The prevalence of non-compete clauses is surprisingly high, with adverse consequences for economic dynamism, wages and productivity. This brings into closer focus recent attempts to restrict the use of such clauses in some OECD countries.
By Dan Andrews, Andrea Garnero and Sara Holttinen
Somewhere in the contract you signed on your first day, there may be a clause that outlives the job itself. A non-compete clause bars you from joining — or starting– a competing business for a period after you leave. These clauses were meant for a narrow purpose: to stop a departing executive or engineer from walking valuable trade secrets straight to a rival. New evidence from the OECD suggests they have quietly become something much broader, and far more common, than that original justification can bear.
Drawing on new employee and employer surveys developed by the OECD and Bocconi University and fielded by Ipsos across 15 OECD countries — covering more than 30 000 workers and 6 000 companies in all — the latest OECD Employment Outlook offers the first harmonised, cross-country picture of how these clauses are used. The findings are striking.
Not just for the boardroom
Between one-fifth and one-third of private-sector workers across these countries report being bound by a non-compete clause, ranging from around 11‑15% in Poland and 7‑18% in Italy, to close to 30% in Canada and between 29% and 41% in Sweden (Figure 1). (Non-disclosure agreements, a lighter-touch alternative, cover around one-half.) That would be unremarkable if the clauses stayed where they started — among managers, specialists and staff with access to sensitive commercial information.
But the reality is that non-compete clauses now reach well down the wage and skills ladder. Sizeable shares of workers with no more than a lower-secondary education, workers in the bottom tenth of the earnings distribution, and workers on fixed-term contracts report being covered. So do many people who say they have no access to any confidential information at all. They are also more common among young workers — consistent with a practice that has been spreading over time. Rather than being carefully negotiated, the clauses are often applied indiscriminately, dropped into standard contracts as boilerplate.
Broad, uncompensated — and often unenforceable
The clauses are frequently wider than national law would comfortably allow. Many run longer than a year, extend across an entire country or beyond, or reach past the employer’s own line of business. And although compensation is one of the things courts weigh when deciding whether a restriction is reasonable, close to one-half of covered workers report receiving nothing at all in return.
The upshot is that a substantial share of non-compete clauses would probably not survive a court challenge. But here lies the twist: they don’t need to. Most workers never test them. The mere presence of a clause — and the belief that it might be enforced — is often enough to keep people from moving. The clauses exert a chilling effect: they bite through perception as much as through law, which is why even tightly regulated countries do not escape their effects.
Why it matters for the economy
This is where individual contract terms add up to something macroeconomic. When workers stay put out of caution, labour moves less freely to where it is most productive, and the knowledge that travels with people spreads more slowly between firms. Both channels matter for growth at a time when many OECD economies are wrestling with a long productivity slowdown and weak wage growth.
The survey evidence points in a consistent direction. Non-compete coverage is associated with lower job mobility (5% of private-sector employees have been prevented from changing jobs and 3% from starting a business because of a non-compete clause) and slower wage growth, particularly for less-educated workers. It is also associated with weaker productivity: a higher prevalence of non-compete clauses at the industry level is associated with lower productivity, with a 10 percentage-point increase linked to a 1.9% decline in productivity, with the drag somewhat smaller — but still present — where regulation is tighter. These links are suggestive rather than proof of cause and effect, since firms and workers who use such clauses differ in ways that are hard to observe fully. But they align with a growing body of experimental and quasi-experimental research reaching similar conclusions.
What policymakers can do
Some jurisdictions have opted for outright bans — several US states among them — while a proposed federal ban in the United States was ultimately abandoned in the courts. Most OECD countries have taken a more tailored route: barring the clauses below an earnings threshold, exempting particular occupations, requiring employers to pay compensation, capping duration, or mandating advance disclosure so that a restriction reflects genuine agreement rather than default fine print.
Yet regulation on paper is only part of the answer. Because these clauses work through what people believe, transparency and enforcement matter just as much. Clear statements of what the law actually requires, plain-language contracts, accessible public advice, and credible sanctions for overly broad clauses can all help — and today such sanctions remain rare. Competition authorities have a complementary role in pursuing the no-poaching and wage-fixing agreements between employers that suppress mobility from another direction.
Non-compete clauses were built to protect legitimate business interests. The evidence suggests that, as currently used, many do little of that — while quietly weighing on the mobility, wage growth and dynamism that healthy labour markets and well-functioning economies depend on. Getting the fine print right is not a small matter.
For further information see the dedicated web page: Non-compete and related agreements: Hoarding talent, holding back growth?“
This post draws on the chapter “Non-compete and related agreements: Hoarding talent, holding back growth?” in the OECD Employment Outlook 2026.
References:
OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en
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