Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete
46 Pages Posted: 29 Jan 2015 Last revised: 14 Aug 2017
Date Written: August 13, 2017
This study examines the effect of noncompete enforceability on training and wages. An increase from non-enforcement to mean enforceability is associated with a 14% increase in training, which tends to be firm-sponsored and designed to upgrade or teach new skills. In contrast to theoretical expectations, the results show no evidence of a relationship between noncompete enforceability and self-sponsored training. Despite the increases in training, an increase from non-enforcement to mean enforceability is associated with a 4% decrease in hourly wages. One noncompete policy that does not reduce training but is associated with higher wages throughout the distribution is the requirement that firms provide workers with consideration beyond continued employment in exchange for signing noncompetes.
Keywords: Training, Wages, Employee Mobility, Covenants Not to Compete
JEL Classification: J3, J4, J6, K3, L41, M53
Suggested Citation: Suggested Citation