Monday, January 9, 2023

How do we create incentives for firms to train employees?

...with noncompete clauses. For example, if a firm trains an employee to code using Salesforce, the employee gains a valuable skill that they can take to another firm. Employers anticipate such opportunism and use a variety of contractual provisions, like noncompetes, to guard against it. 

Unfortunately the FTC just voted to ban noncompetes.  

As Commissioner Wilson notes in her dissent, though FTC pays lip service to the diminished incentive to train employees:
“there is evidence that non-compete clauses increase employee training and other forms of investment,”
they dismiss its importance.  

This is a time-honored political tactic--when banning a practice, ignore its benefits and tout its costs--but it sets a bad precedent and undermines Agency credibility. 

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