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Low-Wage Workers and the Enforceability of Noncompete Agreements

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  • Michael Lipsitz

    (Federal Trade Commission, Washington, District of Columbia 20580)

  • Evan Starr

    (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

Abstract

We exploit the 2008 Oregon ban on noncompete agreements (NCAs) for hourly-paid workers to provide the first evidence on the impact of NCAs on low-wage workers. We find that banning NCAs for hourly workers increased hourly wages by 2%–3% on average. Since only a subset of workers sign NCAs, scaling this estimate by the prevalence of NCA use in the hourly-paid population suggests that the effect on employees actually bound by NCAs may be as great as 14%–21%, though the true effect is likely lower due to labor market spillovers onto those not bound by NCAs. Whereas the positive wage effects are found across the age, education, and wage distributions, they are stronger for female workers and in occupations where NCAs are more common. The Oregon low-wage NCA ban also improved average occupational status in Oregon, raised job-to-job mobility, and increased the proportion of salaried workers without affecting hours worked.

Suggested Citation

  • Michael Lipsitz & Evan Starr, 2022. "Low-Wage Workers and the Enforceability of Noncompete Agreements," Management Science, INFORMS, vol. 68(1), pages 143-170, January.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:1:p:143-170
    DOI: 10.1287/mnsc.2020.3918
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    2. Deschamps, Pierre & De Sousa, José, 2021. "Labor mobility and racial discrimination," European Economic Review, Elsevier, vol. 135(C).
    3. repec:hal:spmain:info:hdl:2441/6ftmcu468j8a49bft2hrpi6uql is not listed on IDEAS
    4. Abigail Ferguson & Nellie Lew & Michael Lipsitz & Devesh Raval, 2023. "Economics at the FTC: Spatial Demand, Veterinary Hospital Mergers, Rulemaking, and Noncompete Agreements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(4), pages 435-465, December.

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