Economic and Structural Effects of Occupational Licensure

• In Event: 245 - Regular Session. Jobs, Occupations, and Labor Markets

Abstract

During the past few decades, licensure, a state-enforced mechanism for regulating occupational entry, quickly became the most prevalent form of occupational closure. Broad consensus among researchers is that licensure creates wage premiums by establishing economic monopolies. This article demonstrates that, contrary to established wisdom, licensure does not limit competition, nor does it increase wages. Rather, licensure creates a set of institutional mechanisms that enhance entry into the occupation, particularly for historically disadvantaged groups, while simultaneously stagnating quality. Results are based on a new occupational dataset, covering thirty years, that exploits interstate variability in licensure across the three hundred census-identified occupations. I argue that licensure, instead of increasing wages, creates broad structural changes within an occupation, in ways that fundamentally alter the nature and structure of work, tasks, and status, and may well shape the relationship between occupations, the selection of members, and the distribution of rewards.

Author

• Beth Red Bird, Northwestern University