Overview
This series examines how non-compete agreements can shape workers’ career paths before legal enforceability is settled. Using a 2026 Chicago Fed working paper on NLSY97 job transitions, it separates incidence from enforceability, tests investment and outside-option mechanisms, and compares wage trajectories and job tenure for low- and high-education workers. The results are heterogeneous and remain working-paper evidence: slower later wage growth for low-education workers, faster growth for high-education workers, and imprecise tenure effects.
Learning outcomes
- A non-compete can constrain career choices before a court rules, because perceived legal risk can narrow outside options.
- Higher average pay in NCA jobs does not prove workers receive compensation for lost mobility.
- In the studied NLSY97 transitions, low-education workers had no clear immediate premium and significantly slower wage growth after four years.
- High-education workers showed faster later wage growth, but tenure effects were imprecise and mechanisms were not directly measured.
Keywords
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PlansFAQ
Can a non-compete affect a worker before a court decides whether it is enforceable?
Yes. A worker may treat a competing job as risky or unusable under legal uncertainty, narrowing practical outside options before a ruling.
Do non-compete jobs pay more because workers are compensated for lost mobility?
Not necessarily. Higher average wages in NCA jobs reflect selected workers and jobs; the Chicago Fed study does not find a clear transition premium.
What did the 2026 Chicago Fed working paper find about later wages?
In its retained NLSY97 transition sample, it found significantly slower four-year wage growth for low-education workers and significantly faster later growth for high-education workers after NCA status changes.
Does wage growth show whether a non-compete locks workers into jobs?
No. Wage trajectories and job exit are different outcomes, and tenure effects were imprecisely estimated for both education groups.
Can this evidence justify a universal non-compete policy?
No. It supports matching policy to incidence, enforceability, rights clarity, or investment, but it does not estimate a specific ban or contract reform.