Modern-day air travel versus 1974: Packed in like cattle, but the mileage is better

If you want to find quick sympathy in Canada in January, you can complain about one of two things: the weather, or the airlines.

“Long-time air traveller Guilford Boyce says he misses the golden age of travel, when airlines went out of their way to make passengers feel special,” a Jan. 2 CTV News report noted, in a web article titled “Passengers lament ‘nickel-and-dime’ fees as airlines face thin profit margins”.

“Boyce says things have changed in the last few decades, to the point where he feels more like livestock every time he gets on a flight.”

Indeed, the days when airlines promoted themselves on the basis of their service — at least in Economy Class — are gone. To the extent that they still do compete on service, it’s usually in their expensive premium cabins.

But if we, the traveling public, are getting less pampered in our close-together Economy seats, at least we can claim that we are getting better mileage out of our dollars.

A web site called Departed Flights has posted a collection of image scans from old airline timetables. One of the more interesting scans is the Winnipeg page from a Northwest Orient timetable published in December, 1974. The Twin Cities-based airline, which dropped the “Orient” part of its name in the ‘80s and was absorbed into Delta Air Lines some seven years ago, published its each-way fares in its timetables.

This was possible at the time given that air fares were government-regulated, and set at fixed prices proportional to distance, even if these prices were at odds with supply and demand.

And those fares were usually eye-wateringly expensive by today’s standards.

Keen to get away from Winnipeg’s winter cold to someplace warmer, like California? A 1974 round-trip to Los Angeles or San Francisco would have set you back $290 Cdn. — or $1,366 in 2016 dollars. A round-trip to Tampa/St. Petersburg, Fla., meanwhile, would have cost the equivalent of $1,281 in 2016 dollars.

Currently, July 2017 round-trips between Winnipeg and both Florida and California are priced in the $700 to $800 range.

The only fare that is more expensive today than it was in 1974, after adjustment for inflation: the relatively short trips to Minneapolis/St. Paul and to Chicago; and presumably to Grand Forks.

 

Winnipeg to… 1974 one-way fare (CAD) 1974 round-trip fare 1974 fare in 2016 dollars Typical mid-week July 2017 fares as of Jan. 8, 2017 (CAD) 1974 fare would now pay for a round-trip to…
Boston $125 $250 $1,178 $340 London
Chicago $70.35 $140.70 $663 $699 Seattle
Grand Forks, N.D. $22.05 $44.10 $208 Not bookable, despite Delta serving both cities via MSP. Google Flights lists “travel agent” fares from $900 and up.
Los Angeles $145 $290 $1,366 $706 Honolulu
Miami $148 $296 $1,394 $751 Madrid
Minneapolis/St. Paul $46.20 $92.40 $435 $597 Montreal
New York City $111 $222 $1,046 $396 Shanghai
San Francisco $145 $290 $1,366 $760 Hong Kong
Tampa/St. Petersburg $136 $272 $1,281 $748 Lima

It’s also instructive to observe how much further one can go for the same amount of money in 2017 compared to 1974. The same amount that one would have needed to fly to New York City and back in 1974 — $222, equivalent to $1,046 in 2016 — would pay for a round-trip to Shanghai thanks to the current trans-Pacific fare wars.

As for that 1974 $296 round-trip fare to Miami — equivalent to $1,366 in 2016 dollars: Today, the same amount would pay for a round-trip journey to Madrid. And the $250 you would have spent in 1974 to go to Boston — $1,178 in 2016 dollars? That would get you to London and back today.

So, while passengers might be packed in closer together than ever, less fed and less pampered, today is still arguably the golden age of international travel. Never have so many been able to travel so many miles at such a low cost.

Trust leads to security leads to trust: The forgotten lesson that made a mess of 2016

“In the future, Americans — assuming there are any left — will look back at 2016 and remark: ‘What the HELL?’” American humourist Dave Barry wrote in his retrospective on 2016. “If years were relatives, 2016 would be the uncle who shows up at your Thanksgiving dinner wearing his underpants on the outside.”

Likening it to “a choice between ointment and suppository,” the U.S. presidential election was Barry’s prime example of the mess that 2016 turned out to be.

“CNN told us over and over that Donald Trump was a colossally ignorant, narcissistic, out-of-control sex-predator buffoon; Fox News countered that Hillary Clinton was a greedy, corrupt, coldly calculating liar of massive ambition and minimal accomplishment.”

“And in our hearts we knew the awful truth: They were both right.”

The absurdities of 2016 extended beyond the United States. The British — mainly the English — voted in June to leave the European Union, despite the possibility of a renewed bid for Scottish independence (continued membership in the E.U., popular in Scotland, having been one of the factors that prompted Scots to vote against separating from Britain in 2014), and the unraveling of the hard-won Irish peace (Northern Ireland also having voted against leaving the E.U.)

In other populist revolts, the Austrian far-right came uncomfortably close to winning the 2016 presidential election, and recent polls showed Marine Le Pen, of the anti-immigrant Front National, running a close second in the run-up to the 2017 French presidential race.

The strange mood has even crept into Canada, where the presumptive front-runner for the leadership of the Conservative Party — the party which has governed Canada for half of the past 30 years — is Kevin O’Leary, a comically abrasive businessman turned full-time TV personality, with no political experience, who brandishes a spatula in a Dec. 24 YouTube video and vows to take it to Ottawa and “scrape all that crap out”. (To his credit, O’Leary has avoided the anti-immigrant sentiment of Kellie Leitch, the Winnipeg-born Conservative leadership candidate whose capacity for getting attention through mean-spiritedness has not so far given her lasting momentum.)

What is behind the bitter mood that made 2016 the year of Donald Trump, Brexit, Marine Le Pen and the slowly rising weirdness of the Conservative leadership race?

The most probable explanation comes from the book Viking Economics by George Lakey, a retired professor and peace activist. In the book, he contrasts the sense of mutual security and trust that citizens of Norway, Sweden, Denmark and Finland feel with the chronic insecurity of life in the United States — not to mention other countries, to varying degrees.

The United States operates a different economic model, which values insecurity . . . A family depends on a job that might disappear tomorrow; it lands in a feeble safety net; it has few prospects for finding another job as good or better. Small wonder that U.S. unions sometimes defend inefficient labor practices and outmoded organization of work, even though undermining productivity — whatever it takes to keep workers in jobs. In other words, compared with the high-productivity Nordic model, the U.S. insecurity approach creates an incentive to resist efficiency.

Lakey contrasts the American tendency to resist a social safety net with the freedom that a strong social safety net has given Nordic business owners to experiment with new ways of doing things, and to Nordic unions to accept and even welcome such changes.

There is reason to believe that the Nordic approach has secured positive results. The 2016 World Competitiveness Scoreboard places fifth-place Sweden and sixth-place Denmark just behind the third-place U.S. (and ahead of tenth-place Canada) in its ranking of the world’s most competitive economies. China and Switzerland took the top two spots.

And there is reason to believe that chronic insecurity takes a toll on people, and on their faith in democracy.

Andrew Wroe, of the University of Kent in the U.K., has carefully researched whether economic insecurity and anti-government sentiment are linked. In the case of the United States, he wrote in a 2015 commentary on the London School of Economics web site, the answer is “an unambiguous yes”.

As Jacob Hacker points out in The Great Risk Shift, the US government has deliberately privatised risk in the name of ‘personal responsibility’ by dismantling large parts of the social insurance system, and it has done so at a time when macro-economic changes have actually increased threats to economic security.

[. . .]

. . .[P]rior research demonstrates that political trust is vital to the good functioning of contemporary polities. One possible remedy for low trust would be to halt and then reverse the privatisation of risk by bringing the government back in. Comparative European data show that countries with more extensive welfare systems generally experience higher levels of political trust, possibly because welfare protects people against insecurity. However, the major progressive reforms that may help restore trust in the US are primed to fail precisely because trust is so low. Distrusting citizens, which constitute a large majority of all Americans, are less likely than trusting citizens to support major liberal reforms to the welfare state; indeed, they are more likely to support conservative alternatives that further privatise risk and, in turn, further increase insecurity. Such is the irony of the politics of trust.

Indeed, in 2014, three French researchers examined the relationship between the comprehensiveness of the social safety net in OECD member-countries and the degree to which the citizens of those countries trusted one another. They found that countries that were more polarized between trustworthy and untrustworthy — or “civic” and “uncivic” — individuals had the greatest difficulty supporting an effective social safety net.

Uncivic citizens, the sort who evade their tax obligations while seeking to extract all they can from social benefits, will support the expansion of the welfare state more strongly than civic citizens will, since they expect to benefit the most from it while shirking the costs. A rise in the share of uncivic citizens could thus increase the demand for a generous welfare state. However, an opposing force is also at play. Civic citizens will be less inclined to support high taxes if they expect to be surrounded by uncivic individuals who do not pay taxes and abuse social benefits . . . [But an increase in support] appears when everyone is civic. In this situation, all individuals strongly support the welfare state because nobody cheats on taxes and social benefits.

So, in short, what went wrong that gave the world the upcoming Trump presidency and Brexit debacle? A safe bet is that the U.S. and the U.K. fell into a “distrust trap”: a culture of economic insecurity, and resentment at feeling abandoned to fend for themselves by politicians who went on to live comfortable lives separate from the wider community, killed trust in politicians. Meanwhile, difficulty trusting fellow citizens made a strong social safety net that would ease their burdens unsustainable.

The lesson? Trust matters. With it, a society thrives. Without it, a society begins to fall apart.

Between 2005 and 2009, the World Values Survey asked people around the world if they felt that “most people can be trusted”. In Norway and Sweden, with their strong social safety nets and high levels of confidence in their parliaments, two-thirds or more of citizens agreed that, yes, most people can be trusted. In the U.S., however, only 39 percent considered most others trustworthy; and in the U.K., just 30 percent felt this way.

As for Canada: we were barely more likely than the Americans to trust our compatriots, with 42 percent of us considering most other people to be trustworthy. Never assume that a Donald Trump can’t happen here.

Sex and the American Voter

Academic writing has a long and proud tradition of being painfully dull and slow to get to the point, but perhaps that’s simply because no one was able to research whether there was a link between how people vote and their sex lives. Until now.

Finally, three researchers from three U.S. universities have successfully navigated the academic minefields of obtaining time and money and overcoming ethical objections to answer such questions we’ve all been dying to know the answer to, such as whether U.S. conservatives or liberals are more likely to make love in the missionary position.

The answer to that question, according to these researchers is: conservatives are more likely to prefer the missionary position. Their article, which appeared online in full-text earlier this week before being pulled behind a paywall, also found that social conservatives tend to have sex for the first time at a later age and to have fewer partners, yet are also more likely to be satisfied with the state of their sex lives.

U.S. liberals, meanwhile are said to be more likely to take part in “adventurous sexual behaviors (e.g., sex toys)”, and in risky behaviours, such as sex with a total stranger.

Fortunately, I was able to screenshot a particularly colourful paragraph from their findings this past week and post it to Twitter for a laugh before the paywall was imposed. Among the more salient bits:

“Those who gave more oral sex or received more oral sex are more conservative on out-group/punishment attitudes (anti-immigration, pro-death penalty, etc.), but more socially liberal (support gay rights, pro-choice, etc.)”

 

“Those who have more sex with a woman on top are also more conservative on out-group/punishment attitudes, more likely to [have voted] for Romney, but more socially liberal. Those who have more ‘doggy style’ sex are more conservative on out-group/punishment attitudes, but more socially liberal.”

 

“People who masturbate more are more liberal on all attitude dimension, self-report as liberal, Democrats and [as having voted for] Obama.”

 

“Those who engage in more S & M [were] more likely to vote for Obama, self-report as liberal and have more liberal social attitudes. People who engage in more hand-to-breast contact [were] more likely to vote for Romney, self-report as conservative, and be more conservative on out-group/punishment and economic attitudes.”

 

“People who kiss on the mouth more [were] more likely to vote for Romney, self-report as conservative and Republican, and be more conservative on out-group/punishment and economic attitudes.”

After Americans go to the polls Nov. 8 to elect a new president, after what has undeniably been the most wretched and embarrassing presidential race in modern history, a desire to have less politics and more cuddling would be entirely understandable. But let’s just hope those couples where one voted for Trump and the other voted for Clinton can patch up their differences.

“The relationship between sexual preferences and political orientations: Do positions in the bedroom affect positions in the ballot box?” by Peter Hatemi, Charles Crabtree and Rose McDermott will be published in the Personality and Individual Differences journal in Jan. 2017.

 

 

The economist who says Canada is headed for a credit crisis

Professor Steve Keen, of Kingston University in Greater London’s western suburbs, has made a name for himself as one of economics’ leading contrarian voices. He has criticized the idea that no one could have seen the 2008 global financial crisis coming as “balderdash“. He was one of the relatively few economists to favour Britain leaving the European Union; and perhaps less controversially, he sees the common European currency as “destroying Europe” and as something which “should never have started in the first place.

But Keen foresees problems in more places than just Europe. In an interview broadcast in late September on RT, the Russian government’s foray into 24-hour cable TV news, Keen discussed the rising risk of a debt crisis in China caused by the over-construction of new housing and office space. As he sees it, private debt and demand for credit has reached hazardous levels:

“The potential trigger is simply the level of private debt. Anything above 1.5 times GDP is enough to put you in the range where changes in credit have a large impact on your demand. Secondly, if your credit demand exceeds 10 percent of GDP, you’re in danger territory again, because, simply, stabilization of that rate of growth of credit, so that it grows at the same rate of GDP, will mean a fall in total demand in those economies.”

The more disturbing part of the interview comes when Keen sets his sights firmly on Canada:

“The most vulnerable economy apart from China on that front appears to be, of all things, Ireland — again! They’ve got themselves back in the situation; but that may involve their dodgy accounting and their dodgy tax records. But certainly Canada. Canada is the western developed economy that I think is most exposed to a credit crisis, and indeed using a different metric, that’s the country that the BIS [the Bank for International Settlements; a Swiss-based banking institution for the world’s central banks] identifies as the most likely one to face a credit crunch.”

Indeed, news watchers might have noticed that just this past week the Canada Mortgage and Housing Corporation (CMHC) issued its first-ever “red warning” for the Canadian housing market, noting that “high levels of indebtedness coupled with elevated house prices are often followed by economic contractions . . . The conditions we now observe in Canada concern us.”

One glimmer of hope that Keen sees for Canada is that the federal government’s deficit spending might turn out to be a good thing, by diluting the impact of any shock that comes along. Yet he also sees some risk from the possibility that those deficits might come under attack for political reasons:

“What worries me of course is when that credit crunch occurs, the political opponents to Trudeau will blame it on his deficit spending. But his deficit spending is one thing that’s attenuating how bad that shock is going to be. So, Canada definitely, Australia, Sweden, Norway, possibly Switzerland, there’s about 17 countries . . . but those are the major ones [facing a problem].”

Why a forgotten TV station is a potential pot of gold

Ask many Winnipeggers which TV stations are associated with the phrases “Channel 6, Cable 2”, “Channel 7, Cable 5” and “Channel 9, Cable 12”, and they will know the correct answers: CBC, CKY-CTV and CKND-Global, respectively.

Some might even know that “Channel 13, Cable 8” is Citytv and that “Channel 3, Cable 10” is Radio-Canada, the French-language public network.

But ask Winnipeggers about “Channel 35, Cable 11”, and you’re likely to see a blank expression come across their faces.

From the arrival of the CBC’s Winnipeg station, CBWT, in 1954 to the launch of what was then known as 13 MTN in 1986, the debut of a new local TV station was always a big deal.

By contrast, the launch of Omni 11 on Feb. 6, 2006 — officially, CIIT channel 35, cable 11 — went almost unnoticed. The station, which offered a mix of religious and secular programming, had no local celebrities, weak public awareness, and not even a known studio location.

Subsequent rebrandings as CIIT 11, Joytv and finally as Hope TV — currently a (tedious) mix of religious and foreign-language programming — couldn’t get the station out of the ratings basement. In fact, the latest rebranding was a bit of a disaster. As Joytv, the station reached 70,000 viewers for a total of 84,000 viewer-hours per week in Fall 2012. In Fall 2014, as Hope TV, it was only reaching 20,000 viewers for a total of 42,000 viewer-hours each week.

As for its competitors in Fall 2014:

  • CKY-CTV reached slightly more than 1 million viewers each week, for a total of more than 3.2 million viewer-hours;
  • CKND-Global reached 596,000 viewers weekly, for a total of about 1.8 million viewer-hours;
  • CBWT-CBC reached 735,000 viewers weekly, but for 1.7 million viewer-hours;
  • CHMI-Citytv reached 372,000 viewers weekly, for a total of 729,000 viewer-hours;
  • CBWFT-Radio-Canada, which broadcasts only in French, reached 121,000 viewers weekly, for a total of 214,000 viewer hours — five times CIIT-HopeTV’s total viewer-hours!

With numbers like that, you wonder why ZoomerMedia, Hope TV’s owner, bothers to keep the station on the air.

Believe it or not, the station that even gets thumped by the local French channel in the ratings is a potential pot of gold for its owners: not for its small audience, but for the frequencies that its channel 35 over-the-air signal occupies.

When the first North American television stations went on the air in the late ’40s, only a mere 72 MHz of bandwidth was available, divided among 12 channels, each 6 MHz wide, between 54 and 88 MHz and between 174 and 216 MHz.

Since stations sharing the same channel had to be kept about 300 kilometres apart to minimize interference, and most neighbouring-channel stations had to be kept about 100 kilometres apart, it was soon clear that just 12 channels wouldn’t be enough to satisfy North America’s needs. So, starting from the early ’50s, 70 new UHF channels between 470 and 890 MHz — channels 14 to 83 — were made available to broadcasters.

This was perhaps a little much, so in 1983, the relatively few TV stations between channels 70 and 83 were required to relocate to lower channels or to go off the air so that those frequencies could be used by a new technology: cellular telephones.

The next big technological change came some 20 years later, as TV stations began to migrate from analog to digital broadcasting. With demand rising for additional bandwidth for wireless data services, and digital broadcasting making it possible for two or more broadcasts to share the same 6 MHz TV channel, channels 52 to 69 were the next TV frequencies to be reassigned.

Yet the remaining UHF channels, 14 to 51, were still seen as a wasteful use of bandwidth that could be put to better use by wireless data services. So, the U.S. is preparing to hold an auction that could reassign channels 31 to 51 to other uses, with TV stations currently operating on those frequencies being given the option to either move to a lower channel, if one can be found, or to be bought out and go off the air permanently.

Canada is expected to do the same in the near future.

The frequencies those stations operate on are so valuable that, by one conservative estimate, a 6 MHz-wide channel covering a population of 800,000 could be worth $4.8 million to $9.6 million U.S. just for the rights alone.

That might sound like pocket change by TV business standards, but it might be easier to take the money and run than to move to a new channel — a move that would require stations to spend large sums of money on engineering studies and on installing new or additional transmitters and antennas.

Especially when local TV stations are struggling to make any money. A financial summary published by the Canadian Radio-Television and Telecommunications Commission (CRTC) earlier this year showed that conventional television stations last made a pre-tax profit in 2011, with collective losses exceeding $226 million in 2015.

Three Winnipeg TV stations operate within the 20 channels* being eyed for an eventual Canadian bandwidth auction: Hope TV on channel 35, Global on channel 40 and Radio-Canada on channel 51.

Global does well enough in the market, even assuming that it’s a loss-leader for owner Corus Media, that it might consider moving to a lower channel. The station had originally been expected to remain on its historical channel 9 frequency after the 2011 analog-to-digital transition, using channel 28 only temporarily; but instead requested channel 40, perhaps realizing the higher frequency might have greater future value.

Radio-Canada, on channel 51, could easily share channel 27 with CBC Winnipeg without losing its high-definition picture, allowing the higher channel to be sold off for data use if CBC-Radio-Canada so chooses.

But Hope TV, the little-watched TV station with no local studio and no local personalities? The station that is little more than a rebroadcast of an obscure religious cable network — the ultimate waste of bandwidth, and a sin for which a Toronto TV station was stripped of its licence? The station that gives us the oddity of the Van Impes? It might just be worth their while to take the money and run if and when they get the chance.

* – Excluding channel 37, which is not used for broadcasting in the U.S. or Canada. This small gap in the UHF band is used for scientific purposes.

 

Who’s more likely to visit Canada in the summertime?

It’s early August, and that means that Canada’s tourism industry is in full swing, with not just many Canadians being on holiday, but many foreign visitors arriving as well. The single largest source of foreign visitors might not surprise you: in July and August 2015, 3,954,528 American visitors entered Canada by car, aircraft, train or ship according to Statistics Canada, more than 10 times the number of British (218,438), French (159,063), Chinese (158,496) or Australian high-season visitors (79,206).

But it might be surprising to learn that, on a per capita basis, the United States ranks fifth in terms of its citizens’ propensity to visit Canada during the summer high season, with 12.4 visitors to Canada per 1,000 U.S. residents. Residents of the French territory of St. Pierre and Miquelon, just off the coast of Newfoundland, made 672.9 visits to Canada per 1,000 residents, a not-so-surprising figure given the territory’s isolation. The other three among the top five were current or former British colonies linked to Canada by proximity and migration: Bermuda (73.1 visits per 1,000 residents), the Cayman Islands (32.7) and the Barbados (13.2).

Foreigners entering Canada in July and August 2015, per 1,000 home country residents. Top 25 countries on a per-capita basis; countries with fewer than 1,000 visitors to Canada excluded. Visitor information source: Statistics Canada CANSIM tables 427-0003 (non-U.S.), 427-0004 (U.S.) (Click to enlarge)

Foreigners entering Canada in July and August 2015, per 1,000 home country residents. Top 25 countries on a per-capita basis; countries with fewer than 1,000 visitors to Canada excluded. Visitor information source: Statistics Canada CANSIM tables 427-0003 (non-U.S.), 427-0004 (U.S.) (Click to enlarge)

Of the long-haul markets, Hong Kong residents and the Swiss (5.6 and 5.3, respectively) showed the strongest interest in visiting Canada in the summer of 2015. Hong Kong residents were most likely motivated by personal ties to Canada, given that the severely undervalued Hong Kong dollar would make Canada seem unusually expensive (while making Hong Kong better value for Canadians heading over there). For the Swiss, however, the drastically overvalued Swiss Franc makes the rest of the world a bargain, Canada included.

If distance, exchange rates and migration patterns all shape foreigners’ willingness to visit Canada, so too it seems does language. Making more than three visits per 1,000 residents, the New Zealanders, British, Australians and Irish show a greater propensity to visit Canada than do residents of, say, most European countries — even the economically healthy Nordic ones — with the exception of the Icelanders, the well-off Luxembourgeois and the aforementioned Swiss.

The Jimmy John’s case: When doing what’s best for the organization means doing what’s worse for the economy

Usually, when you hear about staff being required to sign non-compete agreements as a condition of employment, it’s easy to assume that this only applies to the big-shots: executives, senior managers, people with intimate knowledge of corporate strategy, and so on, and surely not to a 19-year-old restaurant server or even a 24-year-old shift supervisor at a suburban fast-food outlet.

Think again. In a country where so many feel that “the little guy” is condemned to always end up with the short end of the stick that many have turned to Donald Trump or Bernie Sanders as would-be saviours, a news story appeared this past week that might just reaffirm their suspicions.

Illinois attorney-general Lisa Madigan filed a lawsuit mid-week against Jimmy John’s Gourmet Sandwiches, a Champaign, Ill.-based sandwich shop franchise, for requiring its employees until just last year to sign non-compete agreements. These agreements forbade employees from seeking employment with any other restaurant “that does at least ten percent of its business making sandwiches” within a two- or three-mile radius of any Jimmy John’s restaurant nationwide.

Under the agreement, the ban on working for even marginal competitors remained in effect for two years after leaving Jimmy John’s.

The non-compete agreement was almost certainly designed as a bluff to discourage staff turnover, not with the intent of actually enforcing it. Enforcement would have required:

a.) Keeping track of former employees’ whereabouts, or somehow finding out that the former employee had landed a job at Subway a mile and a half away, 15 months later (possible, but unlikely);

b.) Giving enough of a damn about the alleged breach to actually attempt to hold the former employee to the terms of the non-compete agreement (extremely unlikely for a low-wage job, and unlikely even in some better-compensated, mid-level jobs, if the path of least resistance was to just ignore the whole matter), and;

c.) If all else failed, convincing a court to enforce the agreement even though the courts have a history of overturning such agreements in all but the most serious of disputes.

Even Jimmy John’s conceded in a written statement that holding restaurant workers to non-compete agreements was a bit absurd:

“We made clear to the Attorney General that we would never enforce a non-compete agreement against any hourly employee that might have signed one. We offered to have our CEO sign a declaration to that effect, and pointed the Attorney General to an April 2015 ruling dismissing a federal claim against Jimmy John’s over the use of non-compete agreements, on the grounds that those agreements were not at risk of being enforced.”

Non-compete agreements are nevertheless popular. While the percentage of Canadian workers covered by non-compete agreements is not readily at hand, a White House analysis released just a month ago found that 18 percent of American workers are subject to restrictions on finding work elsewhere, including 14 percent of those earning less than $40,000 annually.

They even have their defenders. “Something strange is happening in the Beehive State,” law professor Nathan Oman wrote in Salt Lake City’s Deseret News this past March, as legislators were passing a new law banning non-compete agreements — a law Oman described as “a solution in search of a problem” and “a classic example of the legislative process run amok.” In defence of non-compete agreements, Oman wrote:

“In non­compete agreements, employees commit not to work for their former employers’ competitors if the employment relationship ends. This encourages employers to invest in their employees and share proprietary information. Everyone benefits, which is why employees and employers agree to the contracts in the first place.”

“In theory, such contracts could harm workers and consumers by giving monopoly power to employers. We solved this problem, however, more than a century ago. Like every other state, Utah law already requires that such contracts have reasonable limits on their geographic scope and duration. Indeed, any business that used them to monopolize a market would commit a crime under federal antitrust laws that have been in place since 1890.”

Others see non-compete agreements as being harmful to the overall economy even if they are beneficial for individual businesses by protecting secrets and calming competition.

On Twitter, I called the idea of requiring restaurant workers to sign non-compete agreements "asinine". Martin's response (in jest, I hope!) made my day. If you don't already do so, follow me on Twitter at @kevinmcdougald

On Twitter, I called the idea of requiring restaurant workers to sign non-compete agreements “asinine”. Martin’s response (in jest, I hope!) made my day.
If you don’t already do so, follow me on Twitter at @kevinmcdougald

A 2010 research paper by three academics from the MIT Sloan School of Management, the INSEAD global business school and the Harvard Business School found that non-compete agreements were economically harmful by encouraging former employees to move away in search of work and thus “stripping enforcing regions of some of their most valuable knowledge workers while retaining those of lesser value.”

“To the extent that one can draw normative conclusions from the above findings, policymakers who sanction the use of non-competes could be inadvertently creating a potential regional disadvantage. From a regional policymaker‘s perspective, the free flow of particularly high-ability talent to the best opportunities seems beneficial as long as it occurs locally . . . whereas such talented workers who take out-of-state jobs are a loss to the region. Regions that choose to enforce employee non-compete agreements may therefore be subjecting themselves to a domestic brain drain not unlike that described in the literature on international emigration out of less developed countries.”

[…]

“…[E]nforcement of non-compete agreements might act as a brake on labor pooling in two ways. First, regions that allow firms to enforce non-compete clauses against ex-employees drive some of their most highly valued skilled workers out of the region, decreasing the local supply of talent. Second, the interorganizational mobility of those workers who remain in the region is lower when non-competes are enforced. Given the role of labor pooling as a microfoundation of agglomeration, we should therefore expect more clustering in regions such as Silicon Valley where non-competes are unenforceable.”

This was supported more recently by a U.S. Department of the Treasury report which found that, while non-compete agreements can protect trade secrets and thus encourage innovation, reward employers for spending more on employee training and reduce staff turnover, they can also lead to lower wages, cause people to leave the careers in which they are most productive, and slow productivity growth.

The Treasury report recommended, among other things, that employers be dissuaded from requiring non-compete agreements unless there is a high probability that they could and would be enforced (i.e., not frivolously or as a bluff, as in the Jimmy John’s case) and requiring that employees continue to be paid at partial salary by their former employers in exchange for agreeing not to seek employment with competing organizations.

The Jimmy John’s case, and the evidence above, suggests that it might be a good use of legislators’ time in the U.S., Canada and elsewhere to limit the use of non-compete agreements. While those in the business and legal communities might see such agreements as useful from their point of view, it’s a benefit that comes at a cost to the wider community. It’s also an example that there’s a gap between what’s good for business (or labour, which has made its own case for competition-limiting measures at times) and what’s good for the economy. The two are not always the same, or even compatible.