American workers won a significant, if little-noticed, victory when seven major fast-food chains recently agreed to a settlement led by Washington State Attorney General Bob Ferguson to end “no poaching” clauses in contracts signed by their workers. The clauses, buried deep in the paperwork presented to often inexperienced workers, required them to seek permission before they could look for a job at another location of the same chain. Such agreements reduce labor costs for the chains but proved deeply unfair to workers seeking to switch to locations that are more convenient or who simply want to earn higher wages.
This agreement is a good first step, but there’s much more work to be done. Wages earned by less-skilled American workers have stagnated. They face difficulties switching jobs due to a combination of public policy and employer behavior.
These are significant problems that deserve continued attention from both the left and the right, preferably with more thoughtful analysis than we have seen recently from public figures as diverse as Alexandria Ocasio-Cortez and Pat Buchanan. While figures like these have bemoaned a supposed lack of job stability today and the end of “lifetime” employment, they get it exactly backward.
The Bureau of Labor Statistics reports the average American’s tenure in the same job has crept steadily up for all groups of workers over age 25 for more than a decade. Even teenage boys spend longer in their mostly temporary, part-time jobs than they did in the past. Part-time work overall has declined significantly as the economy has improved and the number of people working part-time but interested in full-time work also has plummeted. Self-employment has declined steadily for more 30 years in good economies and bad and the number of people working a side-gig is at a record low. More people work for very large companies and small businesses’ share of jobs is shrinking. Self-employment has declined steadily for more than 30 years in good and bad economies and the number of people working a side-gig is at a record low.
This evidence of “job lock” actually may be a major cause of wage stagnation, because switching jobs is a major way to increase earnings. The opportunities for greater responsibility, leadership and higher pay in any given industry or with any employer will always be limited. Studies by the Atlanta Federal Reserve Bank and employment services provider ADP show that people who switch jobs consistently increase their wages by a full percentage point more each year than those who stay in place. Compounded over the course of a career, this amounts to hundreds of thousands of dollars for a typical worker.
Since the phenomenon of job lock is complicated and likely stems from a multitude of factors, there’s unlikely to be any one silver bullet. But a few modest public policy changes, beyond a federal statutory ban on “anti-poaching” clauses, would make sense.
For instance, federal law should outlaw “front end” noncompete clauses for workers, as well as contract provisions that require at-will employees to pay employers any amount above a signing bonus to quit their jobs. State laws limiting noncompete agreements play a major role in both the innovative nature of California’s Silicon Valley (skilled people with good ideas easily can start new companies) and the proliferation of plush worker benefits there.
Just as importantly, occupational licenses, which are now required for a third of all jobs, should be made portable across state lines in the same way and to the same extent that driver’s licenses are. Certifications granted in one state should be usable in all.
America’s highly flexible labor market is a major competitive advantage around the world. While both the left and the right are wrong to yearn for the nonexistent “good old days” of greater employer loyalty, policies that limit the ability of workers to switch jobs deserve speedy elimination.