Don’t like your job? Quit for a rival firm

A fifth of American workers have a non-compete clause in their contract, barring them from leaving to join a rival. Owing to a new rule issued by the Federal Trade Commission on April 23rd, these clauses may soon be voided. Advocates hope this will inject dynamism into the American economy and lead to stronger wages; critics warn it will stifle investment.

The debate about non-compete clauses is an old one, dating back to Europe in the 1400s. Courts generally came down on the side of apprentices trying to escape the clutches of their mentors. In the Industrial Revolution, though, views shifted. The main argument in support of non-compete clauses—then and now—is that they protect firms with an understandable interest in defending trade secrets. With them in place, companies become more willing to make hefty investments and train up workers, confident that they will reap the benefits from both. A recently published study by Jessica Jeffers of HEC Paris found that when American states make non-competes easier to enforce, firms increase their physical investments by as much as 39%.