Employee Freedom (Reading 02)

Senior year has arrived, and with it the crunch to decide where I will begin my professional career has set in. I have spent the past few months researching companies, their cultures, and locations. Thus far, I have dedicated many hours and large chunks of my mental capacity to this task. While I have not yet decided where I will start, I ideally envision myself loving and staying at whichever company I choose for a substantial amount of time. However, at least early in my career, it is likely that I will end up switching jobs frequently. It will simply be in my best interest to do so.

This is not to say that I do not believe that employees should be loyal to a company. Employees should believe in what they are doing, do their best at it, and work to add value to their company. However, there is no reason an employee cannot accomplish these things for just a handful of years. Additionally, companies should also reciprocate such loyalty, but this is simply not reality. It is well documented that employee compensation does not increase much when employees stay loyal to a company. Accounting for inflation, annual raises are on average less than 1% (1). This contrasts with an average raise between 10% and 20% when switching companies (1). Clearly, employees who wish to pursue the American dream are incentivized to switch.

I believe a foundational aspect of working in America is the freedom to take control of your own career and better one’s life. Doing so involves the right to pursue new, better opportunities at any time. As such, while employees should give their work their best effort for the entirety of the time they are working there, it is completely ethical for them to explore other opportunities. However, there are many barriers erected by companies which directly inhibit this right.

Over the past several years, noncompete clauses have become more and more prevalent. Intuitively, there is a sense in which noncompete clauses seem appropriate. Traditionally, noncompete clauses prevented employees from working with direct competitors where trade secrets are of relevance. Specifically, they were designed to prohibit sharing of the company’s intellectual property. However, recently, companies are attempting to assert ownership over work experience with these clauses (2).  Companies devote many resources to onboard and train new employees. Noncompete clauses now attempt to stake claim on the result of that investment, just a company would do with the IP of a product developed by an employee. However, there is a real debate to be had whether this is ethical, and if so, under what circumstances.

Intuitively, there are many cases in which noncompete clauses seem inappropriate and unnecessarily restrictive. For example, it seems obvious that teachers should not be barred from selling pet food in the summer due to a noncompete (3). The result of such a clause simply results in lower wages and less freedom.

However, there are also cases in which one might be more inclined to support noncompete clauses. Take for example a large technology company developing artificial intelligence. Should this company bar employees from working for other AI company’s? Many might be inclined to say yes, especially if that would result in a competitor. However, what about the case of someone who is an expert in AI? It is conceivable that such a noncompete would prevent the worker from obtaining any relevant job.

Furthermore, there are other undesirable consequences of supporting noncompete clauses. For example, it has been shown that allowing employers to control general employee knowledge and skills reduces investment and innovation (4). Overall, noncompete clauses just seem to restrict freedom and hinder advancement technologically and economically.

Clearly, there is at least reason to question whether these noncompete clauses are ethical. The government seems to be weighing in as well in support of employee rights. An interesting example of the opposite end of the spectrum is Shenzhen. In Shenzhen, the idea of noncompete clauses would sound absurd. There, collaboration has resulted in innovation at an unheard-of rate and resulted in Shenzhen becoming one of the fastest growing economies in the world. Perhaps relaxing these regulations would bring similar effects to the US while also improving workers freedom.

Generally, I would be in favor of relaxing noncompete agreements and giving employees the ability to try new things and more easily grow professionally by challenging themselves at new jobs. This is not to say I support entirely the Shenzhen mindset where IP is unheard of. It is important that companies are rewarded for developing and researching new technologies. Obviously, companies should be allowed to enforce their property rights of intellectual property to achieve this, but this can be done without owning an employee.

Sources

  1. https://www.forbes.com/sites/cameronkeng/2014/06/22/employees-that-stay-in-companies-longer-than-2-years-get-paid-50-less/#854e351e07fa
  2. https://www.nytimes.com/2017/05/13/business/noncompete-clauses.html?_r=1
  3. http://www.reuters.com/article/us-usa-noncompetes/white-house-urges-ban-on-non-compete-agreements-for-many-workers-idUSKCN12P2YP
  4. https://www.theatlantic.com/business/archive/2014/10/how-companies-kill-their-employees-job-searches/381437/