The Washington Post-Wonkblog

Bosses want capitalism for themselves and feudalism for their workers

By Matt O’Brien         July 26, 2017

(HBO)

If some employers had their way, you would have to pledge eternal fealty to them just to get a paycheck.

You would bend the knee, bow your head, and swear to serve them faithfully, now and forever, even if someone else tried to hire you away for more money. And in return for this loyalty, you of course would get none. Your company could fire you whenever it wanted and wouldn’t have to take care of you when you got old. If you were really lucky, it might, just might, give you a small 401(k) match. In other words, it’d be capitalism for bosses, and feudalism for workers.

Now, as much as this might sound like a caricature, it’s actually the way things are in Idaho. Well, except maybe for the genuflecting. As the New York Time’s Conor Dougherty reports, the state’s non-compete laws are so strict that people can’t leave their jobs for a new one unless they can show that it wouldn’t “adversely affect” their current employer. That’s an impossible standard that would leave workers — and, more to the point, their wages — entirely at the mercy of their bosses.

This is not, to put it mildly, the way things are supposed to work. When unemployment is as low as it is now, companies are supposed to have to fight over workers by paying them more. If there’s one thing chief executives excel at, though, it’s cutting every cost other than their own bonuses. They’ve figured out that it’s a lot cheaper to simply tell their employees that they’re not allowed to leave than it is to pay them enough that they wouldn’t want to leave in the first place. Which is to say that Idaho isn’t the only state going medieval on workers. Many of them are. Non-competes, which started off as a way to stop a company’s top executives from revealing legitimate trade secrets to rivals, have turned into a tool for suppressing wages that now cover 14 percent of all people making $40,000 or less, according to the U.S. Treasury Department.

There’s no reason that sandwich shop makers or doggy day-care workers or summer camp counselors should have to sign non-compete agreements like some of them have recently. No reason other than that businesses know they can get away with it. Jobs were so scarce for so long in the aftermath of the Great Recession that companies realized they could put almost any condition on them and still find plenty of people willing — no, desperate — to take them. To the point that even people who were trying to get jobs at Jimmy John’s felt like they had to promise that they wouldn’t take any of the secrets they were about to learn about putting slices of meat in between pieces of bread to go work for, say, Subway instead.

It’s a reminder that economics isn’t just about supply and demand. It’s also about who has the power to make demands. Which actually has more to do with government policies than market forces. Things like how high the minimum wage is, how easy it is to form a union, and, yes, how tough non-compete laws are all affect the balance of power between capital and labor independent of the unemployment rate. So does the welfare state itself. Indeed, businesses have historically been opposed to Social Security, Medicare and, more recently, Obamacare not only because those programs cost them money, but also control over their workers. When the government helps people be able to afford to retire, companies can’t afford to hire quite as many of them — not if they want to maintain their profit margins. That’s because workers have more bargaining power when there aren’t as many of them actually looking for, well, work.

The same kind of logic, by the way, applies to stimulus spending. As economist Michal Kalecki argued back in 1943, a government that hires unemployed people is a government that doesn’t have to give business what it wants to get them to hire unemployed people. The more the government does, then, the less sway businesses have over the economy and everyone in it.

The important thing to understand is that capitalists don’t believe in capitalism. They believe in profits. There’s a difference. Capitalism is about free competition, while profitability, taken to the extreme, is about the lack of it. After all, the best way to make money is to drive everyone else out of business, and to then force your workers to accept subsistence-level wages. It’s the contradiction at the heart of capitalism, which, if it weren’t for the fact that governments can intervene to save the system from itself, could very well lead to revolution.

That’s what happens when you turn workers into vassals.

Matt O’Brien is a reporter for Wonkblog covering economic affairs. He was previously a senior associate editor at The Atlantic.