Breaking the Chains of Contract: The Labor Market Effects of State Noncompete Agreement Restrictions

Abstract

Nearly one in five American workers is bound by a noncompete agreement, with evidence suggesting these contracts suppress wages and reduce job mobility. Between 2021 and 2023, six states enacted significant restrictions on noncompete agreements, including Minnesota's landmark full ban in July 2023—the first such ban since Oklahoma in 1890. We use a staggered difference-in-differences design with Callaway-Sant'Anna estimators to evaluate the effects of these restrictions on worker turnover and earnings. Using Quarterly Workforce Indicators data from 2018–2024, we find no statistically significant effects on aggregate turnover rates (ATT = -0.01, SE = 0.15) or average earnings (ATT = -0.02 log points, SE = 0.01) in the short run. Event study estimates show no pre-trends but also no clear post-treatment effects. Our null findings may reflect that (1) aggregate state-level data lacks power to detect effects, (2) effects are concentrated in subgroups not identifiable in QWI, or (3) policies require longer implementation periods. These results suggest caution about expecting immediate aggregate labor market effects from noncompete restrictions.