President Joe Biden signed an executive order promoting economic competition on Friday that includes three provisions designed to improve opportunities for workers.
The president’s order asks the Federal Trade Commission to limit or ban noncompete agreements, address unnecessary occupational license requirements, and revise guidance for sharing wage information between HR professionals.
“Barriers to competition are also driving down wages for workers,” the White House said in a statement on Friday. “When there are only a few employers in town, workers have less opportunity to bargain for a higher wage and to demand dignity and respect in the workplace.”
Noncompete agreements prevent workers from going to a competitor or starting a competing business within a certain period after leaving their previous job. Between 36 million and 60 million private-sector workers were subject to noncompete agreements in 2019, according to estimates by the Economic Policy Institute.
“The only economic leverage that non-unionized workers have is the implicit threat that they could quit and go somewhere else,” Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, told Yahoo Money. “Noncompete agreements reduce wages. Your employer doesn't have to pay you bigger wages if they know that you don't have outside options.”
Limiting noncompete agreements or making them unenforceable — as Biden’s order sets out to do — may not be enough, according to Shierholz. Banning them instead would give workers more leverage, she said.
For instance, noncompete agreements are unenforceable in California, but some research has found that they still suppress wages because workers often don’t know they can’t be sued by their employers, according to a 2020 paper by the Journal of Law, Economics, and Organization.
Biden’s order also asks the FTC to ban “unnecessary” restrictions on occupational licensing. About 30% of U.S. jobs require this kind of licensing, according to estimates by the Federal Trade Commission. But these restrictions stifle entry into these occupations, limit job growth, and make moves between states more difficult, according to Alexander Colvin, a labor relations law professor at Cornell University.
“Research has found that occupational licensing is quite widespread and really does inhibit a lot of workers from entry into jobs and business opportunities that they otherwise would be able to take advantage of,” Colvin told Yahoo Money. “This is quite significant to these potential rules which would really affect the labor force a lot.”
Such licensing particularly burdens military spouses, with 1 in 3 of them working in a field requiring a license while being subject to moves every few years, according to data by the Department of Defense.
The executive order also asks the FTC and the Department of Justice to strengthen guidance to prevent employers from sharing wage and benefit information with one another to suppress wages.
Current guidance allows third parties to make wage data available to employers without being subject to antitrust scrutiny. But workers aren’t entitled to know how their compensation stacks up against the pay of other workers with similar experience and skills, key information that could help them negotiate better wages.
“As a package, [it’s] clearly a coordinated effort to try and shift the labor market functions to give more power to workers,” Colvin said. “It's clearly a pro-wage growth agenda that the administration is trying to push here.”