reading # 10

reading # 10 - The Prevalence and Effects of Occupational...

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The Prevalence and Effects of Occupational Licensing * Morris M. Kleiner, University of Minnesota and NBER Alan B. Krueger, Princeton University and U.S. Department of the T r e a s u r y Forthcoming in the British Journal of Industrial Relations , volume 48: No. 4, December 2010. A b s t r a c t Our study provides the first national analysis of the labor market implications of workers who are licensed by any agency of the government in the U.S. Using a specially designed Gallup survey of a nationally representative sample of Americans; we provide an analysis of the influence of this form of occupational regulation. We find that 29 percent of the workforce is required to hold a license, which is a higher percentage than that found in other studies that rely on state-level occupational licensing data or single states. Workers who have higher levels of education are more likely to work in jobs that require a license. Union workers and government employees are more likely to have a license requirement than are nonunion or private sector employees. Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions -- that is about 15 percent, and that being both licensed and in a union can increase wages by more than 24 percent. However, unlike unions which reduce variance in wages, licensing does not significantly reduce wage dispersion for individuals in licensed jobs. *We thank Larry Katz and Charles Wheelan for comments and Matthew Hendricks for his assistance with the study. We also thank participants at the Labor and Employment Relations Association annual meeting, the referees, and the editor Alex Bryson for their insightful comments on earlier drafts. The views expressed in this paper are those of the authors, and not necessarily those of the U.S. Department of the Treasury.
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1 Introduction One of the fastest growing, yet least understood, institutions in the U.S. labor market is occupational licensing. The movement to a service-oriented economy from manufacturing, where unions and contracts were prominent, created a demand for a “web of rules” of the workplace that licensing may have provided (Dunlop, 1958). While unions have declined, occupational licensing has grown over the last fifty years (Kleiner, 2006). Occupational regulation in the U.S. generally takes three forms. The least restrictive form is registration, in which individuals file their names, addresses, and qualifications with a government agency before practicing their occupation. The registration process may include posting a bond or filing a fee. In contrast, certification permits any person to perform the relevant tasks, but the government—or sometimes a private, nonprofit agency—administers an examination and certifies those who have achieved the level of skill and knowledge for certification. For example, travel agents and car mechanics are generally certified but not licensed. The toughest form of regulation is licensure; this form of regulation is often referred to as “the right to practice.” Under licensure laws, working in an occupation for compensation
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This note was uploaded on 11/29/2010 for the course PSC 222 taught by Professor Jing during the Spring '10 term at Rochester.

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reading # 10 - The Prevalence and Effects of Occupational...

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