Low-Wage Workers and the Enforceability of Noncompete Agreements

We exploit the 2008 Oregon ban on noncompete 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. Whereas 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.

This paper was accepted by Lamar Pierce, organizations.