This Week at Bloomberg, 1/3/2021

Noncompetes in Texas, export controls, skilled immigration, and the erosion of the middle class

"The round part is #CésarPelli's 731 Lexington or more colloquially know as 'Bloomberg Tower' (2004). #igersnyc #midtownmanhattan #architecture" by JasonParis, CC BY 2.0

If you only read Noahpinion, you might forget that I also write for Bloomberg Opinion! So like my colleague Tyler Cowen, I thought it would be good to summarize my weekly Bloomberg writing here in the newsletter. I want y’all to get the maximum possible amount of Noah Smith Thought. ;-)

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Texas and Noncompetes

Some tech companies and investors are making a lot of noise about moving to Austin. But if Texas really wants Austin to become one of the country’s top tech clusters, it should think about banning the enforcement of noncompete agreements, as California does.

Some excerpts:

All else equal, companies would like to be able to block their workers from moving to competitors. Ideas will inevitably leak between companies when employees move…But by preventing these ideas from spreading around, a company does a little bit of damage to the entire industrial ecosystem around it. Ideas are synergistic — they can be rearranged into different combinations and produce new technologies, products and management techniques. Sometimes simply having the same employee in a different working environment or role will allow them to do great things. Fairchild Semiconductor, for example, famously gave rise to a huge number of spinoff companies that formed the backbone of the original Silicon Valley…

Banning noncompetes would be inconsistent with Texas’ principles and reputation as a defender of free markets. Noncompete agreements are restrictions on the free movement of labor; they gum up markets. Ultimately, the market is more important than the prerogatives of any particular company.

Read the whole article here.

Export Controls and the U.S.-China Trade War

While investment restrictions on Chinese companies are probably wise as a way to prevent technology from leaking, export controls are a far more dramatic and risky move. The danger is that the U.S. could be creating an Iron Curtain around its own tech industry that would end up leaving China as the global tech leader.

Excerpts:

Export controls are hurting U.S. companies. If China can’t buy high-tech equipment, semiconductors, and software from the U.S., then it will go buy them from Japan or Europe or elsewhere. Or if the U.S. manages to block that too, then China will simply learn how to make the products itself. The main enduring result will be a loss of revenue for American manufacturers, who will now be permanently shut out of the Chinese market…

U.S. equipment makers will lose business elsewhere too, because other countries are afraid the U.S. will try to stop them from selling products to China made with American equipment. And export controls deter foreign manufacturers from investing in the U.S., as then they might not be able to sell to China.

Read the whole thing here!

Biden, Don’t Forget Skilled Immigration

We all know about the issue of asylum-seekers from Central America. But what many people forget is that Trump has been waging a quiet, vicious, and largely successful war against skilled immigration for the past 4 years. If we’re going to get serious about competing with China and beating COVID-19 and other threats, Biden needs to reverse Trump’s brain drain.

Excerpts:

If China is the workshop of the world, the U.S. is its research park. The concentration of high-value industries in America depends crucially on the presence of top research universities, which in turn depend crucially on attracting the best and brightest scholars from all over the globe. Just as Silicon Valley needs engineers to move in from other cities and just as Houston can’t train all its energy industry workers locally, the U.S. -- with less than 5% of the world’s population -- needs to pull in researchers from abroad in order to maintain its pole position as the center of science. As a pointed illustration of this fact, note that the co-founder and chairman of Moderna, the American company whose vaccine promises to save millions of Americans from Covid-19, was born in Lebanon…

In addition to making it easier for foreign students to get and keep visas, and to work longer after graduation, Biden can use vigorous and vocal rhetoric to make it clear that the U.S. welcomes foreign students. This will not only help preserve the U.S.’ dominance in science and technology, but will also help the economies of college towns, which depend on the overseas money that international undergrad students pump into local businesses.

Read the whole post here!

Middle-Class Inequality

When we talk about inequality we tend to focus on the vast fortunes of a few mega-billionaires. But there’s another kind of inequality — the spreading-out of the middle class — that we don’t talk about as much. Why should a checkout clerk or a receptionist not be able to enjoy a middle-class lifestyle?

Excerpts:

The fact that the widening of inequality in the middle class happened decades in the past, and was largely complete by the mid-1990s, probably helps explain why it doesn’t get discussed much these days.  But it’s a change that never reversed itself; It's become a permanent feature of our economy, something we now just take for granted…

So as the U.S. focuses on the fortunes of Bezos and Musk, it would do well not to forget this other kind of inequality. The 1980s left the U.S. an uncomfortable legacy that we’ve never dealt with. If we want to restore the ideal of a middle-class nation, we will eventually need to do something about it.

Read the article here!