#NoncompeteAgreements #FTC #WorkersRights
Hey everyone! 👋 I stumbled upon an interesting article discussing the impact of noncompete agreements on the economy and workers’ wages. Has there been research on this topic? 🤔
According to the FTC, banning noncompete agreements could potentially lead to higher wages for workers and benefit consumers. But what do you think? Do you believe that getting rid of noncompetes would be a step in the right direction?
Check out this article for more information: [Link to the article]
Possible Solutions:
– Implement regulations restricting the use of noncompete agreements
– Encourage transparency and fairness in employment contracts
– Support policies that promote worker mobility and competition
Let’s discuss! 💬 #EconomicImpact #WorkerRights
Yes, though the state of research on non-competes leaves a lot to be desired. This is because there are powerful selection effects for non-competes, which make it difficult to identify mechanisms.
The headline result is that non-competes seem to boost a worker’s wages – when the worker covered is capable of negotiating wages. The mechanism is unclear – it could be workered covered by a NCA get additional training and resources, or it could be a pure selection effect. For workers who cannot negotiate wages, there is no immediate effect.
When looking at non-competes more broadly, states that enforce NCAs more aggressively have lower wage growth than states that don’t enforce NCAs. Qualitative work suggests this is a result of lower labor mobility.
How these two results interact for workers who can negotiate their wages is unclear.
My understanding of the literature is that banning NCAs for low wage or entry level workers would be a good thing. Those workers are not in a position to gain leverage from a NCA to increase wages. For senior managers or technical workers, NCAs seem to be beneficial for workers. In between, for mid-career workers, the impact of NCAs is unclear.
Regardless of whether they are legal, it seems best practice is for courts to be skeptical of NCAs and to be lax with enforcement.
Look for papers by Evan Starr or Matt Marx for more information on the impact of non-competes. Most of their stuff is outside the economics literature, but much of it follows similar methodologies.