President Joe Biden’s State of the Union address on Tuesday was packed with proposals, figures, and achievements from throughout his first two years in office — but one segment in particular could have a major impact on the way America does business in the future.
The hamburger analogy
Using a hypothetical story about a cashier at a fast-food restaurant, Biden denounced the idea that he or she could be forced to sign a so-called “noncompete agreement” that would essentially make a job at any other hamburger restaurant in the community off-limits.
Such contracts might not be commonplace in the restaurant industry, but they are standard in a variety of workplaces. An estimated 30 million U.S. employees are currently working with such an agreement in place.
This limits workers’ opportunities and effectively holds them captive to their current employer unless they want to shift gears and find a job in a totally different industry.
As economics professor Matt Marx explained these agreements: “You’ve been working in this industry for 20 years? Oh, well, sorry, you can’t do that anymore because you worked for us for two years. Tough luck, you have to find something else to do.”
The FTC is getting involved
Last month, Federal Trade Commission Chair Lina Khan confirmed that there was a proposal in place that would ban these controversial employer contracts. Not only is the “freedom to change jobs” a critical component in a healthy economy, she said, but noncompete clauses can deprive employees “of higher wages and better working conditions” while making it harder for employers to recruit new talent.
“By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition,” Khan asserted.
The agency believes its rule could give workers $300 billion per year in additional wages.