US ban on “non-competes” could boost wages

The US Federal Trade Commission reckons there would be 8,500 more start-ups each year if companies were banned from adding “non-compete” clauses to staff contracts. So it has gone ahead and banned them. In principle this means US firms can’t prevent departing employees working for competitors for a defined period or setting up their own companies. In practice nothing will change pending legal challenges but the FTC’s Lisa Khan has deep union backing. She says non-competes are holding down wages by an average of more than $500 a year because they deprive employees of bargaining power. This is a surprisingly big fight – between the Democrat and Republican FTC commissioners who voted on the ban on party lines; between unions and chambers of commerce; and between sympathetic lower courts and the Supreme Court – which thinks the FTC is overreaching. Non-competes used to be mainly for over-achievers. Now they now affect one in five Americans.