Item — HN Reader

The less labour rights a country has, the more competitive a country's businesses are. If you can keep your workers in quasi-indentured servitude, you're going to be more profitable than a business that can't.

It's a prisoner's dilemma because even though the economy would be better if non-competes were banned, any individual business makes more money by forcing employees to sign one.

Workers' rights need to be an essential part of any trade agreement specifically to prevent a scenario where the United States can't legislate workers' rights because it'll put American companies at a disadvantage globally.

https://crsreports.congress.gov/product/pdf/IF/IF10046/24

This is already being done with USMCA (NAFTA replacement) enshrining collective bargaining rights in the auto industry, so companies won't outsource to avoid dealing with a union.

Maybe banning non-competes is something the USA should prioritize in future trade agreements. That's something that would address the problem she's pointing out and benefit the economy.

4 comments

> The less labour rights a country has, the more competitive a country's businesses are. If you can keep your workers in quasi-indentured servitude, you're going to be more profitable than a business that can't.

Counter point, you are conflating each individual business profits and motives for the profitability of the economy and country. But each business doesn't exist in an a vacuum, but inhabits the same environment for getting workers. By making it easier to start new companies, and to compete, by banning non competes, the surviving business might actually be more profitable than the ones before.

Example: California doesn't have non compete, and it rules the tech world, with a lot of the more profitable tech companies there. While each individual company might benefit if it was suddenly allowed to do non competes, they benefit way more for being located in such a center for innovation.

> Counter point, you are conflating each individual business profits and motives for the profitability of the economy and country.

That was mentioned in the second paragraph.

> It's a prisoner's dilemma because even though the economy would be better if non-competes were banned, any individual business makes more money by forcing employees to sign one.

It makes "more money" in the sense that other businesses make less money. But it's not exactly a zero sum game in most industries.

It's entirely possible for something to be a positive-sum game, and still have people individually acting in their own self-interest reducing the size of the economy.

Global warming is the same thing. If everyone pollutes, we all die and the world ends. Individually however, if I'm in a world where everyone is burning coal, I don't see any gain to setting up my own wind turbine. Meanwhile everyone who kept burning coal has a slightly better existence until we all die a horrible death. The flipside is also true, if I'm the only one burning coal in a world of wind turbines, I won't have a significant effect on the climate and I get cheaper energy.

The economic solution to this is regulating greenhouse gas emissions so nobody can gain an advantage from burning coal. We all live and businesses make more money (because Earth will still exist to make money on).

It's also possible to do this with non-competes. If a world without them is economically better, we need to put our efforts into banning them globally. It doesn't make sense to only ban them in the US or Canada, because companies can just outsource to where it's acceptable.

> you are conflating each individual business profits and motives for the profitability of the economy and country

I think everyone does really. In fact, I'd say this is the "big idea" behind conservative fiscal policy as a whole. This assumption is the seed of it all.

Non-compete doesn't actually do anything useful for businesses, otherwise they would have happily pay workers for the privilege of not working for their competitors.

Since that basically happen approximately never, noncompete agreements without pay should be illegal.

Given the option to pay for it, or have it for free, the choice they make not to pay is a clear reason.

If they did have to pay, it could definitely be advantageous to pay employees not to leave, on a selective basis.

The first statement is largely true, the second statement is not. Somebody has to buy the stuff you make. At the level of an individual company this isn't a thing -- Ford isn't really going to sell a big percentage of its cars to its own employees -- but at the national level it is, because Ford does sell a substantial percentage of its cars to Americans. And it's easier for companies to sell domestically than internationally because domestic customers will favor them and foreign governments use protectionism to varying degrees.

The reason that most "labor rights" make companies uncompetitive is that they're inefficient. Requiring companies to provide specific benefits, rather than money with which employees can buy whatever they want, lowers real compensation because wages adjust to compensate (typically by rising slower than global GDP) and then you're stuck with whatever version of the benefit the employer provides instead of having the option to take the money instead and being able to choose yourself in a competitive market. Which raises the company's costs relative to their perceived attractiveness to workers. Unions for structural reasons typically prioritize things like seniority rules that aren't to the benefit of all their members (namely the newest ones) and in turn make it hard for the company to attract new talents who don't want to wait 30 years to get the salary a foreign competitor can offer today. This is why, when given the choice between higher pay and some other employer-provided benefit, people typically take the money. But the rules get passed because they're sold as a free lunch, and then industries decline there because they're not.

Non-competes are the opposite because they have a similar effect on the industry as a whole as do the inefficient labor rules, i.e. they increase the costs of other companies in the same jurisdiction. John was working for company A and wants to work for company B, but isn't allowed to, so company B have to hire Chris, who isn't as good -- otherwise company B would have hired him to begin with. It hurts the workers and every company except for company A. Then company A (or as a group, large incumbents) go to the government to lobby to let them do this even though it hurts the industry and country as a whole.

In general, anti-trust rules improve the competitiveness of a country's industries, because they improve the competitive fitness of its companies and allow them to survive when new foreign competitors come who would eat the lunch of a wasteful bureaucratic incumbent that isn't accustomed to competitive pressure but can't touch a hundred nimble entrepreneurs who are already doing what it takes to win the customer's business in the face of stiff competition. It turns out this is also the same thing that actually helps workers.

-1: banning non-competes attracts the best talent.

https://www.google.com/search?q=non-compete+route+128+vs+sil...