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Title: Occupational Licensing and Labor Market Fluidity

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: We show that occupational licensing has significant negative effects on labor market fluidity. Using a balanced panel of workers constructed from public CPS and SIPP data, we investigate the causal effect of licensing on labor market outcomes. We apply a Propensity Score and Coarsened Exact Matching strategy and find that workers who have a government issued occupational license experience significantly lower churn rates than non-licensed workers. Specifically, licensed workers are 5% less likely to switch occupation, and 1% less likely to enter non-employment in the following month. Moreover, occupational licensing represents a barrier to entry for both non-employed workers and employed workers. Employed workers are 2% less likely to enter a licensed occupation next month than a non-licensed occupation, while non-employed workers are 0.1% less likely to enter a licensed occupation. This barrier effect is more prominent for employed workers relative to those entering from non-employment because the opportunity cost of acquiring a license is much higher for employed individuals. Lastly, we find that licensed workers have higher average wage growth rates than nonlicensed workers whether they stay in the same occupation in the next year or switch occupations (6.5% higher for both cases). We find significant heterogeneity in this licensing effect across different occupation groups. These results hold across various data . . .

Url: https://site.stanford.edu/sites/g/files/sbiybj8706/f/5241-kleinerxu_2019june.pdf

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Authors: Kleiner, Morris; Xu, Ming

Publisher: Queen's University

Data Collections: IPUMS CPS

Topics: Other

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