Locked in: Noncompetes dent wages, mobility

ANN ARBOR'High-tech employees working in states that enforce noncompete agreements suffer for it in lower wages and reduced job mobility. Jagadeesh Sivadasan, an associate professor of business economics and public policy at the University of Michigan's Ross School of Business, compared data for workers in states that strongly enforce noncompete clauses with those that do not. "Companies use noncompete agreements to protect their intellectual capital, but we find statistically significant effects for lower wages and lower mobility, meaning they stay in a given job longer," Sivadasan said. Sivadasan and his co-authors'Ross doctoral student Jin Woo Chang, Natarajan Balasubramanian of Syracuse University, Mariko Sakakibara of UCLA and Evan Starr of the University of Maryland-focused on tech workers because of the prevalence of noncompetes in that industry. They analyzed individual worker-level data from the U.S. Census Bureau, which collects it from states. They then ranked each state according to how strongly it enforces noncompete agreements, drawing on work by Norman Bishara, U-M professor of business law and ethics. California, for example, doesn't enforce them at all, while Florida's state law is more generous for employers.