Progressives have long held that the right’s economic theories are just elaborate rationalizations for funneling money to the elite. The argument goes like this: In any capitalist society, business owners and senior managers will inevitably have economic interests that run contrary to those of ordinary workers. The less firms have to spend on wages for common laborers, the more they can increase compensation for executives and dividends for investors. Similarly, the less income governments progressively redistribute, the higher the wealthy’s posttax earnings.
Economic elites therefore have a strong incentive to fund political movements that minimize the bargaining power of workers and the fiscal ambitions of governments. And given their outsize share of national income, the rich also have copious financial means to bankroll such political activities.
In a democracy, however, it is untenable for a political movement committed to benefiting the few at the expense of the many to identify as such. Rather, such a movement would need to manufacture theories for why policies that appear to serve the interests of a tiny elite actually serve those of society as a whole.
In practice, a pro-plutocracy movement would need a theoretical justification for why it is generally bad for governments to interfere with “free markets.” After all, ordinary workers can exert more influence over democratic governments than they can over private investors. When state officials make a decision about how to allocate a society’s scarce resources, the masses can reward or punish them in “one person, one vote” elections. When private investors make such decisions, however, they are rewarded or punished by markets in which, effectively, one dollar equals one vote. Thus, one would expect pro-plutocracy movements to sing paeans to the efficiency, creativity, and justice of free markets. They might produce economic models showing that workers are better off without state-mandated minimum wages or theories detailing the logistical impossibility of state economic planning or treatises celebrating the indispensability of competition for innovation.
But these ideas would all just be means to an end. The movement’s ultimate commitment wouldn’t be to maximizing innovation, open competition, or economic liberty but rather to advancing the invidious interests of elite business owners and bosses. Were the movement ever forced to choose between upholding free-market ideals and safeguarding class domination, it would abruptly dispense with the former. The inequality would be the point.
As an account of American conservatism, I think this narrative is a tad unfair (there are some genuine insights in right-wing economic theory and some libertarian intellectuals who genuinely oppose elite rent seeking). But in the wake of the Federal Trade Commission’s proposed ban on noncompete agreements, conservatives have been making a compelling case for the vulgar Marxist point of view.
Last week, the FTC proposed a rule that would ban companies from subjecting workers to noncompete agreements. Typically nestled into the small print of labor contracts, such agreements prohibit workers from leaving their employers to work for a competitor or start a rival business. Initially conceived as a means of preventing a firm’s high-level executives from smuggling trade secrets to a competitor, noncompetes have trickled down into every segment of the labor market. Fast-food workers have found themselves barred from taking jobs with rival chains. Manuel laborers hired to shovel dirt have been sued by their former employers for taking better jobs with competing firms. Guards earning minimum wage have been forbidden from taking another security position within a 100-mile radius of their employer at pain of paying their former bosses $100,000 for the liberty of working for someone else. In all, an estimated one-in-five U.S. workers — 30 million people — are bound by noncompete agreements.
Noncompete clauses are antithetical to many of the conservative movement’s purported values. The right has traditionally celebrated the virtues of open and competitive labor markets. “One important economic dimension of individual liberty is the right to sell one’s labor services without attenuation,” the economist Richard Vedder argued for the Cato Institute in 2010.
Conservatives have specifically argued that, as long as that right is protected, workers don’t need heavy-handed government policies to secure fair wages: If laborers accrue coveted skills and experience, then a competitive market will give them the necessary leverage to earn a wage commensurate with their productivity. Meanwhile, Republicans have long insisted that the rigors of free-market competition are uniquely conducive to innovation, which increases our society’s collective prosperity.
Noncompete agreements violate Vedder’s conception of individual liberty and nullify the right’s preferred mechanisms for raising wages and productivity. A worker bound by a noncompete agreement cannot sell their labor services to the highest bidder. Instead, they must accept whatever terms their employer offers, since that company effectively boasts a monopoly on their skills. This not only reduces the bargaining power of that individual worker, but of other workers throughout the economy: Each worker who stays in an underpaying job because they’re legally barred from taking another opportunity is occupying a job opening that would otherwise be available to someone else.
Research comparing wage rates in states that enforce noncompetes strictly with those that do not indicates that such agreements reduce workers’ incomes by between 3 and 4 percent, or more than $250 billion, every year.
At the same time, noncompetes undermine economic dynamism and entrepreneurship. Many of America’s most celebrated tech companies were founded by individuals who left incumbent firms to start their own businesses in the same sector. Studies have found that noncompetes do in fact suppress start-up formation. As FTC Commissioner Lina Khan articulates the problem in a recent New York Times op-ed, “How can a new business break into the market if all of the qualified workers are locked in? Or if the would-be founder is bound by a noncompete?”
If one assumes that the conservative movement is earnestly committed to safeguarding workers’ economic liberty, promoting competitive labor markets, and encouraging innovation, then you’d expect it to oppose noncompete agreements and, thus, support the FTC’s proposed ban.
On the other hand, if one stipulates that the right’s avowed love of free markets is purely instrumental and that its real economic commitment is to capitalist class domination, then you’d expect it to support noncompetes and oppose the FTC’s rule.
Many conservatives have taken the latter position.
Brian Albrecht, of the International Law and Economics Center, decried the FTC’s decision in a blog post. His reasoning is as follows:
If implemented, the FTC’s total ban of noncompetes replaces the decision making of businesses and workers, as well as the oversight of state governments, with a one-size-fits-all approach. Under that new regime, we need to ask: How quickly will they respond to new information—for example, that it had destructive implications? How easily can they make incremental changes?
One may hope the FTC, as an expert-led agency, could easily adjust to incoming evidence. They will just follow the science! But that response would be self-contradictory here. The FTC just showed that it is happy to go from 0 to 100 with its rules. It went from doing hardly any work on noncompetes to a total ban. In no optimal policy model where the benevolent regulator is responding to information is that how a regulator would process and act on information.
This is very odd logic. Albrecht is effectively asserting that it is not possible for the available evidence about a policy to change in a short period of time, which seems obviously untrue. More important, though, he is arguing that the FTC should not be trusted with the authority to ban noncompete agreements because it has not demonstrated it routinely achieves “optimal” policy. Yet he never even attempts to show that the status-quo approach to this issue — which leaves relevant decisions about noncompetes up to businesses, workers, and states — has produced something closer to optimality. The federal regulator is held to a standard of perfect competence and benevolence; the status quo, to no standard whatsoever. Albrecht just takes it as given that a decentralized web of business, workers, and subnational authorities will be more responsive to the evidence of noncompetes’ pros and cons than the federal regulator. But there is no reason to believe this is the case.
It’s patently absurd to expect businesses to optimally respond to information on this issue; the clearer the evidence that noncompete agreements benefit employers at the expense of workers and incumbent firms at the expense of potential start-ups, the stronger businesses’ incentive to use noncompete clauses.
Albrecht’s invocation of workers’ discretion, meanwhile, is either ignorant or disingenuous. Defenders of noncompete clauses lean hard on the notion that they represent wholly voluntary agreements between workers and businesses. As the Chamber of Commerce argued in 2020, “It is important to note that noncompete contracts are not unilaterally imposed on employees. They are contracts freely bargained for before or during a period of employment. The employee gains something valuable in exchange for the voluntary commitment.”
But in the vast majority of cases, this is simply false. In 2021, the University of Michigan conducted a massive survey of the U.S. labor force and found that only 10 percent of employees negotiate their noncompetes, while one-third were presented with noncompete agreements after they had accepted a job offer (at which point rejecting the clauses would have required them to take an unexpected hit to their incomes). Indeed, as journalists have repeatedly documented, a great many workers sign noncompete agreements without ever realizing they’ve done so.
As for state governments, in an era when local journalism is collapsing and all politics is national, there is good reason to fear that well-heeled interest groups will have an easier time dictating policy terms at the state level (where public attention and engagement is relatively low) than at the federal one. In any event, whatever one’s theoretical intuitions, it is empirically true that many state governments have been totally nonresponsive to the information that employers are imposing noncompete agreements on fast-food workers and suppressing wages throughout their economies.
Nevertheless, Scott Lincicome of the Cato Institute approvingly shared Albrecht’s insights.
For its part, the Wall Street Journal editorial board denounced the FTC’s proposed rule as “an air kiss to Big Labor.” The paper’s op-ed rests primarily on procedural arguments against the propriety of unelected officials authoring sudden policy changes through creative interpretations of existing statutes. Of course, if the editorial board and its ideological fellow travelers harbored a principled opposition, they would be staunch critics of the Supreme Court’s conservative majority.
On the substance of the issue, meanwhile, the Journal offers a combination of outright falsehoods and hand-waving. The paper writes, “Job mobility in America hasn’t suffered despite non-compete clauses”; in fact, labor mobility has steadily declined in the U.S. since the 1980s. The Journal asserts that noncompetes “encourage innovation” in the tech sector but declines to grapple with any of the evidence to the contrary, including … the entirety of Silicon Valley: If noncompete agreements are required for innovation, it is rather odd that America’s high-tech sector is headquartered in a state that has prohibited noncompete agreements since the late 19th century.
To be sure, the fact that conservatives have made weak arguments against the FTC’s rule does not mean their avowed commitment to free markets is disingenuous. As noted above, one can theoretically reconcile opposition to the FTC proposal with support for free markets by insisting that the former violates freedom of contract. As Lincicome argued on Twitter, “in general, policy should have a strong, general presumption AGAINST government intrusion into private transactions.”
Yet the right does not honor that principle with any consistency. When Vedder championed “the right to sell one’s labor services without attenuation” for Cato in 2010, he did so in the name of supporting “right to work” laws. Such laws intrude on private transactions between businesses and workers. In states without right-to-work laws, unionized laborers and firms have the right to freely enter into contracts that require all of a firm’s workers to pay fees that cover the unions’ costs of bargaining, a.k.a. “agency fees.” This is critical for maintaining unions’ finances: If workers are allowed to secure the benefits of collective bargaining (which generally include the services of union lawyers) without paying for them, free riders can drain the union’s funds.
In states without right-to-work laws, workers who detest unions can still choose not to work at firms with such contracts. If they take a job at such a firm anyway, then they’ve freely entered into a labor agreement that mandates paying fees to a union. Yet, in that case, the Cato Institute believes the freedom of contract must be subordinated to the worker’s abstract economic right to sell their labor services however they see fit. In other words: When employers leverage their bargaining power to impose noncompete clauses on workers, we must not intrude upon their freedom of contract. When unionized workers leverage their bargaining power to impose agency fees on free riders, however, the government must intervene to ban such work arrangements.
This is a strange pair of positions for a political movement impartially committed to free-market ideals. It is a quite natural one, however, for a movement principally devoted to perpetuating the economic domination of business owners and bosses.