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

59 Pages Posted: 20 Sep 2019

See all articles by Michael Lipsitz

Michael Lipsitz

Miami University Department of Economics

Evan Starr

University of Maryland Robert H Smith School of Business

Date Written: September 10, 2019

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 NCA bans on the earnings of low-wage workers. We find that banning NCAs for hourly workers increased hourly wages by 2-3% on average. Scaling this estimate by the prevalence of NCA use in the 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. The positive wage effects are found across the age, education and wage distributions, though they are stronger in occupations where NCAs are more common. The Oregon low-wage NCA ban also raised monthly job-to-job mobility by 12-18%, increased the proportion of salaried workers, and decreased the probability of being unemployed, without affecting hours worked.

Keywords: Low-Wage Workers, Non-compete Agreements, Monopsony Power

Suggested Citation

Lipsitz, Michael and Starr, Evan, Low-Wage Workers and the Enforceability of Non-Compete Agreements (September 10, 2019). Available at SSRN: https://ssrn.com/abstract=3452240 or http://dx.doi.org/10.2139/ssrn.3452240

Michael Lipsitz

Miami University Department of Economics ( email )

Oxford, OH 45056
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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