The Equation for Equality and the Impact of No-Poach Clauses

Welcome to the Letter From The Chief Economist.

This week the United States celebrated Martin Luther King Jr. day—and his legacy is especially important to us at Lightcast, because so much of his life and work was dedicated to economic equality and the rights of workers.

On Monday, we published a short look at Dr. King’s impact as a champion for workers’ rights, especially in how equitable treatment and access in the workplace is a crucial part of racial and economic justice overall. 

One specific way we at Lightcast have worked to promote equitable access for people of color is our work with the nonprofit education group Npower as part of its Command Shift initiative. Last year, in our collaborative report titled “The Equation for Equality: Women of Color in Tech,” we found that the tech industry could double the number of Black, Latina, and Native American women in its ranks if it reached out to new pools of workers who already have many of the necessary skills. 

While 225,000 women of color hold tech jobs today in the US, another 470,000 are “tech-eligible,” that is, they have skills that overlap with those needed in the industry. And because the tech industry offers high-paying jobs with great potential for career advancement, diversifying the tech workforce is a practical way to improve economic conditions for individuals and communities.

For example, here’s one graphic from that report—women of color are heavily represented in the jobs of Electronic Medical Records Specialist and Call Center Manager, and those jobs have many of the skills to become a Computer Support Specialist or Technical Support Supervisor, respectively. Both of those next-step occupations carry a significant pay premium and are underrepresented by women of color. 

(If this kind of analysis—feeder jobs, skill overlap, bridge skills, next-step jobs—sounds familiar, you might know it from our December launch of Career Pathways in the Analyst platform. With the new release, you can now plot this kind of data yourself to understand the pathways most relevant to your work.)

Because the tech industry offers high-paying jobs with great potential for career advancement, diversifying the tech workforce is a practical way to improve economic conditions for individuals and communities. I’m proud of the work we did on “The Equation for Equality,” and you can read more about the project here or download the full report here. 

Economic News

In last week’s newsletter, I had JOLTS, the Employment Situation, and CPI to catch up on. This week, there’s nothing that makes as many headlines, but still plenty to catch up on.

First, retail sales fell hard in December, lower than expected. Sales fell 1.1% over the previous month (seasonally adjusted), according to the Commerce Department, while sales were also revised lower in November. This suggests a divergence between trends in the labor market and the economy overall. While December’s jobs number came in above expectations and suggests employers are still investing and building, this retail sales number shows customers are being cautious amid expectations of a recession and inflation that’s coming down but still high. 

I also want to note that UK Office for National Statistics had a busy week. Their Labour Market Overview contained data for September through November 2022 and showed unemployment was up 0.2% to 3.7%, while job vacancies were slightly down, and “despite six consecutive quarterly falls, the number of vacancies remains at historically high levels.”

While unemployment went slightly up, it’s still at a historic low, and while vacancies are down. they’re still historically high, and the labor market overall remains much tighter than it was before the pandemic. Sounds familiar to those of us watching from the US. 

The UK CPI also came out yesterday—though in this case, the acronym stands for “Consumer Price Inflation” instead of the American “Consumer Price Index.” Annual inflation was slightly less in December than it had been in November, moving from 9.3% to 9.2%. The largest price increases came from household energy and food and beverages, while the biggest decreases came from transportation (including petrol) and clothing. A slight tick downward is moving in the right direction, and this is the second straight month of decline, but UK consumers are still in an unenviable position. Annual US inflation only cleared 9% once during this current cycle, peaking at 9.1% last June. 

The last piece of economic news I want to flag isn’t a statistical release, but a policy change that has the potential to make some waves in the labor market: a proposal by the Federal Trade Commission to ban noncompete clauses in employment contracts. By restricting how much (or, in fact, whether or not) employees can work for competitors, businesses can protect both their economic and intellectual property interests, but the question is whether that employer advantage comes at the cost of workers’ rights and hinders competition in the labor market. Speaking of which…

In The Papers

The resident expert on noncompete agreements here at Lightcast is Matt Walsh, so I want to highlight one of his papers this week: “The Effect of No-poaching Restrictions on Worker Earnings in Franchised Industries,” co-authored with Brian Callaci, Sergio Pinto, and Marshall Steinbaum. 

Their research covered the period between 2018 and 2020, when the Washington State Attorney General’s office led a campaign to discontinue no-poach clauses in franchising contracts. The legal details are complex, but essentially, but essentially, the typical contracts that fast food workers signed restricted them from switching to new jobs at other fast food restaurants, and then that restriction was lifted. 

Once it became possible to switch jobs, pay across the fast-food industry saw a boost, by an average of 8.3%. The median worker in the affected group earned $26,133 before the pay rate increased, corresponding to an annual boost of $862.39. They identified this change by means of job posting data that Lightcast collected. The researchers were able to narrow in on the relevant variables (like geography, company name, occupation, and advertised salary) because of how they matched company-level policies with our job posting data.  

The number of workers at these specific restaurant franchises between those specific years obviously don’t represent the entire labor market, but the finding is sound: increased competition in this labor market led to higher wages. It’s easy to see a situation where conditions respond in a similar way across the entire US, if the FTC recommendation to ban noncompetes is adopted. We’ll keep watching to see what unfolds.

Until next week, 

Bledi Taska

Lightcast Chief Economist