New Research on Licensing's Effect on Employment

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Traditionally, scholars believed that occupational licenses, such as medical licensing for doctors, reduced the number of people who could get into the occupation. This limit on the supply of workers was believed to result in increased wages for the workers that made it in. However, it turns out that the opposite is true! Using more than 15 million observations over 30 years of the Current Population Survey, researcher Beth Redbird has found that the licensing process actually increases access, particularly for underrepresented groups (women and racial minorities).

Even more interesting, occupational entry barriers change the face of an occupation – who gets a job and what they do at work. We might expect serious occupational entry standards, like a bar exam for paralegals or a school requirement for massage therapists, would make it more difficult to enter the occupation, but it actually facilitates entry. Informal barriers, which tend to encourage discrimination and homogeneity, are replaced with formal procedures, which have a greater potential to be color-blind and can be standardized, measured, and publicized. The new “free market” of labor, following the decline of unions, has given way to a new institutional form of closure that has a startling effect on who gets which jobs.

Originally presented: August 30, 2017


Beth Redbird, Assistant Professor, Northwestern University

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