Alan Hyde

The International Labor Organization in the Stag Hunt for Global Labor Rights

The International Labor Organization (ILO) is not an effective force for raising labor standards in the developing world and could become considerably more effective by taking account of two of the most important and interrelated recent theoretical developments in understanding labor standards. First, countries derive no comparative advantage in the global trading system from most very low labor standards. The ILO should therefore concentrate its energies on lifting these, rather than (as it so often does) concentrating on labor standards that are a source of comparative advantage, the elimination of which is resisted strongly and effectively. Second, the tools of game theory may be used to identify the collective action problems that prevent countries from lifting their own labor standards, and create a role for a transnational agency that may assist them.

Intellectual Property Justifications for Restricting Employee Mobility: A Critical Appraisal in Light of the Economic Evidence

Legal impediments to labor market mobility, such as enforcement of restrictive covenants and trade secrets law, have only recently come under careful economic scrutiny. So far, there are no provable social gains in enforcing noncompete covenants. Studies have made empirical comparisons between enforcing and nonenforcing states, some horizontal comparisons, some comparing a jurisdiction before and after legal change. These invariably show the social advantages of not enforcing noncompetes. States that do not enforce noncompetes have more startups, venture capital, growth, investment in human capital, and patenting. The last finding is crucial since courts often accept the unsupported argument that enforcing noncompetes gives employers incentives to train employees and make other investments in human capital. Enforcing noncompetes also creates social waste of employee talents, as most affected employees are unable to work in their areas of expertise. Economic models of contracts to impede employee mobility are highly responsive to their assumptions, but the dominant approach shows that employers and employees can negotiate efficient allocation of intellectual property on the employee’s departure, even if the employer has no ex ante intellectual property rights. The old employer simply outbids rivals. The time has come for law to join those states refusing to enforce restrictive covenants, and to restrict employer claims that departing employees will disclose trade secrets.

A Stag Hunt Account and Defense of Transnational Labor Standards - A Preliminary Look at the Problem

Labor standards with transnational application may be modeled as agreements among developing countries to overcome collective action problems, although this has not previously been done. Specifically, many labor standards arise in Stag Hunt games, in which there is a Pareto-optimal solution if, but only if, no player defects. Examples include bans on child labor or noxious work practices. It is not in any nations interest to rely on child labor or poisonous work practices, and they play no role in optimum development strategies, but the country that defected from a ban on these practices might anticipate particular streams of trade or foreign direct investment, gains that we model as short-term. The model, in light of the behavioral literature on Stag Hunt games, has implications for the number of countries that can be bound by a labor standard, institutional aspects of labor standard formulation, subject matter of labor standards, and sanctions. There is thus no conflict between transnational labor standards, and the theory of comparative advantage, since countries adopt only labor standards that are in their interest.

What Should the Proposed Restatement of Employment Law Say About Remedies

Employment termination in breach of contract is normally remedied by anticipated earnings from the lost job, mitigated by any amounts that the victim actually earned, or could with reasonable effort have earned, from alternative employment. Traditionally neither consequential nor punitive damages are available. The assumption is that most people who lose jobs unlawfully manage quickly to find alternative employment and suffer no long-lasting harm. Recent economic and epidemiological research explodes this assumption. Workers who lose jobs experience health problems (stroke, heart disease, depression, tobacco use), increased mortality, and continuing economic losses, long after the period of unemployment. Moreover, that period of unemployment after job loss lasts much longer than it used to. The Restatement should not freeze existing remedies, but should permit common law remedies to evolve to resemble statutory remedies under the Civil Rights Act of 1991, for example by expanding the covenant of good faith and fair dealing.