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Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.
The government is poised to approve a proposal that will raise wages, boost innovation, and increase entrepreneurship. In the paraphrased words of President Biden: It is a big freaking deal!
Specifically, the Federal Trade Commission (FTC) will be voting in an open commission meeting on April 23 [ [link removed] ] on a new rule that will ban the use of noncompete clauses. These are restrictive employment contracts that bar workers from leaving a job to work for a competitor. 
Estimates have varied [ [link removed] ], but research has found that anywhere from a fifth to nearly half of workers are subject to a noncompete agreement. Millions of Americans, many unknowingly, are being denied the fundamental right and freedom to switch jobs! This is why the FTC received over 26,000 public comments [ [link removed] ] last year on its proposal to ban these contracts. FTC Chair Lina Khan said at the time the proposal was made public, “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy.”  
The FTC’s ban would have major impacts on workers wallets. The FTC estimates [ [link removed] ] that banning noncompetes will increase wages by over $300 billion and help close racial and gender wage gaps. This is just one example of why competition policy is so important for workers. A couple of years ago an extensive analysis by the Treasury Department found that wages are 20% lower [ [link removed] ] than they would be if there was more competition in the economy. While noncompetes are not used exclusively by giant corporations with massive market share, they can further entrench a company’s grip over an industry and its workers. 
Noncompetes not only limit worker mobility, but they restrict workers from starting new and competing businesses, dampening entrepreneurship and innovation. In addition to increasing wages, the FTC estimates that banning noncompetes will double the number of companies [ [link removed] ] founded by a former worker in that industry. The ability to create spinoff companies was a key reason the midwest became a technology leader [ [link removed] ] long before Silicon Valley. Speaking of Silicon Valley, it is no mere coincidence that California has banned noncompetes for decades. 
Beyond the academic studies, one of the fun examples I believe underscores the impact eliminating noncompetes could have, comes from a favorite topic of this newsletter. Baseball! For decades the owners of major league baseball teams used their unusual and unjust exemption from antitrust laws [ [link removed] ] to enforce something called the reserve clause, which was a noncompete on steroids. The reserve clause gave teams perpetual control over a player, even once their contract had expired, meaning if players wanted to switch teams they had to be traded or cut. 
In 1969, a star outfielder for the St. Louis Cardinals named Curt Flood would challenge the reserve clause in court [ [link removed] ]. Flood lost the battle, and his baseball career, but players won the war. In 1975 an arbitrator's ruling struck down the reserve clause [ [link removed] ]. Since that time, salaries for major league players have [ [link removed] ]increased significantly, demonstrating what mobility can do for workers. Think about the increase in wages that followed the so-called “Great Resignation” in the immediate aftermath of the pandemic. Banning noncompetes is unlikely to turn everyone into a millionaire, but it will give them some agency and bargaining power back.
The FTC rule, as significant as it is, is just the first step in removing these constraints on workers and would-be entrepreneurs. One key gap in the FTC’s authority is that the rule would not extend to nonprofit businesses. This is particularly important in healthcare, where larger healthcare systems are often technically nonprofits and able to increase their dominance through the use of noncompetes [ [link removed] ], putting profits over patients. A Minnesota doctor wrote to the FTC about the ubiquity of noncompetes [ [link removed] ] in healthcare, saying “when all of the contracts you sign contain a non-compete clause, this is by no means voluntary, but compulsory, which subsequently transforms any willful employment into indentured servitude.”
This is why more states need to join California, Minnesota, North Dakota and Oklahoma in banning these contracts entirely, although several other states have taken steps to ban them in certain professions. Not only can state bans fill the gaps in FTC authority, but a law prohibiting their use would more permanently codify that restriction. But for now we can celebrate what should be a vote next week to approve the rule prohibiting noncompetes. This would be a massive win for workers and another example of the ways the Biden Administration’s focus on antimonopoly policy is delivering tangible wins for Americans.
YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:
House Republicans
I am not sure running on “higher costs for Americans” is politically popular but that’s not stopping House Republicans:
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Who Pays on Tax Days
This Judd Legum and Tesnim Zekeria post from [ [link removed] ]Popular Information [ [link removed] ] is worth your time:
“Between 1945 and 1980, American households that made $1 million or more paid an average of 50.1% of their income in federal taxes, according to a new report from Americans for Tax Fairness. This period following World War II was characterized by "substantial economic growth and broadly shared prosperity" with rapid income growth "at roughly the same rate up and down the income ladder." Higher taxes for the wealthy funded "public investments that helped build a thriving economy for all: constructing the interstate highway system, improving public education, facilitating mass home ownership, expanding healthcare coverage."
According to the most recent IRS data, American households with more than $1 million in income now pay an effective tax rate of just 26%. Yes, because of inflation, $1 million has less purchasing power today than it did 44 years ago. But $1 million still exceeds the income of 99.5% of American households.”
Billionaires
From Mother Jones:
“As of April 1, according to the latest analysis of Forbes data by the nonprofit Americans for Tax Fairness (ATF), the combined wealth of the nation’s 806 billionaires—their population rises and falls with the markets—had reached a record $5.8 trillion. That’s more than $7 billion a head and nearly double their total holdings in late 2017, when congressional Republicans unilaterally rammed through a package of widely unpopular tax “reforms” skewed in favor of America’s most affluent.”
Corporate Greed
“Every time you pay more for your food [at the grocery store] it’s about corporate greed. You’re paying for stock buybacks and for bonuses for corporate executives [ [link removed] ],” says Senator Sherrod Brown, who gets it!
Office Snacks
At least one CEO understands [ [link removed] ]…
Billionaires… Again…
SOME GOOD NEWS
Lina Khan is coming to Iowa!
If you’re in Central Iowa this weekend, FTC Chair Lina Khan will be hosting a listening session regarding Koch Industries purchasing Iowa Fertilizer Company. (Both JD and I will be there too!) To RSVP go here [ [link removed] ].
Say hi and talk monopoly
If you are in Minneapolis on Thursday next week (April 25), you can join me at the 331 Club to grab a drink and talk monopoly power. More info here [ [link removed] ].
BEFORE YOU GO
Before you go, I need two things from you: 1) if you like something, please share it on social media or the next time you have coffee with a friend. 2) Ideas, if you have any ideas for future newsletter content please comment below. Thank you.
Break ‘Em Up, 
Justin Stofferahn

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