Occupational Licensing in US – Those with a license earn higher pay, are more likely to be employed, and have a higher probability of receiving retirement and pension plan offers

Occupational licensing has become increasingly important in the regulation of services in the United States. The number of occupations requiring a license has grown since the 1970s, as has the percentage of workers who have attained or are covered by a governmental license. The number of studies analyzing occupational regulation, however, has not kept pace.

Perhaps the largest barrier has been the absence of appropriate data. Although the Bureau of Labor Statistics surveys workers on their union status, and also asks whether they are displaced from their jobs through the Current Population Survey, no information is currently available from this survey about whether individuals are certified or licensed as a condition of employment. Although occupational associations such as the American Bar Association and the American Dental Association collected wage and salary data, as well as the number of new entrants and pass rates by state through the early 1980s, the state pass-rate information is no longer tabulated or released to the public. New data for addressing important licensing issues, however, have recently become available. We analyze several labor-market effects of occupational regulation using these data, the 2008 panel of the Survey of Income and Program Participation (SIPP), a large, nationally representative data set covering the period May 2008 through November 2013. We primarily utilize the Professional Certifications, Licenses, and Educational Certificates topical module linked with Core data from the 13th wave of the 2008 panel. We refer to previous topical modules in the SIPP to estimate the impact of license and certification attainment on nonwage benefits.

Our empirical analysis finds that after controlling for observable heterogeneity, including occupational status, those with a license earn higher pay, are more likely to be employed, and have a higher probability of receiving retirement and pension plan offers. According to our estimates, where governmental licensing is required for the job it raises hourly wages by about 8.4 percent. In addition, licensing does not appear to have much effect on reducing wage inequality among various categories, but licensed workers in the bottom quartile seem to gain relative to similar workers.

Chosen excerpts by Job Market Monitor. Read the whole story at  Analyzing the Labor Market Outcomes of Occupational Licensing | Cato Institute.