Oregon Office of Economic Analysis

In recent weeks, I have been forwarded two new Oregon-related research papers that I have found particularly interesting. What follows is a overview of these papers. As always, if you have something you think our office should know about, please let us know! Email me here.

Low-Wage Workers and the Enforceability of Non-Compete Agreements. Michael Lipsitz and Evan Starr.

When it comes to underlying issues regarding economic mobility, wage growth and the like, two issues that economists have been researching more and more in recent years have been the impacts of occupational licensing and non-compete agreements. These issues overlap to some degree and have impacts across the economic spectrum. That said, particular focus, or at least lip service, is paid toward low-wage workers where the costs of these policies may be the greatest.

Occupational licenses create barriers to entry for new firms and workers trying to earn a living. Even if once they obtain the license, they earn slightly higher wages, their ability to switch jobs, careers, or move to a different state is restricted in the sense they may have to re-do all of that work again.

Similarly, non-compete agreements tend to restrict employment opportunities and hold down wage growth. This is because one of the best ways for workers to see wage increases is to switch firms, where a competitor outbids the current employer for the skills and experience of the employee. Now, non-compete agreements can have a time and a place for their use when it comes to firm secrets, or poaching clients and the like. However, research finds they generally hamper economic growth. There are a few particularly infamous examples from around the country, including a fast food restaurant having their employees sign non-compete agreements, thus preventing their workers from finding employment at another fast food establishment.

This new paper by Lipsitz and Starr focuses on a policy change here in Oregon that, effectively, made non-compete agreements unenforceable for hourly workers and for those earning below average incomes. This was actually something I, personally, was unaware until the authors reached out in the past year to discuss Oregon’s economy and the like. This particular legislation passed in 2007 (SB 248) and went into effect at the beginning of 2008.

Unfortunately there are no perfect natural experiments nor perfect data. A change like this occurring right as the economy went into the tank complicates matters as does the underlying data (CPS, aka the household survey, which is relatively small and noisy). All of that said, Lipsitz and Starr do everything they can empirically to control for known factors and isolate changes due to the policy.

The upshot of their research is that making non-competes unenforceable for low-wage workers increased hourly wages 2-3% — roughly equal to a year’s worth of wage gains. The policy also increased worker mobility, meaning that the probability of a worker moving from one firm to another increased as well. They find these results hold under a number of different specifications and also find expected results when breaking down the labor market into different occupations, based on educational attainment, race or ethnicity, or by gender.

The bottom line is that the research finds outcomes here in Oregon consistent with what one would expect given economic theory and the concerns surrounding non-compete agreements and low-wage workers.

Socioeconomic Well-Being and Forest Management in Northwest Forest Plan-Area Communities. U.S. Forest Service.

Last year the U.S. Forest Service issued a massive, 1,000+ page report on the Northwest Forest Plan. Eric White, one of the researchers, pointed me to Chapter 8 which discusses the research regarding socioeconomic well-being in communities within the forest plan area. It is a thorough look at underlying economic trends and issues and generally confirms many of the things our office has written over the years. A few items stood out to me in the chapter.

First, the sheer amount of research that has been conducted on communities and the local economies in the plan area was something I had not realized. Most of this research focused on the first decade following the plan implementation, where the largest impacts were felt. The report tries its best to synthesize and summarize these findings, with an incredible bibliography for future readings.

Second, two of these papers found that following the decline in federal harvests, the timber industry jobs losses were about 50/50 in terms of losses due to the harvest declines themselves and those due to increased automation and efficiency in the mills. One paper had it at 40/60 while the other had it 60/40.

Third, I enjoyed the discussion surrounding the different types of communities and the different paths they have taken in recent decades. By enjoy, I mean I think the report does a good job of discussing this and not trying to sugarcoat it. The report talks about communities that have grown in recent decades, largely due to their natural amenities attracting new residents and tourists. The report also notes that these newly created jobs are not perfect substitutes for the ones lost. The report also discusses communities pursing new production strategies and those that have experienced declines.

Fourth, and finally, the report is the most thorough I have seen regarding other uses of forests besides timber production. I suppose this should not be a surprise given the U.S. Forest Service is writing about the impacts of the forest. However I have not seen it spelled out like this and it is well worth your time if you are interested in learning more. Now, these other uses include things like biomass and recreation, but the part on nontimber forest products was new to me (starts of PDF pg 44). This includes bark, berries, bulbs, Christmas trees, fence materials, firewood, fungi, posts and poles, roots, seeds, and many other items. Additionally, the report touches on other types of forest-related employment as well, including forest service contracting, and ecosystem and wildfire management.

Overall, the report is not easily summarized in a few sentences. Nevertheless it remains a good resource for those interested in learning more about these topics and the underlying research.