Licensing Occupations: Ensuring Quality or Restricting Competition?

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9780880992848: Licensing Occupations: Ensuring Quality or Restricting Competition?

The licensing of occupations is often seen as stealth regulation that operates under the public policy radar screen. Unlike other labor market institutions, such as laws regulating unions or the minimum wage, the regulation of occupations has received little attention from the press, academics, or policymakers.

However, this lack of attention is not because occupational licensing is diminishing in the labor market. Since the 1950s, licensing coverage has grown from about 5 percent of the workforce to more than 20 percent, while unions have declined from about a third of the workforce to less than 13 percent, and to less than 8 percent in the private sector. In addition, approximately 50 occupations are licensed in all states, and about 800 occupations are similarly regulated in at least one state.

This pathbreaking book reveals the impacts of occupational licensing on the economies of the United States and several EU countries. Kleiner provides a thorough and up-to-date examination of the costs and benefits of occupational licensing (OL). He offers an explanation for the growth of OL, defines the winners and losers in terms of earnings and the quality of services provided by licensees, compares the differing labor market and price impacts of OL in the United States and Europe, provides evidence on the overall net impacts of OL for society, and offers policy alternatives to OL.

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About the Author:

Morris Kleiner is a professor at the Humphrey Institute of Public Affairs and the Industrial Relations Center at the University of Minnesota-Twin Cities, a research associate in Labor Studies at the National Bureau of Economic Research, and a visiting scholar in economic research at the Federal Reserve Bank of Minneapolis.

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The general issue of licensing is often thought of in the context of most peopleís general experience with getting a driverís license (Camerer et al. 2003). In the case of driverís licenses, there are generally no supply limits that may drive up the benefits to a group of citizens, and the tests and requirements for the license are generally low. Most people would argue that driverís licenses are a good idea because a person cannot control who is driving on the road next to them and would like some assurance that the other individuals on the road are at least minimally competent. In contrast with licensing drivers, the entry costs of occupational licensing are generally high. Many years of schooling are often required, as are classes focused on professional training and tests that are often difficult to pass and given infrequently. Moreover, in the case of regulated occupations (e.g., doctors, dentists, and cosmetologists), the consumer has the ability to choose a service based on the perceived quality and service price but no ability to choose an unregulated practitioner. Whereas motor vehicle licensing has few costs and many benefits, the licensing of occupations is often perceived as providing few benefits to consumers and possibly imposing large costs.

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