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  5. Social and Economic Outcomes of Occupational Licensing
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Social and Economic Outcomes of Occupational Licensing

Paper Session

Friday, Jan. 5, 2024 10:15 AM - 12:15 PM (CST)

Grand Hyatt, Crockett C/D
Hosted By: Labor and Employment Relations Association
  • Chair: Peter Blair, Harvard University

Exploring the Effects of Occupational Licensing on Wage Inequality in the U.S.

Kihwan Bae
,
West Virginia University
Morris M. Kleiner
,
University of Minnesota
Connor Norris
,
West Virginia University
Edward J. Timmons
,
West Virginia University

Abstract

Wage inequality has starkly increased in the United States since the 1970s. During this time, the economy has experienced significant structural changes. The relative importance of the manufacturing sector has declined and the service sector has expanded. This shift influenced labor market institutions: unionization rates fell while occupational licensing grew and became the most important labor market institution. So far, the literature has not followed this change in the labor market and attempted to measure the impact of occupational licensing on wage inequality in the U.S. during this transition period. Occupational licensing limits entry into licensed professions and increases wages for licensed professionals. Also, licensing typically requires aspiring workers to obtain a certain level of education or training, which may lead to higher human capital and subsequent higher wages. In this vein, we examine the evolution of relative wages of those in universally licensed occupations versus those in other occupations. Our study using hourly earnings data from the Current Population Survey (CPS) Outgoing Rotation Group (ORG) 1979-2019 shows that the wage gap between universally licensed and other occupations surged up until the early 1990s. From the 1990s to 2019, the wage gap persisted for high skilled workers but declined or even disappeared for middle or low skilled workers. These trends provide suggestive evidence that entry barriers into licensed occupations may contribute to the increase in overall wage inequality in the U.S. over the previous four decades.

Does Licensure Improve Audit Committee Performance?

Bobby Chung
,
University of South Florida
Ben Posmanick
,
St. Bonaventure University
Alex Obie
,
St. Bonaventure University

Abstract

The Sarbanes-Oxley Act (SOX) mandates that boards of publicly-traded firms disclose whether they have at least one ``financial expert'' on the audit committee to reduce accounting errors. We combine multiple data sources, including restricted-use firm-level data and manually-matched director information, to analyze more than 5,200 publicly-traded firms from 2000 to 2018. Leveraging plausibly exogenous year-by-firm variation and fixed effect models, SOX significantly increased the employability of certified public accountants (CPAs) at the expense of other professionals at the board level. Contrary to the policy intention, we find a precise zero effect for the presence of CPAs on audit committees on accounting restatements.

Occupational Licensing and Social Mobility in the U.K.

Maria Koumenta
,
Queen Mary University of London
Mark Williams
,
Queen Mary University of London

Abstract

In this paper, we examine whether there is a degree of intergenerational transmission of occupational status such that, while being a general phenomenon, is also particularly relevant in the presence of occupational licensing. We begin by discussing the literature on the intergenerational transmission of occupation-specific human capital and then move on to consider the reasons why the institutional structures associated with occupational licensing can exacerbate the intergenerational transmission of occupational membership. In our empirical analysis, we find strong evidence of a substantial increase in the propensity to follow the same career as one's parents when the latter work in a licensed occupation.

Influence of Occupational Licensing on Retirement Transitions

Yun Taek Oh
,
University of Minnesota
Morris M. Kleiner
,
University of Minnesota

Abstract

Bridge employment has been a widely-selected option to smooth out the process of moving from a full-time career job to a complete withdrawal from the labor force. This study categorizes bridge employment into three types - switching occupations, leaving employers, and reducing work hours - and uses respondents aged 50 to 60 in the Survey of Income and Program Participation 2014 to examine the effect of occupational licensing on the decision of having bridge employment in later life by using propensity score matching. The result shows that licensed male workers are less likely to have bridge employment by leaving their employers, implying that occupational licensing increases the job security of older workers. On the other hand, the effect of occupational licensing on switching occupations is not statistically significant for both genders, implying that occupational licensing does not always reduce the occupational mobility of older workers.

Discussant(s)
Darwyyn Deyo
,
San Jose State University
Samuel Dodini
,
Norwegian School of Economics
Ilya Kukaev
,
Lehigh University
Alicia Plemmons
,
West Virginia University
JEL Classifications
  • J4 - Particular Labor Markets