Working Paper: NBER ID: w22810
Authors: Suyoun Han; Morris M. Kleiner
Abstract: The length of time from the implementation of an occupational licensing statute (i.e., licensing duration) may matter in influencing labor market outcomes. Adding to or raising the entry barriers are likely easier once an occupation is established and has gained influence in a political jurisdiction. States often enact grandfather clauses and ratchet up requirements that protect existing workers and increase entry costs to new entrants. We analyze the labor market influence of the duration of occupational licensing statutes for 13 major universally licensed occupations over a 75-year period. These occupations comprise the vast majority of workers in these regulated occupations in the United States. We provide among the first estimates of potential economic rents to grandfathering. We find that duration years of occupational licensure are positively associated with wages for continuing and grandfathered workers. The estimates show a positive relationship of duration with hours worked, but we find moderately negative results for participation in the labor market. The universally licensed occupations, however, exhibit heterogeneity in outcomes. Consequently, unlike some other labor market public policies, such as minimum wages or direct unemployment insurance benefits, occupational licensing would likely influence labor market outcomes when measured over a longer period of time.
Keywords: occupational licensing; labor market outcomes; grandfathering; wages; hours worked
JEL Codes: J08; J3; J38; J44; J8; J88; K0; K2; L12; L38; L51; L84; L88
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Duration of occupational licensure (J44) | Wages for continuing workers (J31) |
| Duration of occupational licensure (J44) | Wages for grandfathered workers (J39) |
| Duration of occupational licensure (J44) | Yearly hours worked (J22) |
| Duration of occupational licensure (J44) | Labor market participation (J29) |
| Duration of occupational licensure (J44) | Monopoly model of regulation (L43) |