Economist Mike Walden: Non-Compete Contracts

This is Mary Walden with economist MW welcoming you to the economic perspective.  Today’s program looks at non-compete contracts.  Mike, most workers like to be able to quit their job and take another job they like better or with better pay.  But I understand this isn’t always possible.  Please explain.

  1. 20% of jobs today have a non-compete contract
  2. Means a worker can’t quit and take a similar job with a rival firm for a certain number of years
  3. Two reasons given – firm would have given worker specialized training, and worker may have company specific knowledge that don’t want rivals to know
  4. But studies show there are firms with non-compete clause where these concerns wouldn’t be evident – for example, one sandwich shop chain use to have them
  5. Studies also show workers operating under non-compete clauses have lower earnings – perhaps because can’t take a higher paying alternative
  6. One upside – firms with non-compete clauses appear to invest more
  7. Still, many states are considering curtailing the use of non-compete clauses