Noncompetes Suppress Worker Mobility and Earnings Without Protecting Trade Secrets

New Findings Co-Authored by Smith’s Evan Starr in The Quarterly Journal of Economics Offer Direct Causal Evidence as Federal and State Regulations Shift

Findings from a groundbreaking field experiment recently published in The Quarterly Journal of Economics provide, according to its authors, the clearest cause-and-effect evidence to date that noncompete agreements reduce worker mobility and earnings—while offering no measurable benefits in protecting sensitive business information.

The work, by Professor of Management and Organization Evan Starr at the University of Maryland’s Robert H. Smith School of Business with Bo Cowgill (University of Toronto) and Brandon Freiberg (INSEAD), evaluates more than 14,000 job offers across two finance firms and represents one of the largest randomized studies ever conducted on restrictive employment contracts.

For years, employers have argued that noncompetes are needed to guard trade secrets—and that workers would not agree to give up future job options unless they were compensated for it. Yet Starr and his colleagues uncover five findings that directly challenge those assumptions:

• Mobility and Earnings: Removing a noncompete increases mobility between competing employers by 36–52% and raises workers’ total earnings by 12–17%.
• No Secret Protection Benefits: The researchers find no evidence that noncompetes reduce the leakage of sensitive information beyond what a standard nondisclosure agreement already provides.
• No Wage Compensation: Workers do not receive higher pay for accepting noncompetes.
• Inattention and Uncertainty: Many workers remain unaware of noncompetes buried in contracts, often skimming past the clause in seconds—consistent with a behavioral model of inattention.
• Adverse Selection: Being upfront with a noncompete, instead of burying it in the contract, makes it harder to attract workers, but those who do accept are more likely to violate the restriction.

“As least in our setting, noncompetes reduced mobility and earnings without reducing the spread of firm secrets,” the authors write—summarizing a core tension revealed by the experiment.

First-of-Its-Kind Experimental Design

The researchers partnered with two firms hiring thousands of freelance recruiters on short-term contracts. Workers were randomly assigned to receive a contract with no noncompete, a contract with a highly salient noncompete placed on the first page, or a contract with a hidden noncompete embedded mid-document.

All contracts included a nondisclosure agreement (NDA), allowing the researchers to isolate the effect of adding a noncompete on top of other confidentiality protections.

The experiment tracked contract review behavior, acceptance decisions, and subsequent responses to job opportunities that could violate either the noncompete or the NDA. Many workers skimmed past the noncompete in seconds, and a substantial share remained unaware of the restriction until firms contacted them after employment—evidence consistent with a behavioral model of inattention.

Workers did not negotiate noncompete terms, and they were not more likely to accept higher wages when randomly offered a noncompete. Even unenforceable noncompetes—such as those used in states like California—reduced mobility just as much as enforceable ones. “In other words, the law doesn’t matter,” Starr notes. “The presence of the clause alone changes behavior.”

The experiment also examined secret sharing between two employers. “It’s difficult to test how noncompetes affect secret sharing outside of an experiment like this because secrets are, generally, secret and thus hard to observe,” Starr says. “This research design lets us see firsthand what secrets workers share between competitors and the effects of noncompetes on that sharing behavior.”

The findings come amid ongoing national debate over noncompete agreements. Although the Federal Trade Commission’s proposed nationwide ban was recently halted in court, states continue to advance restrictions, and federal agencies have signaled increased scrutiny of labor-market contracting practices.

The work directly informs these discussions by providing rare causal evidence rather than observational correlations, Starr says. It also offers a blueprint for evaluating other restrictive terms—including NDAs, training repayment agreement provisions, non-solicitation clauses, and no-poach agreements.

“By occupying the role of the employer and randomizing contract conditions, we can finally observe how workers respond to these provisions in real time,” Starr adds. “This approach opens the door to measuring the causal effects of a wide range of employment restrictions and other managerial practices with far greater precision.”

Implications for Employers, Workers and Policymakers

For employers, the study shows that removing noncompetes substantially increases worker mobility without increasing the risk of trade-secret leakage—suggesting that NDAs alone provide comparable protection, Starr says. Firms should weigh the perceived benefits of noncompetes against the real costs: candidate dropoff and the possibility that workers willing to sign restrictive clauses may also be more likely to violate them.

Regarding workers, Starr notes that job seekers often overlook fine-print noncompetes and receive no wage premium for accepting them. They should be alert to contract language that limits future job changes. Even seemingly routine onboarding documents can restrict mobility and depress long-term earnings, he adds. “Workers should recognize that agreeing to post-employment restrictions may reduce their ability to seek raises or pursue better opportunities later on.”

Starr also notes that unenforceable noncompetes still deter workers from moving jobs, revealing a gap between what the law says and how workers behave. The study shows that early-notice rules don’t raise wages—workers exposed to both prominent and buried noncompetes still earned less. It also finds that simpler tools like NDAs protect sensitive information just as well. For policymakers, the takeaway is straightforward: any evaluation of noncompetes should weigh their limited benefits against their clear costs to worker mobility and wage growth.

Read “Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses” in The Quarterly Journal of Economics.