Low-Wage Workers and the Enforceability of Non-Compete Agreements

Management Science, Forthcoming

84 Pages Posted: 20 Sep 2019 Last revised: 20 Oct 2020

See all articles by Michael Lipsitz

Michael Lipsitz

Federal Trade Commission Bureau of Economics

Evan Starr

University of Maryland Robert H Smith School of Business

Date Written: October 19, 2020

Abstract

We exploit the 2008 Oregon ban on non-compete 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. While 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.

Keywords: Low-Wage Workers, Non-compete Agreements, Wages, Mobility, Labor Market Frictions

Suggested Citation

Lipsitz, Michael and Starr, Evan, Low-Wage Workers and the Enforceability of Non-Compete Agreements (October 19, 2020). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3452240 or http://dx.doi.org/10.2139/ssrn.3452240

Michael Lipsitz

Federal Trade Commission Bureau of Economics ( email )

600 Pennsylvania Ave NW
Washington, DC 20580
United States

Evan Starr (Contact Author)

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

United States
(301) 405-2320 (Phone)

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