Noncompete Agreements in the U.S. Labor Force

Authors

Evan P. Starr, University of MarylandFollow
J.J. Prescott, University of Michigan Law SchoolFollow
Norman D. Bishara, University of Michigan - Stephen M. Ross School of BusinessFollow

Document Type

Article

Publication Date

2-2021

Abstract

Using nationally representative survey data on 11,505 labor force participants, we examine the use and implementation of noncompete agreements and the employee outcomes associated with these provisions. Approximately 18 percent of labor force participants are bound by noncompetes, with 38 percent having agreed to at least one in the past. Noncompetes are more likely to be found in high-skill, high-paying jobs, but they are also common in low-skill, low-paying jobs and in states where noncompetes are unenforceable. Only 10 percent of employees negotiate over their noncompetes, and about one-third of employees are presented with noncompetes after having already accepted job offers. Early-notice noncompetes are associated with better employee outcomes, while employees who agree to late-notice noncompetes are comparatively worse off. Regardless of noncompete timing, however, wages are relatively lower where noncompetes are easier to enforce. We discuss these findings in light of competing theories of the economic value of noncompetes.

Comments

Available at SSRN: https://ssrn.com/abstract=2625714 or http://dx.doi.org/10.2139/ssrn.2625714

Recommended Citation

Starr, Evan P., J.J. Prescott, and Norman D. Bishara. "Noncompete Agreements in the U.S. Labor Force." Journal of Law and Economics 64, no. 1 (2021): 53-84.