Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete

45 Pages Posted: 29 Jan 2015 Last revised: 28 Sep 2016

Evan P Starr

University of Maryland Robert H Smith School of Business

Date Written: September 28, 2016

Abstract

This study examines the effect of noncompete enforceability on training and wages. An increase from non-enforcement to mean enforceability is associated with an 11% increase in firm-sponsored training, no effect on self-sponsored training, and a 1.7% decrease in average wages. The small, negative wage effect averages together contrasting positive effects for low earners but negative effects for high earners. 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: Firm-Sponsored Training, Wages, Mobility, Covenants Not to Compete

JEL Classification: J3, J4, J6, K3, L41, M53

Suggested Citation

Starr, Evan P, Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete (September 28, 2016). Available at SSRN: https://ssrn.com/abstract=2556669 or http://dx.doi.org/10.2139/ssrn.2556669

Evan P Starr (Contact Author)

University of Maryland Robert H Smith School of Business ( email )

United States
(301) 405-2320 (Phone)

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