Economic Research and Federal Trade Commission’s Proposed Rule Banning Non-Compete Agreements

In January 2023, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking (NPRM) on non-compete agreements, which in effect would ban all non-compete clauses in employment contracts. The NPRM provides a detailed description of research on the effects of non-compete clauses, evaluating the research’s reliability and estimating costs and benefits of the proposed rule. Such a rule could have a substantial impact on how labor markets operate, so the FTC apparently recognizes the importance of considering relevant economic research related to its proposed rule.

In this article, James Langenfeld, Chris Ring, and Mary Wilson Grist review the research discussed in the NPRM and other related research; and provide comments on the existing research and conclusions that can be drawn from it. In particular, the authors focus on whether the balance of the research supports the type of rule proposed by the FTC, a rule focused on low-income workers, or no rule at all.