Occupational Licensing and Labor Market Fluidity

This study shows the influence of occupational licensing on two occupations that provide similar services: occupational therapists and physical therapists. Most of the tasks for these two occupations differ, but several jobs overlap, and individuals in both occupations could have legal jurisdiction over these tasks. We empirically examine how these two occupations interact with one another in the labor market on wage determination and employment. Unlike previous studies, our study examines two occupations that are female dominated both within the professions and among its leadership. Our results show that occupational licensing can raise the wages of members of both occupations, but the duration of state occupational licensing statutes is the dominant influence on wage determination. Occupational licensing is also associated with a reduction in annual hours worked and in the relative numbers of members in each of the professions. Moreover, the ability of physical therapists to have direct access to patients is associated with a reduction in hourly earnings for occupational therapists, suggesting some substitution for certain service tasks across the two occupations. The ability of these two occupations to be both complements to and substitutes for one another provides new evidence on how the growing number of regulated occupations that are similar interact and influence one another.

Analyzing the Extent and Influence of Occupational Licensing on the Labor Market

Using longitudinal data from the Canadian Survey of Labour and Income Dynamics from 1999 to 2011, the article compares the pay and benefits of licensed and unionized workers. In a cross section of respondents and using ordinary least squares estimates, it finds a pay premium of 0.155 log points for those with an occupational licence compared to those without one; the comparable union wage premium is slightly more than half, that is 0.085 log points. Fixed‐effects estimates go in the opposite direction (0.028 and 0.046 log points for licensing and unionization, respectively), suggesting the existence of unobservable factors correlated with licensing and union status. Unionized workers are more likely to access standard benefits, such as medical insurance and pension plans, but licensed workers benefit little from their licensing status in access to benefits. Finally, union workers are significantly less likely to receive incentive pay, such as profit sharing, while the association between occupational licensing and incentive pay is close to zero and statistically insignificant.

This paper first documents trends in employment rates and then reviews what is known about the various factors that have been proposed to explain the decline in the overall employment-to-population ratio between 1999 and 2018. Population aging has had a large effect on the overall employment rate over this period, but within-age-group declines in employment among young- and prime-age adults also have played a central role. Among the factors with effects that we can quantify based on existing evidence, labor demand factors, in particular increased import competition from China and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment. Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of state minimum wages and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate. In addition to the factors whose effects we roughly quantify, we identify a set of potentially important factors about which the evidence does not yet allow us to draw clear conclusions. These include the challenges associated with arranging child care, improvements in leisure technology, changing social norms, increased use of opioids, the growth in occupational licensing, and declining labor market fluidity. Our evidence-driven ranking of factors should be useful for guiding future discussions about the sources of decline in the aggregate employment-to-population ratio and consequently the likely efficacy of alternative policy approaches to increasing employment rates. (JEL E24, J64)

Elite economists and lawyers contend that occupational licensure raises consumer prices and unemployment. Billed as a bipartisan boost to market competition, this technocratic policy agenda rests on thin empirical foundations. Studies of the wage effects of licensing rarely couple this analysis of its putative costs with convincing analysis of the benefits of the professional or vocational education validated via licensure. While some licensing rules may be onerous and excessive, licensing rules are inadequate or underenforced in other labor markets. Furthermore, by limiting labor market entry, occupational licensing rules, like minimum wage and labor laws, can help stabilize working- and middle-class wages. Although current antitrust law provides an ideological framework for technocratic attacks on licensing, it is fundamentally unsuited for evaluation of labor markets. Contemporary antitrust law's arcane concept of efficiency reflects neither the legislative objectives animating the antitrust statutes nor popular understanding of what competition policy should do.

Labor Market Impacts of State-Level Professional Licensing of Undocumented Immigrants

This dissertation, situated in the field of applied microeconomics, delves into the intricatedynamics between institutional changes, socialmovements, and microeconomic outcomes across different sectors. Through three comprehensive essays, it uncovers the nuanced impacts of educational policy adjustments, political activism, and healthcare sector consolidation on individual and institutional behavior, employing a variety of empirical methodologies to address these complex interactions. The first essay investigates the repercussions of modifying teacher testing standards on the pipeline of new educators. By leveraging a quasi-experimental setup precipitated by changes in the minimum passing scores for teacher training programs, this analysis provides a detailed examination of how increased testing standards influence enrollment and graduation rates across educational institutions. The findings reveal a pronounced decline in both metrics, with the most significant impacts observed in academicallyweaker institutions. This suggests that the elevated standards may exceed the optimal threshold for filtering candidates, inadvertently exacerbating shortages in the teaching workforce. Moreover, the study attributes a substantial portion of recent reductions in new teacher graduations to these augmented standards, challenging existing paradigms around educational qualification and workforce readiness. The second essay shifts the focus to the societal and economic ramifications of the Arab Spring protests, particularly concerning Egyptian women's exposure to domestic violence. By adopting a triple difference analytical approach and exploiting regional variations in protest intensity, this research offers novel insights into the transformative power of political engagement on gender dynamics. The empirical evidence suggests a significant reduction in the likelihood of women experiencing various forms of intimate partner violence in areas with heightened protest activities. This decline is correlated with an increase in women's decision-making autonomy, suggesting a redefinition of gender roles spurred by visible participation in public and political spheres. However, the study notes that these positive outcomes are not accompanied by shifts in societal attitudes towards domestic violence or changes in labor market participation, indicating a complex interplay between visibility, empowerment, and structural change. The third essay examines the labor market implications of hospital mergers within local commuting zones, focusing on the shifts in labor demand and employment composition post-merger. Utilizing causal inference techniques to isolate the effects of mergers from other market dynamics, the analysis challenges conventional metrics such as the Herfindahl-Hirschman Index for predicting labor demand shifts in the healthcare sector. Results demonstrate a concentrated increase in labor demand within merged entities, primarily for specialized and higher-skilled positions, underscoring the localized and sector-specific nature of employment responses to organizational consolidation. Collectively, these essays contribute to a deeper understanding of howpolicy decisions, social movements, and institutional transformations influence microeconomic indicators and individual behaviors. By employing rigorous empirical methodologies to dissect these relationships, this dissertation not only advances academic discourse in applied microeconomics but also offers pertinent insights for policymakers and stakeholders across the educational, social, and healthcare domains. Through its multifaceted exploration of teacher qualification standards, women's rights and visibility in political unrest, and labor market dynamics within healthcare consolidation, the research underscores the importance of considering broader socio-economic contexts and the unintended consequences of policy and institutional changes.--Author's abstract

ABSTRACTWe exploit the staggered introduction of CPA Mobility provisions in the United States to study the effects of spatial licensing requirements on the labor market for accounting professionals. Specifically, we examine whether the removal of licensing‐induced geographic barriers affects CPA wages and employment levels, as well as the pricing and quality of professional services. We find that, subsequent to the adoption of CPA Mobility provisions, wages of accounting professionals decrease, whereas employment levels are unaffected. The documented wage effect stems from smaller CPA firms, is more pronounced for CPAs holding senior positions, and persists over time. We also find that service prices decline and that this effect is concentrated in local CPA firms. Moreover, we document that the increased wage and price pressure is not associated with deteriorating service quality. Collectively, our results suggest that the removal of occupational licensing barriers has sizable effects on labor supply and service prices. Our findings inform the current regulatory debate on occupational licensing.

This study examines occupational licensing in the United States using a specially designed national labor force survey. Estimates from the survey indicated that 35% of employees were either licensed or certified by the government and that 29% were licensed. Another 3% stated that all who worked in their job would eventually be required to be certified or licensed, bringing the total that are or eventually must be licensed or certified by government to 38%. We find that licensing is associated with about 18% higher wages but that the effect of governmental certification on pay is much smaller.

The analysis of occupational licensing has concentrated largely on its labor market and consumer welfare effects.By contrast, relatively little is known about how occupational licensing laws originated or the key factors in their evolution.In this paper, we study the determinants of U.S. licensing requirements from 1870 to 2020.We begin by developing a model where licensing arises as an endogenous political outcome and use this framework to study how market characteristics and political incentives influence regulators' choices.Our empirical analysis draws on a novel database tracking the initial enactment of licensing legislation for hundreds of unique occupations, as well as changes to the specific qualifications required to obtain a subset of licenses over time.We first show that, consistent with the predictions of our model, licensing requirements are more common and were adopted earlier for occupations whose tasks plausibly pose some risk to consumers.Second, large, urbanized states are significantly more likely to produce new policies.Third, among occupations regulated before 1940, licensing requirements appeared earlier in states with more practitioners and where incumbent workers likely experienced greater labor market competition.After 1980, state-level factors are more strongly associated with the timing of policy adoption.Finally, political organization, as measured by the establishment of a state professional association, significantly increases the probability of regulation.Together, our findings suggest that both public and private interests have contributed to the diffusion of licensing requirements across states and occupations.

Recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions. These cross-sectional estimates use specialized data sets, with small sample sizes, for the period 2006 to 2008. The authors’ analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the National Longitudinal Survey of Youth (NLSY79) from 1979 to 2010. They develop several approaches, using both cross-sectional and longitudinal analyses, to measure the impact of these two labor market institutions on wage determination. The estimates of the economic returns to union coverage are greater than those for licensing statutes.

The costs of occupational licensing fall disproportionately on minorities and the poor. Licensing seeks to eliminate the lower-quality, lower-price services that low-income consumers would be more likely to select. Perhaps more important, however, is the impact on workers who are denied entry into the occupation. Recent evidence confirms that licensing regulations esclude less-educated and minority workers more than proportionally. The consequences for these excluded workers include unemployment or lower earnings—either by moving to a less-favored occupation or practicing without a license. The outcomes ofnonprofessional trades regulated by licensing are similar to those predicted by segmented labor market theory. Those who fail to obtain the credential (license) are denied access to the trade even if they are no less productive.

Occupational Licensing and Accountant Quality: Evidence from Linkedin

Previous articleNext article No AccessNegro Employment in Southern IndustryDonald DeweyDonald Dewey Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 60, Number 4Aug., 1952 Article DOIhttps://doi.org/10.1086/257237 Views: 12Total views on this site Citations: 26Citations are reported from Crossref Copyright 1952 The University of Chicago PressPDF download Crossref reports the following articles citing this article:Nina Banks, Warren C. 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The Labor Market Effects of Occupational Licensing in the Public Sector