers to obtain a larger piece of the pie.

Defenders of the practice say it encourages companies to make investments, for example in employee training, since the company is more likely to reap the benefits. They also insist that workers are compensated for the loss of bargaining power with higher wages or greater job security. Indeed, some experts have asserted that the elimination of noncompete agreements would cause wages to fall, because workers would no longer be paid for signing.

The Oregon study shows that this theoretical model of labor markets bears little relationship to the lived reality. After the law took effect, job hopping increased by as much as 18 percent — and wages for workers no longer bound by noncompetes rose by as much as 21 percent.

Put plainly, the old rule allowed employers to suppress their workers’ pay.

I would certainly like to see evidence that the availability of non-compete agreements to employers resulted in their spending more on training than would otherwise have been the case. I have not noticed it. Quite to the contrary I have seen an increasing reluctance of employers to invest in training. I have also heard employers express regret for having provided training to their employees only to have those employees leave them for higher paying jobs.

I’m skeptical, however, that non-competes are the main reason for slow growth in employee wages. I think employers are simply pursuing the incentives they have. More important reasons are globalization and its flipside, mass immigration.

Strategies other than bans on non-compete agreements, returning the H1-B visa to its original purpose, and controlling illegal immigration might be to provide incentives for employers to provide training for their employees and limiting the eligibility for bidding on federal contracts to companies who employ significant numbers of foreign workers, either as W-2 employees or temps.

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Training

Yesterday I participated in a (mandatory) Harassment and Sensitivity Training Seminar. These seminars aren’t what they sound like. I have been participating in sessions like this for about 50 years; I have conducted some.

This one was pretty typical. The one thing that was unusual was during the Q&A afterwards a question was asked (by the CEO) about pronouns. That’s a first, at least for me.

I asked a follow-up question: are there any relevant statutes or case law? The woman conducting the seminar sort of grimaced and said “No statutes but there was a case in the 9th Circuit…”. I interrupted—”So it’s not binding precedent here?”

I think that people are kind of getting ahead of themselves.

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Toss-up

Presidents who have been re-elected to a second term outnumber those who have not by about 2:1. In Larry Sabato’s Crystal Ball Kyle Kondik has this to stay about the present state of the 2020 presidential election:

That makes the overall Electoral College ratings exactly split, 248 apiece, with 42 electoral votes’ worth of Toss-ups: Arizona, Pennsylvania, and Wisconsin, plus Nebraska’s Second Congressional District.

This also puts all of Clinton’s 2016 electoral votes in at least the Leaning Democratic column. But that doesn’t mean the president shouldn’t target some of these states anyway — and he certainly will.

I expect Trump to campaign heavily in all of the toss-ups (Arizona, Pennsylvania, Wisconsin) and “leaning” states regardless of which way they’re leaning (Colorado, Florida, Georgia, Maine, Michigan, Minnesota, Iowa, Ohio, Nevada, New Mexico, Texas) and even some of the states that are supposedly locks for his opponent whomever that may be if only to force that opponent to defend his or her backside.

Will the general election be close? I have no idea. If forced to predict, I will go along with Ray Fair and say that if a new shooting war isn’t started and the economy is no worse than it is now a month before the election, President Trump is likely to be re-elected.

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Why Anti-Corruption Policies Fail

I think that the editors of Issues & Insights are right in their explanation of why Elizabeth Warren’s plan to reduce corruption in Washington will fail as the plans and promises of every president of the last 30 years have done:

Whatever the merits of Warren’s specific anti-corruption proposals, the simple truth is that the rest of her agenda would have the exact opposite effect.

The problem with all these “anti-corruption” efforts is that they are trying to treat the symptom, not the disease.

And, in this case, the disease is Big Government. Put simply, the larger and more unencumbered the federal government is, the more it will feed the lobbyist industry and the political corruption that Warren says she wants to root out.

And, boy, does Warren want Big Government. Her agenda — Green New Deal, Medicare for All, free college, a vast increase in the regulatory state — would more than double the size of government.

The connection between the size of government and corruption isn’t just idle speculation.

Writing in the Global Anticorruption Blog, Harvard law professor Matthew Stephenson says several studies have found a clear correlation in the U.S. between the size of state governments and corruption.

“Within the U.S., when controlling for a number of other economic and demographic factors, states with larger public sectors seem to have higher corruption,” he writes.

A 1998 study, for example, shows “government size, in particular, spending by state governments, does indeed have a strong positive influence on corruption.”

A 2012 study, titled “Live Free or Bribe,” looked at the number of government officials convicted in a state for crimes related to corruption and found that the more economic freedom there was in the state, the less corruption resulted.

“Economic freedom,” the study found, “has a negative impact on corruption.”

What this means is that Warren’s plan — which would result in a drastic expansion in government and an equally sharp reduction of economic freedom — would produce a steep increase in corruption.

but they’re not pointing their finger in precisely the right direction. The reason that all of these anti-corruption plans fail is human nature. People follow their incentives.

However, other than a few lonely anarchists very few people want to end Big Government. They want a military capable of defending the country and to be able to trust the wholesomeness and utility of their food and pharmaceuticals for old people to be able to get health care regardless of their resources and all of the other thousands of things that government provides. When you add them all up it means Big Government.

I don’t believe that means that we are doomed to an ever-deepening slough of corruption. It means that eternal vigilance, etc. It means we need to guarantee that the rules are followed. It means that we cannot just wind up an EPA or an SEC and expect them to perform their intended functions without giving them clearly defined duties and ensuring that they color within the lines. It means that we can’t just trust that officials including elected officials are doing their jobs. That’s hard work and few people want to do it.

It means that government should be limited to its enumerated powers and severely punished when it strays. It will always be in continuing approximation.

Sadly, I don’t think we can root out the present corruption in government amicably.

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What Will the “Far Left” Do?

I disagree with Karl Rove’s assessment in his recent op-ed in the Wall Street Journal:

If Mr. Biden somehow got elected, the pressure from the far left to conform his administration’s policy to its agenda would be overwhelming and relentless. That’s the lesson of the Kavanaugh stoning. Today Brett Kavanaugh, tomorrow whoever gets in the way, including a moderate Democratic president.

I find that hard to reconcile with recent events. So, for example, there is no “anti-war Left” in the United States to speak of. As proof I would submit that substantial war protests practically evaporated when Barack Obama was elected president, despite his major escalation of the war in Afghanistan. They weren’t anti-war; they were anti-Bush.

There would be those who would whine including their allies in the media but I doubt it would go much farther than that. Would they call for Joe Biden’s impeachment? Of course not.

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M4A DOA

The most powerful elected official in the United States is not the President. It is the Speaker of the House. Speakers rarely if ever defer to presidents. It was Nancy Pelosi who drove the American Recovery and Reinvestment Act and the Affordable Care Act, the two most significant pieces of legislation of recent decades. When the Speaker says something will not happen, only persuading the Speaker to change his or her mind will allow it to happen.

In an interview with CNBC Nancy Pelosi recently said:

Democrats should focus on making improvements to Obamacare instead of trying to reinvent the wheel with “Medicare for All,” House Speaker Nancy Pelosi said Tuesday.

“God bless” 2020 Democratic presidential candidates putting forth Medicare for All proposals, Pelosi said in an interview with “Mad Money” host Jim Cramer. “But know what that entails.”

Pelosi’s thoughts on how to improve the nation’s health-care laws appear to align with those of former Vice President Joe Biden, who in his 2020 presidential bid is calling for building on provisions of Obamacare, formally known as the Affordable Care Act.

“I believe the path to ‘health care for all’ is a path following the lead of the Affordable Care Act,” Pelosi told Cramer. “Let’s use our energy to have health care for all Americans, and that involves over 150 million families that have it through the private sector.”

Whatever the Democratic presidential candidates say, from that we can reasonably infer that “Medicare For All” will not happen as long as Nancy Pelosi is House Speaker and Nancy Pelosi will remain House Speaker for the foreseeable future. “Medicare For All” can reasonably be considered a “bait and switch” that will stick to any candidate endorsing it as much as the “Mexico will build the wall” claim has stuck to Trump or “No New Taxes” stuck to George H. W. Bush.

I have long contended that high health care prices are the most significant challenge in reforming our health care system. For example, it is one of the factors behind the GM strike. GM doesn’t want to pay skyrocketing health care bills for its employees and the workers don’t want to pay more than they already do (which isn’t much).

Whether it could be effective or not, strike M4A as a means of curbing health care costs.

We will never be able to cut health care spending until a Speaker dares to cut reimbursement rates which may be never.

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To Moderate or Not to Moderate?

This post is in reaction to a trope being repeated at OTB. Here’s an example of its use:

James, do you really think that the serious problems currently ailing the country, along with the significant challenges looming ahead, can be met by a moderate Democrat? At this stage, the very idea strikes me as (I’ll be tactful) wishful thinking. Today’s Republican party and everything it stands for must be smashed, and it’s simply not in the nature of a centrist to undertake such action.

Half of all Democrats are either moderates or conservatives and two-thirds of all black voters are either moderates or conservatives. The reason it looks different is largely money.

To get the big bucks necessary to run a campaign the way modern campaigns are run you’ve got to go after major donors and to be willing to donate big bucks you’ve got to be highly motivated. The most extreme whether progressives or conservatives are those highly motivated donors and, consequently, figure larger in national politics than might otherwise be the case.

That, too, is one of the reasons that the Congress accomplishes so little. The extremes of the two parties can’t do much other than scream at each other and elected representatives, for the reason mentioned above, are more extreme than their constituents. The moderates who used to form the core of a governing coalition have been weeded out of both parties.

The risk of running a very leftwing candidate for Democrats is, as I have been saying for some time, not that blacks will vote Republican (although that may happen as well) but that they just won’t vote at all. It’s also why Cory Booker is a better VP prospect than Kamala Harris. Kamala Harris just isn’t that popular among black voters.

I’ve mentioned it before. In the Chicago mayoral primaries blacks voted in the largest numbers for the most conservative candidate running.

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The Proof of the Pudding

In a piece from his newsletter published in the New York Times David Leonhardt explains why he’s “rooting for the G. M. strikers”:

“Successful strikes beget more strikes,” Steven Greenhouse, the longtime labor reporter, writes in today’s Times. The reverse is true, as well: Failures by labor unions — and the workers they represent — lead to more failures.

For this reason, the current strike by almost 50,000 General Motors workers matters well beyond the auto industry.

Organized labor is in the midst of a modest winning streak right now. Teachers in at least seven states have staged walkouts. Last year, Marriott workers went on strike, as did other hotel workers in Chicago and health care workers in California. Many of these job actions led to pay increases, as employers decided that they would rather increase wages than continue to deal with the chaos and costs of walkouts and strikes.

A high-profile successful strike by one group of workers, in turn, encourages other workers to take the risk. “When, say, teachers in Oklahoma see their West Virginia colleagues walking out and winning substantial pay increases, there is a contagion effect,” as Jake Rosenfeld, a professor at Washington University in St. Louis, has said. “They start to believe, ‘Hey, we can do that, too.’”

Over most of the past 40 years, of course, the dynamic has been working in the opposite direction. President Ronald Reagan famously fired striking air traffic controllers in 1981, which encouraged companies to play hardball with their own workers. As more companies did so — refusing to grant raises and firing strikers — workers became afraid and disillusioned.

For years, the United Automobile Workers union — the one that went on strike this week — has been suffering from this kind of vicious cycle.

Some of its problems have been self-inflicted, including corruption. U.A.W. leaders have recently been the subject of a corruption investigation, in which a few have been convicted of accepting bribes. In some cases, they took the bribes from employers in exchange for accepting concessions during contract talks. When the U.A.W. narrowly lost an election to unionize workers at a Volkswagen plant in Tennessee this year, some workers said — understandably — that they voted against it because they were skeptical the union would really fight for their interests.

The G.M. strike is in part an effort by the union to halt this cycle of defeat. By calling the strike, the union’s remaining leaders are trying to demonstrate a new willingness to fight for their members. “A successful strike at General Motors could persuade U.A.W. members that the union is willing to take significant risks to fight on behalf of its members, potentially opening the door to more organizing in the anti-union South, where many auto plants have migrated,” Mike Elk wrote in The American Prospect yesterday.

The striking workers are asking for a pay increase and for the reopening of idled plants, among other things, and they are arguing that G.M. is now profitable enough (having earned $8.1 billion last year) to afford both. Given the wage stagnation that most workers have suffered in recent decades — and the larger import of the G.M. strike — I’m rooting for the workers to win a better deal.

I’m also rooting for the U.A.W. to solve its corruption problem and make sure its leaders are looking out for the workers rather than themselves.

I will reserve judgment but the hypothetical I would pose to Mr. Leonhardt is, what if the strike is a failure? What if it results in even more market share lost by GM? Over the last couple of decades GM has gone from the biggest car company in the world to one smaller than VW, Toyota, Daimler, or Ford.

There are major differences between the auto industry and the service sector. The U. S. automakers are in competition with every auto manufacturer in the world and GM’s workers are already less productive than their counterparts in Germany, Japan, or South Korea. Much if not all of that is due to increased automation, i.e. investment by the manufacturers. You can’t outsource having your meals carried to your table in a restaurant or your bed made offshore.

If a successful strike encourages other workers to strike to seek higher wages, won’t an unsuccessful strike discourage them?

As I say I am reserving judgment but I’m concerned that Mr. Leonhardt has watched Norma Rae one too many times. Is the reason for income inequality in the United States that workers have not been given their due by management or that so much of their compensation comes in the form of subsidized health care? To what degree is the decrease in unionization the cause of increasing income inequality and to what degree is it due to unions not providing much value to their members? How much has the adversarial relationship between unions and management, very different from the situation in, say, Japan been a contributing factor to union’s decline?

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One Way or the Other

In response to the New York Times’s publishing of an accusation against Supreme Court Justice Brett Kavanaugh which, apparently, has no confirming evidence or testimony, Washington Post columnist writes:

The story, since modified to include crucial information, was an adapted excerpt from a book, “The Education of Brett Kavanaugh,” written by two Times staff writers, Robin Pogrebin and Kate Kelly. In it, the authors reported allegations by a Yale classmate that Kavanaugh was at a “drunken dorm party” where “friends pushed his penis into the hand of a female student.”

Setting aside the logistics of such a feat, more eye-popping was the omission from the original Times piece that the alleged victim refused to be interviewed for the book — and, according to friends, doesn’t remember any such incident .

Such an oversight is inexcusable.

The Times added these details to the story after they were flagged by the Federalist’s Mollie Hemingway, who had an advance copy of the book. The Times writers, who said the details had been in the excerpt’s initial draft, made media rounds Monday and Tuesday to explain the omission, and essentially blamed editors, who, they said, “in the haste” of trying to close out production, had deleted the reference.

The facts that the alleged victim refused to be interviewed by the authors, and apparently told friends that she doesn’t recall any such incident, amount to the very definition of a non-story. For the record, The Post learned of the accusation last year but declined to publish it because the alleged witnesses weren’t identified and the woman said to be involved refused to comment.

Indeed, the authors’ only sources for the claim were two unnamed officials who spoke to Washington attorney Max Stier, who last year apparently told the FBI and various senators that he witnessed the alleged incident. But Stier refused to talk to the Times writers himself.

Some Democratic contenders for the presidency immediately called for Kavanaugh’s impeachment. They include Sen. Elizabeth Warren (Mass.), Sen. Kamala D. Harris (Calif.), former Rep. Beto O’Rourke (Tex.) and South Bend, Ind., Mayor Pete Buttigieg.

Sens. Warren and Harris should be ashamed of themselves. They are attorneys and officers of the court and as such have responsibilities that transcend those of politics which they have violated by joining in the scrum. That is what being a professional means.

In the United Kingdom it is a commonplace for newspapers to be aligned with one political party or another but in the UK they have libel laws which would have rendered the New York Times a target for a likely successful libel suit. We either need a non-partisan press or libel laws suitable to our present reality.

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Can the American Creed Be Revived?

At The American Interest Suzanne Garment lists twelve “rules” of the American creed which she characterizes as “the American Deal”:

The Deal has two parts, with six rules each. The first part reminds people who want to change the system why they shouldn’t expand their horizons too broadly or hold their fellow Americans in contempt. These first six provisions of the Deal tend to take care of themselves. The chief danger is that they’ll blow up in the faces of those who don’t give them enough respect.

Here are the first six:

Rule One: The Deal is federalism.
Rule Two: The Deal is Tocqueville’s America.
Rule Three: The Deal is that most Americans are, when push comes to shove, locals.
Rule Four: The Deal is that most Americans are religious, more or less.
Rule Five: The Deal is that Americans generally don’t express a desire to take other people’s property outright.
Rule Six: The Deal doesn’t generally include a hatred of the rich.

Of the second six rules she remarks:

Then, there is the second part of the Deal, the one reminding us that we’re Americans, not Hungarians or Poles. None of the elements of the second part of the Deal has unqualified or even natural support. Every one of them periodically disappears under one populist wave or another. To date, these elements have managed to re-emerge—but there are no guarantees.

and here they are:

Rule Seven: The Deal is liberalism.
Rule Eight: The Deal is republican restraint on the display of wealth.
Rule Nine: The Deal is a set of limits on inequality.
Rule Ten: The Deal is immigration.
Rule Eleven: The Deal is world leadership.
Rule Twelve: The Deal is tragedy.

Frankly, I’m skeptical of the viability of that creed today. For example, here’s her exposition on Rule Ten:

The country’s direction on this issue hasn’t been consistent; but it was set at the beginning of the republic, at a time when most Americans still thought of themselves as aggrieved citizens of Britain. In 1776 Thomas Paine, in Common Sense, argued that in fact America was not British but something new: the “asylum for the persecuted lovers of civil and religious liberty from every part of Europe.” Congress’s first law on the subject, the Naturalization Act of 1790, made U.S. citizenship available to any “free white person of good character” who had lived in the United States for two years.

Those terms don’t look especially liberal from the vantage point of the 21st century, but they were a down payment on Paine’s determination that we should be a country of immigrants.

Of course, that wasn’t exactly a definitive verdict. We’ve had periodic immigration crises since at least 1819, when Congress passed the Steerage Act to try to bring some order to the flood of immigrants that overwhelmed the major ports of entry after the War of 1812. As Peter Schuck points out in The New York Times, we are well overdue for a revision to the Deal, one that is concrete and reasoned enough to reduce the oppressive salience of the issue in U.S. politics. It’s going to be a heavy lift, but that’s what the Deal requires.

Note that there’s absolutely nothing in those paragraphs that justifies the sort of immigration we have today. The specifics it gives are “citizens of Britain” and “free white person of good character”. I don’t think that could be sold today. From 1920 to 1965 immigration was constrained in such a way as to preserve the demographic mix that prevailed in the U. S. in 1920 and to keep the percentage of immigrants in the country relatively low. There were forced “repatriations” at multiple times during that period to enforce those provisions. I don’t think that would fly today, either.

And Rule Eleven? That wasn’t part of the Deal until after World War II. Quite to the contrary we expressly rejected “world leadership” for the first 150 years of the Republic’s existence. A century ago Woodrow Wilson tried and failed to convince Americans of that rule. And that says nothing of the rest of the world’s tolerance of American leadership which I would characterize as something between strongly resisted and absolutely rejected.

All things considered I believe Ms. Garment’s “Deal” is a fair approximation of the American Creed but needs some tweaking. I also think that unless we embrace some version of it, we will have either violence or tyranny or both.
However much tweaking it receives I believe that a majority of today’s residents of the United States would reject it for one reason or another. I don’t think that Humpty Dumpty can be put together again.

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