Wednesday, May 27, 2009

More Occupational Licensing

We talked a few weeks ago about occupational licensing. Here's some additional summary:

10. Analyzing the Extent and Influence of Occupational Licensing on
the Labor Market
by Morris M. Kleiner, Alan B. Krueger - #14979 (LS)

Abstract:

This study examines the extent and influence of occupational
licensing in the U.S. using a specially designed national labor force
survey. Specifically, we provide new ways of measuring occupational
licensing and consider what types of regulatory requirements and what
level of government oversight contribute to wage gains and
variability. Estimates from the survey indicated that 35 percent of
employees were either licensed or certified by the government, and
that 29 percent were fully licensed. Another 3 percent stated that
all who worked in their job would eventually be required to be
certified or licensed, bringing the total that are or eventually must
be licensed or certified by government to 38 percent. We find that
licensing is associated with about 14 percent higher wages, but the
effect of governmental certification on pay is much smaller.
Licensing by multiple political jurisdictions is associated with the
highest wage gains relative to only local licensing. Specific
requirements by the government for a worker to enter an occupation,
such as education level and long internships, are positively
associated with wages. We find little association between licensing
and the variance of wages, in contrast to unions. Overall, our
results show that occupational licensing is an important labor market
phenomenon that can be measured in labor force surveys.

http://papers.nber.org/papers/W14979

Comments:
I don't know if I'm right but wouldn't occupational licensing be a perfect way to separate high and low ability people?
 
My dad is a civil engineer and is licensed in several states. Because of that, I don't believe it affects his wages at all. All it does is limit in which states he can conduct business.
 
I believe it's right. The licence shows that the worker have the standard ability in the area.
 
Occupational licensing is necessary in certain fields. It is a form of screening, to hire qualified people. Especially in industries like investment firms and real estate. I wouldn't trust someone without a license to handle my money.
 
I think this occupational licensing thing should be totally redone, wouldn't it be better to simply have an extremely difficult exam for everyone, and then your results are published for everyone to see so that you'd get paid something much closer to your marginal revenue product? like, an electrician that is really talented says, hey, my score is 145, and i charge $50 an hour, whereas another electrician, who also would have attained an occupational license, but only scores 98, is paid the same in the current system?
 
The licensing is nice because yes it clears out many of the people that would not be willing to commit, and sends a signal. I don't know if the test would work because while yes the plumber got a lower score on the exam, but if he can fix the minor problem of a leaky toilet he deserves an equal pay. What would a score a 145 compared to 98 mean that the plumber is not able to handle jobs above a certain level of difficulty. That may lead to large inefficiencies because certain areas may lack the correct number of plumbers necessary to function.
 
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