Measurement of Market Concentration Faced by Labor Pools: Theory and Evidence from Fast Food Chains in Rhode Island with No-Poaching Clauses

Abstract

Contractual restrictions on mobility of workers across units within a franchise – “no-poaching” clauses – have recently attracted attention. The restrictions are claimed to concentrate labor markets to the detriment of employees. Previous research has found that they do. However, previous research has not relied on measures of concentration reflecting that, while no-poaching clauses limit movement of laborers within a franchise brand, they do not directly limit labor movement across franchise brands. This paper challenges assumptions in previous research and develops a new measure of market concentration reflecting the competitive experience of different groups of workers within the same market that face differing and changing restrictions on their employment opportunities. This paper demonstrates how a set of no-poaching clauses alter concentration reflected in the new measure as compared to previously proposed measures of concentration. The paper provides an empirical comparison of performance of the new concentration measure vs. the previously proposed measure of concentration in the same population (restaurant workers in Rhode Island) used in research cited in support of new legislative restrictions and corporate changes in labor contracts.

Keywords: Antitrust, No-Poaching, Concentration, HHI, Franchise

JEL Classification: J08, J23, J41, J42, J47, J53, J62, J63