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2 results

  • 8 - Noncompete Agreements

  • Brianna L. Alderman, Harvard University, Massachusetts, Roger D. Blair, University of Florida
  • Book:
    Monopsony in Labor Markets
    Published online:
    08 February 2024
    Print publication:
    15 February 2024, pp 125-140

  • Summary

    Here, we focus on non-compete agreements (NCAs). NCAs severely limit job mobility and reduce a worker’s opportunities to exploit their human capital. Most NCAs preclude a worker’s ability to obtain a position with a rival employer for six months to two years after separation. In addition, the former employee may not start their own business in the same industry. The economic result of these restrictions is to reduce the labor supply elasticity, which enhances an employer’s ability to depress employee compensation, other benefits, and working conditions.

    Employers argue that they need NCAs for two primary reasons. First, upon separation, an employee could take the former employer’s trade secrets to a rival employer. An NCA may solve this problem because many trade secrets, such as short-run production plans, are short-lived. Second, employers often invest in an employee’s human capital with schooling or training. An NCA provides protection for such investments in human capital.

    In this chapter, we examine the pros and cons of NCAs. We also examine the Federal Trade Commission’s proposal to ban all NCAs completely.

Monopsony in Labor Markets
  • Theory, Evidence, and Public Policy
  • Brianna L. Alderman, Roger D. Blair
  • Published online:
    08 February 2024
    Print publication:
    15 February 2024
  • The economics of monopsony power results in lower wages and other forms of compensation, as well as reduced employment. Wealth is transferred from workers to their employers. In addition, the employer's output is reduced, which leads to increased prices for consumers. Monopsony in Labor Markets demonstrates that elements of monopsony are pervasive and explores the available antitrust policy options. It presents the economic and empirical foundations for antitrust concerns and sets out the relevant antitrust policy. Building on this foundation, it examines collusion on compensation, collusive no-poaching agreements, and the inclusion of non-compete agreements in employment contracts. It also addresses the influence of labor unions, labor's antitrust exemption, which permits the exercise of countervailing power, and the consequences of mergers to monopsony. Offering a thorough explanation of antitrust policy, this book identifies the basic economic problems with monopsony in labor markets and explains the remedies currently available.