Creator: Johnson, Janna and Kleiner, Morris Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 561 Abstract:
Occupational licensure, one of the most significant labor market regulations in the United States, may restrict the interstate movement of workers. We analyze the interstate migration of 22 licensed occupations. Using an empirical strategy that controls for unobservable characteristics that drive long-distance moves, we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration. The size of this effect varies across occupations and appears to be tied to the state specificity of licensing requirements. We also provide evidence that the adoption of reciprocity agreements, which lower re-licensure costs, increases the interstate migration rate of lawyers. Based on our results, we estimate that the rise in occupational licensing can explain part of the documented decline in interstate migration and job transitions in the United States.
Keyword: Labor market regulation, Occupational licensing, and Interstate migration Subject (JEL): J01 - Labor Economics: General, J44 - Professional Labor Markets; Occupational Licensing, L38 - Public Policy, K00 - Law and Economics: General, and J10 - Demographic Economics: General
Creator: Han, Suyoun and Kleiner, Morris Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 556 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.
Keyword: Workforce participation, Labor market regulation, Occupational licensing, Duration and grandfathering effects on wage determination, and Hours worked Subject (JEL): J44 - Professional Labor Markets; Occupational Licensing, L84 - Personal, Professional, and Business Services, J80 - Labor Standards: General, J30 - Wages, Compensation, and Labor Costs: General, L38 - Public Policy, K20 - Regulation and Business Law: General, K00 - Law and Economics: General, J88 - Labor Standards: Public Policy, J08 - Labor Economics Policies, J38 - Wages, Compensation, and Labor Costs: Public Policy, L51 - Economics of Regulation, L88 - Industry Studies: Services: Government Policy, and L12 - Monopoly; Monopolization Strategies